Election housing policy: The bad, the ineffective, and the missing

This post is 3 years old. The data and my views may have since evolved.

With a title like that you can probably guess how unimpressive the current crop of policies have been from my perspective.  That’s not too surprising, since housing is really in the jurisdiction of the provinces and municipalities and most of what the feds can do is spend money and hope the lower levels of government do something useful with it.  The country is angry about housing though, and this is probably the biggest emphasis housing has ever received in a federal election.  That has brought some interesting ideas to the forefront, and I suspect we’ll see more things floated before election time.

Let’s dig through the promises and take a look what they might do.  Note that this is not an exhaustive list of all promises.  The Green Party hasn’t released a platform yet but will be included if they do.  All three platforms are full of vague language like the Conservatives wanting to “encourage” 10 year mortgages, the Liberals wanting to “work with” Indigenous partners on housing, and the NDP promising to “work to end” Veteran homelessness.   Election promises are already wishy washy enough that we’ll focus on only the concrete line items.  A good overview of all of them is here compiled by Brendan Dawe.

Top priority: Pouring on the demand

The housing market has been on fire not just in Victoria but all around Canada.  All the attention has been on the sharp uptick after the pandemic, but the housing market actually started heating up in mid 2019 and the latest performance was simply an acceleration of a previously existing trend.

What do we do when the fire is burning out of control?   Pour on the gas of course.

All the parties have a pile of policy suggestions that are meant to let people allocate more money towards housing.  Of course if you have 10 people competing for 7 homes, letting those 10 people make higher bids won’t help the situation.  But voters expect goodies during an election, so while it’s disappointing how much emphasis is being placed on demand boosting measures at a time when we have excess demand, it’s also understandable from a campaign standpoint.

LiberalsConservativesNDP
Introduce a Tax-free Home Savings Account. $40k if you're under 40 in tax advantaged down payment savings.Raise CMHC insured limit (amount unspecified) and tie to inflation.Introduce 30-year-term CMHC insured mortgages for first time buyers on entry level homes
Increase Home Buyers Tax Credit from $5k to $10kRelax mortgage stress test for self employed and Increase Home Buyers Tax Credit from $5k to 10K
Raise CMHC insured limit to $1.25M and tie to inflation
Force the CMHC to lower premiums by 25%

Despite these measures doing nothing to solve our housing crisis, that doesn’t mean you might not benefit from them.   For example if you have your eyes set on a $1.2M property but can’t come up with the $240,000 down payment, the Liberal’s plans to raise the CMHC limit will allow you to buy it with a drastically lower down payment (about $95,000).   If you can’t swing the payments on a 25 year mortage, the NDP plan to extend amortizations to 30 years for first time buyers could get you into a house.  If you’re self-employed, the Conservatives’ plans to make the stress test less stringent may be just the ticket.

The Liberals get the win (or loss depending on how you look at it) for throwing out the most demand boosting goodies here.  Raising the CMHC insured limit could really increase demand in the $1-$1.25M space, while dropping CMHC premiums by a quarter will save buyers thousands (though it feels dangerously like what led to ICBC’s troubles).  The age discriminating Home Savings Account won’t move the needle but it’s a bone to throw to disillusioned Millennials.

Where they agree: foreign money and financial crime

There’s widespread agreement to do something about foreign money in housing and money laundering.  No surprise, since those measures are wildly popular in BC and it’s politically convenient when the affected people aren’t voters.   The NDP promise a national 20% foreign buyers tax, while the other two say they will outright ban foreign buyers for 2 years.   Though a ban sounds like a stronger position, I believe it’s the opposite.

BC’s foreign buyer’s tax has proven to be effective and robust to court challenges.  The foreign buyers tax reduced the rate of direct foreign buying in Vancouver from around 10% to 2.5% post-tax, while in Victoria foreign buying dropped from 4.2% to 0.7%.   Meanwhile an outright ban may run afoul of USMCA rules, never mind that there seem to be substantial loopholes built in from the start.  The Conservatives say the ban won’t apply to foreign investors “living in or moving to Canada” while the Liberals carved out an exception for those planning to work in Canada or immigrate within two years.  If you think the national measures on foreign buyers will move the market, prepare to be disappointed.

