Canada's 'housing bubble' deemed close to bursting

[misher]

Originally Posted by Nite

Investors are not going to throw out money like that by having their investments not make money. But if some left their unit empty, they are still responsible for getting an entirely new building builts and someone will be living in the non-investor units. that's still a net benefit of having those housing unit on the market.

And again, there is absolutely no evidence besides stupid anecdotes that I saw so and so building with the lights off to suggest that investors would leave their units empty. Vancouver vacancy figures for non-rental homes hover around ~2% and for rental homes at ~1%. They were like that before the empty home/speculation taxes and have not changed much since. In comparison, the average in a city like Edmonton or Montreal is around 5%. In the end people in mass have denied facts and figures and instead thrown our conspiracy theories to base their opinions on. A foreign buyer tax when foreign buyers make up less than 3% of the market, an empty home tax when empty homes are near the absolute minimum by % they can be, a requirement to have 20% rentals in new developments when half of new developments end up rented out anyway, restrictions on strata condos to encourage rental development when strata condos get rented out anyway and pay a ton of fees/taxes, fees on developers because developers are the ones behind housing price increases, etc.

Vancouver went left in 2008 and stayed there for over a decade and their "solutions" have led to rapid rent increases. You can even see just where the new left wing government's policies kicked in causing rental supply creation to drop which hit them two years later in 2010. They did this to themselves and they refuse to admit they are wrong. In Vancouver if its not working, we're obviously not trying hard enough! Or its someone else's fault!

Vancouver's Left wing government went after rental owners and in return renters got screwed as no one wanted to be in the rental business any longer. Developments take 2-3 years to complete (back then it was a bit faster) so you can clearly see the drop in rental vacancies in 2010-2011 when their policies were realized. To quote their 2008 election platform

Use city bylaws to keep affordable rental buildings safe, open, and accessible to the homeless.
The City will strengthen and enforce existing property standards bylaws to prevent rental buildings
from being closed—even making repairs at the owners’ expense if necessary. The NPA has protected
slum-landlords by failing to enforce these basic standards. We can’t be afraid to take action to
ensure that affordable rental housing remains safe, clean, and available.

https://cityhallwatch.files.wordpress.com/2014/06/vision-vancouver-platform-2008-election.pdf

[whatnext]

Originally Posted by Nite

Investors are not going to throw out money like that by having their investments not make money. But if some left their unit empty, they are still responsible for getting an entirely new building builts and someone will be living in the non-investor units. that's still a net benefit of having those housing unit on the market.

No, because the investor drives up the price for end-users. For example take an assignment seller who expects to make a hefty mark-up pn his unit, despite having done absolutely nothng to add value. And then there's the examples I posted upthread of foreign developers drastically pushing up the price of land by overbidding for available parcels, on the assumption they can sell "luxury" product to foreign buyers,

[misher]

Originally Posted by whatnext

No, because the investor drives up the price for end-users. For example take an assignment seller who expects to make a hefty mark-up pn his unit, despite having done absolutely nothng to add value. And then there's the examples I posted upthread of foreign developers drastically pushing up the price of land by overbidding for available parcels, on the assumption they can sell "luxury" product to foreign buyers,

Yes that 3% or less of buyers that reduced to ~1% in 2016 after the FBT in BC is responsible for our recent drastic increase in housing prices. Also who cares if we screw renters long as you can buy a home cheap.

In other news, an interesting study in California shows that development fees are contributing to expensive housing. Note that their highest fees are still lower than Vancouver's.

SACRAMENTO — A long-awaited study detailing how much cities and counties charge developers to build housing in California found that such costs are often hidden, vary widely across the state and have slowed growth.
The report, released this week by the state Department of Housing and Community Development, comes as Gov. Gavin Newsom and state lawmakers continue to search for ways to lower construction costs to help remedy a shortage of available homes. The study recommends that legislators push cities and counties to make public their fees, set standards for services so that costs will be more predictable and take into account how they affect housing production....

Costs also fluctuate from city to city. In the Bay Area suburb of Fremont, the study said, fees cost $22,000 per unit for apartment and condominium complexes and $35,000 per unit in single-family projects. In Sacramento, those same fees are $8,500 and $13,000 per unit, respectively.

