Housing Bubble II: The Quest To Build Enough Homes Where People Actually Need Them

[niwell]

Originally Posted by MolsonExport

I mean, have you been to New York City? Chicago? LA? San Francisco? Boston? These are all great American cities to visit. All of them are eye-wateringly expensive. Just like Montreal, Toronto, and Vancouver.

Atlanta, Minneapolis, etc. are really cheap, but extremely boring places to visit. Just like London, Ontario (where I live...great place to raise a family, but it is extremely boring).

TBH I've found that even mid-tier American cities are very expensive these days. Both in terms of hotels and food/drink. Anecdotal but costs there seem to have spiked considerably more than here over the years, even accounting for exchange rates.

When my relatives from the UK and Australia have visited they don't find things here particularly expensive (and depending on the item quite cheap). Hotels have been the only noted truly high expense item.

[MolsonExport]

Originally Posted by niwell

TBH I've found that even mid-tier American cities are very expensive these days. Both in terms of hotels and food/drink. Anecdotal but costs there seem to have spiked considerably more than here over the years, even accounting for exchange rates.

When my relatives from the UK and Australia have visited they don't find things here particularly expensive (and depending on the item quite cheap). Hotels have been the only noted truly high expense item.

It has been a while since my last trip to Oz, but I found that everything was more expensive down under (hotels, car rentals, food, booze, restaurants, public transit, you name it) relative to Canada.

You'd think that with all the extra rooms created by AirBnB and imitators, that would have put a brake on hotel prices rising. I guess the labor shortage has been acutely felt in the hospitality industry, particularly in the States.

[Innsertnamehere]

Originally Posted by MolsonExport

It has been a while since my last trip to Oz, but I found that everything was more expensive down under (hotels, car rentals, food, booze, restaurants, public transit, you name it) relative to Canada.

You'd think that with all the extra rooms created by AirBnB and imitators, that would have put a brake on hotel prices rising. I guess the labor shortage has been acutely felt in the hospitality industry, particularly in the States.

AirBnB held prices down until around 2018 or 2019, but most major cities have seen heavy restrictions on AirBnB remove most of that supply.

So the last decade has seen a rapid increase in tourism demand, with the first half of that decade seeing most demand absorbed by AirBnB. Then most cities went and effectively banned AirBnB.. and supply of "places to stay" has actually dropped fairly precipitously over the last 5 years or so depending on the market. So prices on remaining supply have skyrocketed.

It's why the rapid price escalation in hotels is mostly limited to urban areas. Rural areas are still mostly unrestricted on AirBnB - so those areas generally still have affordable hotel options. You can still get a roadside hotel pretty cheap, inflation adjusted, but a hotel in a city centre is wildly expensive.

Hotel starts in Canada have absolutely exploded over the last 2-3 years - starts up almost 50% YoY - because of the high hotel costs as well. Hotels are popping up everywhere, including markets previously considered not viable. With rapidly dropping land costs in major cities due to the residential bubble popping, I expect we'll see even more in the next few years as more and more pencil.

This is a good article on the state of the hotel industy:

https://www.cbre.ca/insights/article...canada-in-2025

[whatnext]

Originally Posted by MolsonExport

I was in Switzerland from overseas… I could wait to leave. The cost of everything in Switzerland blew me away. Those darned Liberals and their connections to Ghislaine Maxwell.

Switzerland is indeed expensive. It's funny, I spent some time in Konstanz, Germany a year ago. It's on the border and Kreutzlinger, CH was literally right beside it (pic). I kept wondering why anyone on the Swiss side would shop there instead of just walking down the road and buying stuff in Germany.

I found groceries in Germany to be comparable in price to Canada and sometimes even cheaper.

[IMG]border by bcborn, on Flickr[/IMG]
Looking from Konstanz into Switzerland, my pic


PS Konstanz is a beautiful little city, I'd recommend it. Not bombed in WWII no doubt to it being so close to the Swiss town. Apparently they didn't blackout in order to confuse Allied bombers into thinking it was part of Switzerland.