All the parties have agreed to implement a national beneficial ownership registry modelled after the one the we already have, and take various measures against money laundering.  This is unquestionably a good idea.  More transparency can’t hurt, and merely the announcement of such a system goes a long way to making it more difficult to hide wealth in real estate and increases obstacles to money laundering.

The parties also generally agree on a housing first approach to curbing homelessness, and are proposing a variety of measures to increase supports and funding in that area, as well as improving housing for Indigenous communities.

What about all that supply?  The devil’s in the details

The Conservatives have promised to build 1,000,000 new homes, the Liberals are promising to “build or preserve” 1,400,000, and the NDP are promising 500,000 “affordable” homes.

Which promise is the best?   Well it’s very difficult to tell.   First of all let’s take a look at the rate of housing construction in Canada right now.   Before the pandemic it was running at an annual pace of about 210,000/year while recently it has spiked to 260,000 for the 12 months ending June 2021.  Let’s take a nice round number of 250,000/year as a conservative estimate of the current pace of construction (seasonally adjusted the recent quarterly rate is higher).

Converted to annual rates, the Conservatives plan is then an additional 83,000/homes per year, the NDP are planning 50,000 specifically affordable units per year (presumably on top of the existing construction but this is unclear).  If we generously assume the Liberals will actually build 1.4 million homes over 4 years, that is an additional 100,000 a year.

The problem with all of these plans is that they are basically numbers pulled from thin air.  None of the platforms really talks about how they will overcome municipal obstruction to these new homes, which is particularly fierce in the highest priced markets.  There is vague reference to freeing up federal land or underused office space for housing development but this is unlikely to make a dent.  So it really doesn’t matter what the targets are, I simply don’t believe them.

The NDP have the best worked plan to boost the construction of affordable housing and are operating on a more realistic timeline. They are essentially promising to increase spending on affordable housing and fast track those funds, while implementing smart tweaks like waiving GST on affordable housing.  Given the collapse of social housing construction since the 90s, that is definitely a good direction to move in.  What’s somewhat worrying though is a tweet from Jagmeet Singh promising to “close loopholes that allow rich developers to build unaffordable apartment buildings“.  It’s unclear what is meant, but it’s a worrying sentiment given we depend on market housing for well over 95% of our housing supply.   If the new affordable housing comes at the expense of fewer market units, we aren’t making progress.

The interesting parts

Despite the negative tone of this article, there are a couple of interesting ideas floated in these housing platforms.

Conservatives:  Tie infrastructure funding to density increases.  The promise is to “Require municipalities receiving federal funding for public transit to increase density near the funded transit”.  It’s an idea widely hailed by urbanists, but I was unsure whether to put this into the interesting or bad ideas bucket.  If you support public transit and housing, this seems like a no-brainer, but what if you don’t?  Plenty of the same people opposing housing also don’t take transit, and I suspect this will be more likely to reduce transit funding as cities simply refuse to accept the conditions rather than increase housing supply. Councilor Patrick Johnstone from New West also believes it’s more likely to stumble negotiations over transit than speed up densification. The plan has potential, but only if public transit funding is vastly increased, for example by offering twice the normal amount of funding in exchange for increasing density.

NDP:  $5000 for renters.  Though it has been pilloried in the Twitterverse, the NDP’s plan to give rental households in core housing need up to $5000/year is not actually a bad idea.  Some have said this will enrich landlords who will increase rent in response, but this is simply not how the rental market works.  Rents are set by supply and demand and would not be raised in response to some people getting additional benefits.  As the BC expert panel report on supply and affordability pointed out, owners are systematically advantaged over renters by our tax code, and this program could go some ways to correcting that.  It’s no solution to the housing crisis, but it’s a temporary stopgap for those most in need.