“While fees offer a flexible way to finance necessary infrastructure, overly burdensome fee programs can limit growth by impeding or disincentivizing new residential development, facilitate exclusion and increase housing costs across the state,” said the report by researchers at UC Berkeley’s Terner Center for Housing Innovation...

“At first glance, this study confirms what we have long suspected: that in some areas, local fees on development are so burdensome that they are reducing the ability to construct needed housing and increasing the cost of living for residents,” Grayson said in a written statement. “If we have any hope of lifting our communities out of this crisis, then our local fees must be aligned with our statewide production needs.”

Grayson said he planned on amending Assembly Bill 1484, which is pending in a Senate fiscal committee, to include a proposal to limit local development fees. The deadline for the bill to pass both houses of the Legislature is mid-September.

https://www.latimes.com/california/story/2019-08-06/high-housing-fees-california

In comparison for Vancouver: (Note this is just one of the many fees layered ontop).



For Vancouver:

In the 2012-2014 capital plan, development contributions totalled $87 million in a budget of $702 million, or about 12 per cent.

In the 2015-2018 capital plan, development contributions totalled $366 million in a budget of $1.085 billion, or about 33 per cent.

In the 2019-2022 capital plan, development contributions totalled $1.046 billion in a budget of $2.8 billion, or about 38 per cent.*

https://thetyee.ca/News/2018/10/01/Vision-Vancouver-Rezoning-Addiction/


Is it any surprise that the price of new housing goes up when the fees to build it also go up? I'm certainly not surprised that the politicians who were elected on promises to increase "affordability" are meanwhile raising fees to decrease affordability.

[SHOFEAR]

Originally Posted by dansk

Edmonton is not different, the comment is misinformed about what a starter home is. Drive to any new "starter" area and the home builder gives options from basic flooring/counters and you do your own yard...some home builders cover the front yard as an incentive that is all. You realize quickly in these neighbourhoods that some people don't realize the cost associated with building a garage, landscaping, and fencing as it can take years for those to be completed like in other cities.

maybe starter homes were a bit of a stretch, but i'm fairly confident in saying that the relatively modest homes I and my friends grew up in in the late 80's/early 90s do not have the same amenities as those homes would today. Do not confuse "fancy" amenities with quality.

Basements are an obvious example. Look at basements form previous era's, specifically, the late 70's early 80's, the start of the modern two story home era... very rarely do you have windows in more than one room and ceiling height makes the other 50% of the basement useless for anything but storage. Modern hoes do not have basements with half the area having 5-6 feet of clearance

Having just sold a "starter" home the comments we got from people touring our home were just as laughable as the above comment. Things such as " there is no granite counter-tops" the basement is unfinished and too boxy".

Doesn't this prove my point? People buying a starter home expect more than the bare basics.


Options available on vehicles are a great corollary. Who doesn't get power windows, AC, cruise, automatic trannies, AM/FM etc on entry level cars? These were luxury items years ago...but are now pretty much standard. You probably can't even buy vehicles that basic these days.

[milomilo]

That's kind of the point of technological progress, as things get cheaper then they stop being luxuries and can be affordable in basic models. Is a car today less affordable to buy than 30 years ago? Probably not I would guess.

[misher]

https://urbanyvr.com/188-east-6th-avenue

Even the government can't build a condo building for cheap in Vancouver. A 9 storey East Vancouver affordable rental project (note that this is east van where land is cheap) is costing us $71 million for 145 units working out to $489,655/unit.

We talk about greedy developers who don't price units affordability saying the city/province should take over real estate development, but I don't think the prices the government could offer for condos would be much different than present day. Remember this is the east side, probably downtown we'd be looking at $800,000/unit.

For the money we're spending on affordable rentals in Vancouver we could buy everyone an actual house in Edmonton with change to spare. Government efficiency for you, build the same for more in a stupidly expensive location.

[someone123]

Originally Posted by misher

Even the government can't build a condo building for cheap in Vancouver. A 9 storey East Vancouver affordable rental project (note that this is east van where land is cheap) is costing us $71 million for 145 units working out to $489,655/unit.

Land in East Van is not cheap. The article you posted points out that the land cost alone was $16.85 million for this one building.