[IMG]IMG_0580 by bcborn, on Flickr[/IMG]

[giallo]

I was in Switzerland last October, and it's easily the most expensive country I've ever visited. A little hot dog wrapped in pastry at the Zurich train station was $18CAD. The gas/rest station along the highway had a Burger King inside, and a Whopper meal was $32CAD! Zurich was a really nice city, but I couldn't wait to get out of there. Way too rich for my blood.

A new report shows that Canadian tourism (both local and international) saw record-breaking numbers this summer. I have no idea where the idea that international tourism was down, but the numbers definitely dispute that claim.

• Video Link

I can only speak anecdotally, but Vancouver was absolutely packed with people this summer. Downtown was as busy as I've ever seen it.

[MolsonExport]

I'll put Konstanz on my list of places to see

[jonny24]

Originally Posted by casper

So the free market works. The government 3-4 years ago brought in programs to flood the market with purpose built rentals. Those building are coming online.

The zoning changes are creating more housing.

The feds look to be focused on keeping the housing momentum going. That is good, because it lays the ground work for increased immigraiton.

Ah yes, government intervention, the hallmark of the free market!

Do you really think we've built our way out, and that it's not due to collapsing immigration?

Would you like to buy a bridge?

[casper]

Originally Posted by jonny24

Ah yes, government intervention, the hallmark of the free market!

Do you really think we've built our way out, and that it's not due to collapsing immigration?

Would you like to buy a bridge?

I think it is a combination of the two.

Free market pressures (without government stepping in) created an incentive for condo construction. A developer could easily finance a project (if they had lots of pre-sales on the books), they could make a quick buck and move on. The free market would also encourage them to put higher end finishes to justify charging a premium for the same unit. There was no incentive to build purpose built rentals.

Free market created airbnb, where you could make significantly more buying a condo and renting it out by the day instead of a long term lease. That created demand for shoe box condos. Developers responded by building smaller and smaller condos.

The government stepped in and changed the dynamics by making loans available to build rentals for long term renters and killing the airbnb investment business model. After two-three years of construction we are starting to see those new building hit the markets.

[Innsertnamehere]

Originally Posted by jonny24

Ah yes, government intervention, the hallmark of the free market!

Do you really think we've built our way out, and that it's not due to collapsing immigration?

Would you like to buy a bridge?

Yes. The market reset happening right now is because of cratered immigration. Given that demographic trends is that large cities (i.e. Vancouver and Toronto) tend to see a constant stream of out-migration, backstopped by new residents flowing in from immigration.

The immigration part has now effectively been zeroed out - Canada's net migration in 2025 is effectively 0. But the people are still moving out to other parts of the country from the city.

Toronto is losing population right now. No wonder rents are dropping! That population loss is happening the most in the demographics that rent - new immigrants. It has nothing to do with unit completions.

Unit completions are at record highs right now as well.. but that's not because of Federal rental housing subsidies. It's because they are completions as a result of the frothed over condo market in 2022.

Completions are going to freefall over the next few years. Toronto's "crane count" is already declining pretty rapidly and new housing starts are few and far between.

In 2-3 years the Feds will juice immigration again back to steady growth, and unit completions will go from like 30,000 a year in Toronto to maybe 10,000. Rents will skyrocket again.

[casper]

More stores of surplus rentals in the Toronto market that tenants are passing on.

What is interesting in CBC pulled some stats and in Toronto over 50% of the condos built after 2016 were purchased as investment properties while only a quart of the older ones build before 2000 were investment properties. I think that means people like the older layouts and building. More evidence that the builders are missing the mark.

The layout the CBC had is from a 267 sq ft condo.

Source: https://www.cbc.ca/news/canada/toron...ndos-9.6968060

[GenWhy?]

Most of the people interviewed are essentially priced out of the newer units anyway.

I've known maybe 4 people and been to their places that lived in apartments that size, but is was due to good price, needs met, and their lifestyle. There were other options out there for them but they opted for these small apartments.