Liberals:  Housing Accelerator Fund.   This $4B commitment is basically a transfer to municipalities to improve the supply of housing.  Whether to buy land, hire staff to speed up housing approvals, or subsidize inclusionary zoning.  The Liberals are saying it will lead to 100,000 units which is extremely doubtful and I expect it will be put to spectacularly bad use by some cities, but it could have a real impact for visionary cities that are simply lacking in the resources to get their housing strategies built.

Liberals:  Home Buyer Bill of Rights.  This includes several measures such as banning blind bidding, transparency for sale prices, and a legal right to a home inspection.   How this will be implemented is not explained given this is mostly provincial jurisdiction.  However given that the Ontario Real Estate Association immediately came out swinging against it, they may be on to something.   None of these measures will bring down prices, but they could protect buyers from making irrational bids.  More transparency never hurts.

What’s missing: housing for students

The huge missing piece in every platform is commitments to housing for students.   The expansion in the student population (measured as non-permanent residents in the stats) has been a large driver of population growth.  Dr. Mike Moffat has concisely laid out that a jump in the population growth rate driven mostly by a jump in non-permanent residents in Ontario and our inability to build housing for those newcomers has been a primary driver of house price growth there.

We have similar challenges in BC, and though the pandemic brought temporary relief to the rental market, with returning students the crisis is worse than ever, with many students desperate to find a place for the school year.  The easiest place to house them is on campuses where the land is free and the province has made recent progress on student housing by allowing universities to borrow to construct them.  However the pace of housing construction is still woefully inadequate to address current and future needs.  Though education is provincial jurisdictions, the provinces have historically not said no to free money from the feds, and it would be easy to transfer money to fast track student housing and significantly alleviate the rental crunch in every city with a university in just a few years.    Remember that building rental housing doesn’t just affect the rental market, it also reduces the attractiveness of the resale market for investors and would reduce demand pressures there.

What do you think of the housing platforms so far?  Who’s got the most compelling one?

113 Comments
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Leif
Leif
September 3, 2021 12:20 pm

@Frank I totally agree with “inflation rate far greater than what the government reports”

I look around and everything is up. We were looking at propane fridge and due to shortages they went up nearly 30% over the summer. Will they go down again next year. I highly doubt it.

BUT don’t worry inflation is only 2-3 percent. Total BS.

Frank
Frank
September 3, 2021 3:00 am

Investment in housing is a good way to protect oneself from inflation. I think what we are experiencing lately is an inflation rate far greater than what the government reports. Land, materials and labor all contribute to housing values, all have increased greatly due to demand and labor shortages in many sectors. The trades are especially affected due to the lack of young adults refusing to do manual labor. They have spent their entire lives on computers entertaining themselves and lack the focus to learn something useful. They are also in poor physical condition and are unable to do a full day of manual labor. Ask anyone looking for people to train. My friend works at a box making factory, he’s 51 and the work feeding the massive machinery is very physically demanding. They are also experiencing a labor shortage and are regularly hiring young men. My friend tries to train them and they simply cannot do the work. Technology has its advantages but has created a generation of young people incapable and unwilling to do physical labor, and we find ourselves having to bring in immigrants who are willing and appreciate the opportunity to earn a living. Of course there are exceptions, but generally what I’ve said is true. I believe China is instituting rules limiting the time young people spend on line playing games. Good luck with that.

QT
QT
September 2, 2021 8:47 pm

VGRO is a globally diversified ETF, and there’s pros and cons between investing globally and investing in only US companies. I’ve heard the argument made that US companies are already doing business globally so you don’t need the global diversification, but I’d rather hold part of the international markets directly.

For some it would be fine to invest internationally, but personally I wouldn’t put my money on Chinese and most of other exchange beside the American, German, TSX, and perhaps Japanese due to lack of transparencies.

US has outperformed, but will it forever?

Yes it will, because they carry the biggest stick in the world, and everyone have to use the US dollar to trade till the day that some other currency take over or someone build a stronger arm force than them.

I’m investing for 50 years, not 5.

I’m also in it for the long game, and been investing for 40 years, with self directed for 15 years so far. And, I will continue to do so till the day I die.