It's also a mixed-use building so the $71M figure is going to more than just the 145 residential units. The article doesn't give enough information to calculate the construction cost per residential unit.

I agree that this is not the path to ubiquitous affordable housing.

[misher]

Originally Posted by someone123

Land in East Van is not cheap. The article you posted points out that the land cost alone was $16.85 million for this one building.

It's also a mixed-use building so the $71M figure is going to more than just the 145 residential units. The article doesn't give enough information to calculate the construction cost per residential unit.

I agree that this is not the path to ubiquitous affordable housing.

Much cheaper than downtown and most of Vancouver. Also leasing the land so actual cost to buy it is probably double or more.

Probably more like $550,000 a unit when you count in if they bought the land.
Then add in $50,000 a unit in savings because it’s the government doing it so less fees and taxes (likely it’s much more than this).

Then add in opportunity cost of capital and a profit margin of say another $100,000.

And we get $700,000 a unit if a private developer was doing this. However new units are selling for less than this in east van so either my additions are too high or the government is overspending.

[misher]

I find it hilarious that this is what we're complaining about. Homeownership in Canada has risen over the past 15 years. In the end people will never be happy.
What age do people expect to own a home by? In the end I think its clear people don't really think about saving until 35+.







https://www.savespendsplurge.com/what-is-the-average-net-worth-of-a-canadian-by-age-and-province/

[whatnext]

[misher]

Things are looking a little grim for BC's Construction Industry and government budgets.

The same sentiment is driving the commercial property market downward. Metro Vancouver land sales plunged 50 percent year-over-year in the first three months of 2019, the slowest first quarter in more than half a decade. The bottom line: land and construction costs remain inflated despite the weakness in residential sales. This erosion in profit margins and the obvious downside risk are prompting developers to think twice.
No one should underestimate the significance of these events for B.C., where real estate and construction account for nearly 25 percent of GDP. With 9 percent of the labour force employed in the building industry, according to StatCan, if you’re looking for a catalyst to slow the provincial economy, this is it. Workers are scrambling to finish the record number of units under way, but once the backlog starts to ease, the pipeline looks pretty thin. In other words, expect less work for people in construction, many of whom migrated here for jobs.

I know we raised development fees and taxes as prices went up, but I'm suspecting government will be unable to bring themselves to now lower them as prices decrease. City of Vancouver's budget called for $500+million in development fees annually for the next four years and we're getting about half that with things slowing even further. The BC Provincial budget called for 2+billion in property transfer tax revenue and I suspect its going to be about half that.

According to a December 2018 budget forecast, the municipal government was projected to see $258 million in revenues in 2019 from DCLs, CACs, and DBs — down from $421 million in 2017 and $885 million in 2018, which was a record year for CACs secured as a result of the approved rezoning of Canadian Metropolitan Properties’ redevelopment of the Plaza of Nations at Northeast False Creek.

https://dailyhive.com/vancouver/vancouver-development-cost-fee-hike-cancellation-august-2019

[zahav]

The commerical construction market is really strong right now, there are always fluctuations in land sales and usually because the amount of supply available is very constrained. It isn't a major concern, and I work for a construction management and analytics company...

[SpongeG]

Edmonton and surrounding area see marked increase in 'ghost homes': report

JASON HERRING Updated: August 26, 2019


More and more homes across the country are sitting empty, especially in central and northern Alberta, shows a report from a Canadian real estate website. IAN KUCERAK / POSTMEDIA

More and more homes across the country are sitting empty, especially in central and northern Alberta, shows a report from a Canadian real estate website.

The report by Point2 Homes examined Statistics Canada data and found that between 2006 and 2016, the cities of Grande Prairie, Leduc and Fort Saskatchewan saw the greatest jump in the share of ‘ghost homes’ in the entire country. The proportion of vacant residences in each of those cities more than doubled, with Grande Prairie topping the list with a 181.4 per cent increase.

While Edmonton didn’t see as dramatic of a jump as some of its neighbouring cities, its share of empty homes rose by 32.5 per cent during the same timespan, giving it the second largest increase of capital cities, behind only Winnipeg.