I used to rent a 2-bed basement suite to myself while a friend across town (for the same rent) had this 260sf room close to downtown and work.

[casper]

Originally Posted by GenWhy?

Most of the people interviewed are essentially priced out of the newer units anyway.

I've known maybe 4 people and been to their places that lived in apartments that size, but is was due to good price, needs met, and their lifestyle. There were other options out there for them but they opted for these small apartments.

I used to rent a 2-bed basement suite to myself while a friend across town (for the same rent) had this 260sf room close to downtown and work.

I am not against developers building some of these 260sq units. Clearly there are some people that want it. However they are over built these, they are over priced for what they are and it sounds like the market is saying that.

If I was in the position of picking between a roommate in a 2 bed room vrs having one of these I probably would pick the one bedroom suite.

What is clear is developers need to recalibrate to what the market is asking for.

[whatnext]

Originally Posted by casper

I am not against developers building some of these 260sq units. Clearly there are some people that want it. However they are over built these, they are over priced for what they are and it sounds like the market is saying that.

If I was in the position of picking between a roommate in a 2 bed room vrs having one of these I probably would pick the one bedroom suite.

What is clear is developers need to recalibrate to what the market is asking for.

Do people really want them, or is it what they're stuck with thanks to a string of disastrous government policies?

[GenWhy?]

Originally Posted by casper

I am not against developers building some of these 260sq units. Clearly there are some people that want it. However they are over built these, they are over priced for what they are and it sounds like the market is saying that.

If I was in the position of picking between a roommate in a 2 bed room vrs having one of these I probably would pick the one bedroom suite.

What is clear is developers need to recalibrate to what the market is asking for.

And this was a reason one of my friends opted for the small apartment that was new instead of continuing to live with a roommate. The price for them between the two options was about the same in the same area.

Hopefully Toronto here responds with better policies allowing larger units, but that looks far from happening to me here on the other side of the country.

[Innsertnamehere]

Ultimately those units got built because throughout the last 15 years, while they tended to rent for less overall than the larger, more comfortable units, they didn't rent for less on a per square foot basis.

The race in the condo market was to build as small of a unit that met that unit class as possible. Which means we get ~400sf 1-bed units and 260sf studios.

For example - in 2020, a 400sf 1-bed may have rented for $2000 and a 600sf 1-bed rented for $2300. People were willing to pay more for more space, but on a per square foot basis, that 400sf unit was delivering $5/ft in rent while that 600sf unit was delivering $3.83/ft in rent.

This indicated a strong market preference for smaller units - not just by developers or investors, but by tenants. Tenants were willing to pay far more per square foot for a small unit than a large one.

Why did the market prefer this? Because the market was in a 15-year run of severe undersupply. Tenants when shopping obviously preferred more space (who doesn't!), but rents were rapidly escalating and units so far and few in between, tenants just took whatever unit they could afford - which meant small units.

Now it's 2025, and this has changed. The market is no longer in shortage. Tenants have choice and landlords have to compete instead of the other way around.. and Tenants take the larger, more functional units.

[Changing City]

Originally Posted by Innsertnamehere

Ultimately those units got built because throughout the last 15 years, while they tended to rent for less overall than the larger, more comfortable units, they didn't rent for less on a per square foot basis.

The race in the condo market was to build as small of a unit that met that unit class as possible. Which means we get ~400sf 1-bed units and 260sf studios.

For example - in 2020, a 400sf 1-bed may have rented for $2000 and a 600sf 1-bed rented for $2300. People were willing to pay more for more space, but on a per square foot basis, that 400sf unit was delivering $5/ft in rent while that 600sf unit was delivering $3.83/ft in rent.

This indicated a strong market preference for smaller units - not just by developers or investors, but by tenants. Tenants were willing to pay far more per square foot for a small unit than a large one.

Why did the market prefer this? Because the market was in a 15-year run of severe undersupply. Tenants when shopping obviously preferred more space (who doesn't!), but rents were rapidly escalating and units so far and few in between, tenants just took whatever unit they could afford - which meant small units.