Patrick
Patrick
September 2, 2021 8:31 pm

.

Patrick
Patrick
September 2, 2021 7:57 pm

Sure it could go to -60% but historically it has always bounced back.

It took only 5 months in 2020 to bounce back. This isn’t typical, likely due to the government intervention.

On the other hand, it took 13 years for the S&P 500 to bounce back sustainably to the previous highs of 2000, which it did in 2013. (It bounced back briefly in 2007, and then fell again taking another 6 years ).

You’d get tired of reading posts from people who sold at the 2000 top, as you waited 13 years to regain what you had.

If you operated this blog in years 2000-2013, you’d be posting that “historically it has always bounced back, but it hasn’t bounced back yet”.

So yes, it has always, eventually bounced back. You have to ask yourself if you’re willing to wait 13 years for it to happen. If you’re near retirement (age 60+), the answer to that would likely be no.

(Note that this doesn’t include dividends, but also it is nominal returns (not inflation adjusted), and doesn’t include any financial advisor fees or taxes, so all these factors likely cancel each other out)

patriotz
patriotz
September 2, 2021 4:42 pm

It’s not about sitting out and waiting for the crash. It’s about sitting out and waiting until you can buy with your own money. I was talking about the risks of buying stocks with borrowed money.

QT
QT
September 2, 2021 4:21 pm

I do not understand why one would want to buy VGRO when it have only 3-4 years track record, and it is just a portfolio that purchased 7 others ETFs (VUN, VCN, VIU, VAB, VEE, VBG, VBU)?

Personally I think the S&P 500, Dow Jones, or Nasdaq Index ETF are the better way to go, because the American indexes so far has out performed VGRO on the same time period and they have much longer track record.

Nothing wrong except the dividend yield and interest rate, and the stock prices, are not guaranteed going forward.

You are absolutely correct, but sitting out and waiting for the crash has proven that it didn’t work for many people.

Leif
Leif
September 2, 2021 3:34 pm

https://househuntvictoria.ca/2021/08/26/election-housing-policy-the-bad-the-ineffective-and-the-missing/#comment-81911

Hahah @gwac has Hawk ever resourfaced?

I was with him for a while but this has gotten nuts. I see million dollar houses in front of us on the water taken down for new builds. These were already million dollar homes out in North Saanich.

Looking at the lot prices and redevelopment that people bought waiting for the right time…aka housing prices going up 30-40%.

It’s nuts. I have not been on this board for about a year now but thought I’d come check back in.

We bought a place mid covid pandemic, April 2020 for 1.15M, I’m sure its close to 1.7-1.9 now. Places in the cul de sac down the way were on the market for weeks in 2019 for 750’s and one 2 doors down just went for over 1.2M. For a 90’s spec house.

But when the US prints 7 trillion dollars in a few months what should we have been expecting. I didn’t make 800k in that past year but looks like our house did.

Patrick
Patrick
September 2, 2021 3:08 pm

The only market timing we do is when the market crashes like 2020 dump every spare cent we can find in.

If you can market time like that, you’re wasting your talents putting the money into VBAL and VGRO. That’s nickels and dimes compared to the millions you could make.

Stroller
Stroller
September 2, 2021 12:15 pm

The road to wealth for most people at an annual cost of roughly 0.25%:

Open a BMO InvestorLine Self-Directed account where you will repose your RRSP and TFSA. Free trades for most ETFs.

Every month buy as much VGRO as you can until you’re 45, then as much VBAL as you can until you’re 60, and if you’re still contributing after that age, as much VCNS as you can.

Look at your balance once a year for amusement but never more often than that. You WILL tinker if you look, and you WILL waste your own money. NEVER sell anything unless it’s for your retirement or to fund ONE home.

Your balance when you elect to stop working will be within a percentage point or two of the maximum possible and you never had to speak to a manager, or lay awake wondering about margins, or the latest Chicken Little screams from the financial “experts”.

Total time you will expend in managing your money per year about 45 minutes.