“The fragile economy, the tough labour market, stagnant wages, doubled by oversupply and a slower pace in economic recovery all influenced the increase in the percentage of vacant homes,” said Andra Hopulele, who authored the study.

Overall, 8.7 per cent of homes in the country were vacant, up from 8.4 per cent in 2006 and 7.8 per cent in 2001. Edmonton is creeping closer to the national average, with seven per cent of the city’s homes currently unoccupied.

Three cities on the Prairies saw a decrease in the number of ghost homes, all in southern Alberta, in Airdrie, Okotoks and Lethbridge.

“As many people in northern Alberta lost their jobs because of the recession, it is fair to assume that some of them migrated towards the southern region, looking for jobs and better economic conditions,” Hopulele said.

...

https://edmontonjournal.com/business/rea...-area-see-marked-increase-in-ghost-homes

[ssiguy]

Obviously money laundering and the drug trade play a huge part in Vancouver's housing crisis and empty home syndrome, in other parts of the country {like as noted above, Edmonton} however there is another issue at work...............zero interest rates. This phenomenon of empty housing really is a fairly recent one and basically unheard of prior toi 2000 except in Vancouver. People are not saving any money as any savings they put aside accumulate almost no interest as opposed to betting on a rising housing market. In today's warped economy you are just as well off sticking your money in mattress as opposed to waiting for any interest to accumulate and conversely taking out a loan is a near zero interest affair. Up until 1990 people actually had savings accounts while today you have people who are technically worth a lot but don't have a cent in the bank.

This has left the entire Western world in a real dilema that could very easily result in a real recession or even depression. To fight off recessions the time homoured {and usually quite successful} strategy was to lower interest rates to get the economy moving again by having people borrow more money for houses, cars etc. What do we do today? When it comes to interest rates, where do you go from down? We have etched out only modest growth since the 2008 financial crisis and this despite practically giving money away and indebted the population up to it's neck.

What usually is in the recession war chest we have been living on for the last decade and now, when recession again is looking like a probability, we find ourselves with no ammunition left to fight off the coming downturn.

[Jaws]

Originally Posted by SpongeG

Edmonton and surrounding area see marked increase in 'ghost homes': report

JASON HERRING Updated: August 26, 2019


More and more homes across the country are sitting empty, especially in central and northern Alberta, shows a report from a Canadian real estate website. IAN KUCERAK / POSTMEDIA

More and more homes across the country are sitting empty, especially in central and northern Alberta, shows a report from a Canadian real estate website.

The report by Point2 Homes examined Statistics Canada data and found that between 2006 and 2016, the cities of Grande Prairie, Leduc and Fort Saskatchewan saw the greatest jump in the share of ‘ghost homes’ in the entire country. The proportion of vacant residences in each of those cities more than doubled, with Grande Prairie topping the list with a 181.4 per cent increase.

While Edmonton didn’t see as dramatic of a jump as some of its neighbouring cities, its share of empty homes rose by 32.5 per cent during the same timespan, giving it the second largest increase of capital cities, behind only Winnipeg.

“The fragile economy, the tough labour market, stagnant wages, doubled by oversupply and a slower pace in economic recovery all influenced the increase in the percentage of vacant homes,” said Andra Hopulele, who authored the study.

Overall, 8.7 per cent of homes in the country were vacant, up from 8.4 per cent in 2006 and 7.8 per cent in 2001. Edmonton is creeping closer to the national average, with seven per cent of the city’s homes currently unoccupied.

Three cities on the Prairies saw a decrease in the number of ghost homes, all in southern Alberta, in Airdrie, Okotoks and Lethbridge.

“As many people in northern Alberta lost their jobs because of the recession, it is fair to assume that some of them migrated towards the southern region, looking for jobs and better economic conditions,” Hopulele said.

...

https://edmontonjournal.com/business/rea...-area-see-marked-increase-in-ghost-homes

So Edmonton has a rate 19.5% lower than the national average. That's my takeaway from the article. I think the author, Jason "RED" Herring, was looking for something clickbateable.