Now it's 2025, and this has changed. The market is no longer in shortage. Tenants have choice and landlords have to compete instead of the other way around.. and Tenants take the larger, more functional units.

I think those unit sizes are smaller than is typically seen in the Vancouver market. There's a new application for a twin tower project near Vancouver General Hospital. An earlier version, last year, met the 35% minimum family housing requirement that the City requires. The new proposal is for dedicated workforce housing for Vancouver Coastal Health and Vancouver General Hospital staff, so has far more studio and 1-bed units. (The design changes are all internal; the towers look the same). Even with this switch the studios average 404 sq ft and the 1-bed units 557 sq ft.

[casper]

Originally Posted by whatnext

Do people really want them, or is it what they're stuck with thanks to a string of disastrous government policies?

I am certain most people want the 1,200 sq ft with ocean/lake view and a concierge in the lobby to receive packages and walk the dog for you. You take what you can get and afford.

The market will reprice these units for what they are worth. That is a bad thing for the current owners, who probably overpaid and need to take a loss. It is a good things for those at the lower end of income spectrum. It is going to turn into low cost property either to buy or rent.

If the ban on airbnb was in place 15 years ago, there units probably would never have been built and our cities would have fewer options at the lower end of the market.

Good/bad? Who knows. We are where we are.

Originally Posted by Changing City

I think those unit sizes are smaller than is typically seen in the Vancouver market. There's a new application for a twin tower project near Vancouver General Hospital. An earlier version, last year, met the 35% minimum family housing requirement that the City requires. The new proposal is for dedicated workforce housing for Vancouver Coastal Health and Vancouver General Hospital staff, so has far more studio and 1-bed units. (The design changes are all internal; the towers look the same). Even with this switch the studios average 404 sq ft and the 1-bed units 557 sq ft.

Most hotel rooms are going to be what 250-300 sq ft? Your going to be hard pressed to fit a washroom, queen bed, desk and chair into anything under 200 sq ft. Odd you can fit a kitchen and washer/dryer into that condo.

I think 404 sq ft is far more reasonable for the bottom end of the market.

[MonkeyRonin]

Some interesting data on recent rental applicants across the country (ie. those who've applied to rent an apartment this year): https://www.singlekey.com/en-ca/cana...t-rent-cheque/

The average recent renter in Vancouver is 33 years old and has a household income of $146,194, while in Toronto they're 34 and make $142,346. These are amongst the highest income demographics in the country, and well above their respective city's median household incomes of around $90,000 and $100,000; yet they're mostly still locked out of home ownership.

A similar story is repeated in most of the other cities profiled, though less dramatically so. Ultimately what happens when housing prices have become divorced from incomes, such that even middle aged households at the peak of the earning years will become life-long renters.

[whatnext]

Originally Posted by MonkeyRonin

Some interesting data on recent rental applicants across the country (ie. those who've applied to rent an apartment this year): https://www.singlekey.com/en-ca/cana...t-rent-cheque/

The average recent renter in Vancouver is 33 years old and has a household income of $146,194, while in Toronto they're 34 and make $142,346. These are amongst the highest income demographics in the country, and well above their respective city's median household incomes of around $90,000 and $100,000; yet they're mostly still locked out of home ownership.

A similar story is repeated in most of the other cities profiled, though less dramatically so. Ultimately what happens when housing prices have become divorced from incomes, such that even middle aged households at the peak of the earning years will become life-long renters.

People need to stop and think about how ridiculous it is that in two of our largest cities a $140k income only gets you a rental apartment. And reflect in the disastrous gov’t policies that got us here.

[YOWetal]

Originally Posted by whatnext

People need to stop and think about how ridiculous it is that in two of our largest cities a $140k income only gets you a rental apartment. And reflect in the disastrous gov’t policies that got us here.

Priced out of the market or choosing not to buy a condo? (or not save the money over previous 5 years neccessary to have a downpayment)