[misher]

Originally Posted by ssiguy

Obviously money laundering and the drug trade play a huge part in Vancouver's housing crisis and empty home syndrome, in other parts of the country {like as noted above, Edmonton} however there is another issue at work...............zero interest rates. This phenomenon of empty housing really is a fairly recent one and basically unheard of prior toi 2000 except in Vancouver. People are not saving any money as any savings they put aside accumulate almost no interest as opposed to betting on a rising housing market. In today's warped economy you are just as well off sticking your money in mattress as opposed to waiting for any interest to accumulate and conversely taking out a loan is a near zero interest affair. Up until 1990 people actually had savings accounts while today you have people who are technically worth a lot but don't have a cent in the bank.

This has left the entire Western world in a real dilema that could very easily result in a real recession or even depression. To fight off recessions the time homoured {and usually quite successful} strategy was to lower interest rates to get the economy moving again by having people borrow more money for houses, cars etc. What do we do today? When it comes to interest rates, where do you go from down? We have etched out only modest growth since the 2008 financial crisis and this despite practically giving money away and indebted the population up to it's neck.

What usually is in the recession war chest we have been living on for the last decade and now, when recession again is looking like a probability, we find ourselves with no ammunition left to fight off the coming downturn.

I don’t know why people keep saying money laundering when the NDPs own report said it’s a minor issue at best and is no more in Vancouver than the rest of the nation.

[SpongeG]

Metro Vancouver retail sales down; flat housing market, money laundering to blame, expert says

BY KAREEM GOUDA AND MIKE LLOYD
Posted Aug 26, 2019

METRO VANCOUVER (NEWS 1130) – It looks like people in Metro Vancouver are holding onto their cash a little more these days.

Statistics Canada suggests the regional retail market has declined, and largely attributes that decrease to a flat housing market, combined with money laundering.

Data shows people are buying less, compared to the same time last year.

David Ian Gray, a retail specialist with DIG360, says when people aren’t buying houses, they’re also not spending money on things that go in them.

“When there’s home sales, there’s a lot of ancillary spending on retail, both in terms of renovations and building supplies, landscaping, that sort of thing,” he explains. “But also, remodeling and interior designs — the home furnishings and furniture.”

Additionally, the crackdown on money laundering in B.C. casinos has people on the lookout for shady transactions, which are also felt in the luxury automotive market, he adds.

...

https://www.citynews1130.com/2019/08/26/metro-vancouver-retail-sales-down/

[craneSpotter]

Here we go again??

How turmoil in Hong Kong could boost real estate prices in Canada

Vancouver Sun, Aug 27, 2019
https://vancouversun.com/real-estate/how...wcm/6d1f0c08-e0fd-4241-ae11-94e9f7487f56

The fallout from Hong Kong residents’ months-long clash with China’s government could put further pressure on the real estate markets of Vancouver and Toronto, as well-heeled expatriates and new Chinese immigrants seek safety in Canada, say market observers.

“Yesterday, we had a listing where three different groups came in on a bus, they were all touring homes in Metro Vancouver and they were all from Hong Kong,” Adil Dinani, a Royal LePage real estate adviser based in Vancouver, said last week. “They’re very keen to bring capital over as the situation in Hong Kong worsens.”

Dinani has noticed a spike in interest from Chinese citizens during the past 60 days. Canada is already a well-trodden path for Chinese residents, with Vancouver home to 500,000 ethnic Chinese citizens, and 300,000 Canadians residents living in Hong Kong.

[whatnext]

Originally Posted by craneSpotter

Here we go again??

How turmoil in Hong Kong could boost real estate prices in Canada

Vancouver Sun, Aug 27, 2019
https://vancouversun.com/real-estate/how...wcm/6d1f0c08-e0fd-4241-ae11-94e9f7487f56

LOL, just like those articles over the last couple years from Juwai touting that searches in China for Canadian rela estate were increasing. Buy now or lose out forever!

[someone123]

Originally Posted by craneSpotter

Here we go again??

How turmoil in Hong Kong could boost real estate prices in Canada

BC should restrict general property ownership to permanent residents and citizens but create special economic zones with as of right zoning for 100 storey highrises that can be purchased by anybody. There would be no capital gains exemptions in those areas. This would decouple the investor and resident markets.

There is no inherent reason why investment dollars from Asia have to result in homelessness and overcrowding in Vancouver. We just have a primitive development regime.