Enjoy

Patrick
Patrick
September 2, 2021 11:48 am

No ones forcing you to use an advisor but like I said every study out there says the average do it your self investor underperforms the market by a wide margin.

Well now you’re moving the goalposts, and so we’re making progress. Before you were saying that the self investor underperforms “professional advisers”. Now you’re backing off and saying that the average self investor underperforms “the market.” Big difference,

Because Professional advisers also underperform the market. Here’s a study showing 90% of professional advisers underperformed the market
“ In the investment community, it’s common knowledge that actively managed investment funds typically underperform compared to popular market benchmarks like the S&P 500. ” https://www.businessinsider.com/personal-finance/investment-pros-cant-beat-the-stock-market-2020-7 and
https://www.ifa.com/articles/despite_brief_reprieve_2018_spiva_report_reveals_active_funds_fail_dent_indexing_lead_-_works/

Here’s you saying that all studies are showing self investors underperforming professional advisors.

Actually the dumber way is to leverage and invest on your own in speculative stocks, every study ever done on investing shows that the average “do it your self investor” dramatically under performs the indexes and professional advisors over time.

To put it simply, If someone signs up with a professional adviser, who invests them in index funds, and charges 1% per year , they are going to end up underperforming the index by 1% per year. That’s 10% over 10 years and 50% over 50 years. And underperformance is worse if the professional manager is actively managing the account instead of buying indexes.

patriotz
patriotz
September 2, 2021 10:57 am

every study out there says the average do it your self investor underperforms the market by a wide margin

That doesn’t mean you will. Information on how to track the market with ETF’s is widely available, simple, and free.

If you can’t trust yourself to act logically, by all means pay someone to persuade you to.

Kenny G
Kenny G
September 2, 2021 10:24 am

If it so happened that your idea to get out of the market was a good idea, why would you expect your advisor to concur, when their income is dependent on them talking you out of it?


It’s easy to get out of the market during a volatile period and look like a genius when it falls further, then of course the question is when to get back in, that is usually the problem and I have seen a lot of people sit on the sidelines for years rather then admit their mistake. No ones forcing you to use an advisor but like I said every study out there says the average do it your self investor underperforms the market by a wide margin.

common sense or not
common sense or not
September 2, 2021 8:27 am

well, there are a few disruptors out there: listmenow.ca charges about 300+HST, oneflatfee.ca and a few others. charge about $500 to get your place on MLS without paying 3% on 100k and 1.5% of the rest–> the question is why most people do not use it?

Kenny G
Kenny G
September 2, 2021 7:18 am

Mario and Leo, I am in full agreement with pretty well everything you have said. I don’t believe anyone should be paying an advisor more than 1 percent tax deductible fee including any embedded fees. I still think this is preferable way to go for most people who don’t put in the time to research how to invest and as Leo said one of the main reasons for having an advisor is to stop people from making poorly thought out emotional decisions.

BTW, we did sell our house in the last year and asked for and paid a discounted commission, we had a 2 week subject too offer on a home and didn’t have the time to mess around over Christmas with trying to sell our house that had an unusual legal/illegal structure, as it turned out we were able to sell for slightly more then what we were asking on what we felt was a stretch ask and had only 1 day to close on our house before we had to remove conditions in the new house that by then had several other interested parties waiting for us to close, so in this case I was happy to pay the discounted commission to a realtor who put in a lot of time and energy over the holiday season.

Frank
Frank
September 2, 2021 6:45 am

Noticed a new build on King George Terr., 2250 sq. ft., 6000 sq. ft. lot, almost $2.4 million!!!! What’s going on? Forget about affordable housing, this is ridiculous.

Patrick
Patrick
September 2, 2021 6:29 am

The value of a good advisor is talking you out of bad or emotional ideas.

Many advisors are paid a percentage of what you have invested with them.

If it so happened that your idea to get out of the market was a good idea, why would you expect your advisor to concur, when their income is dependent on them talking you out of it?

patriotz
patriotz
September 2, 2021 6:05 am

Housing, however, remains stable as no one investor can dump their inventory causing prices to drop

Of course investors can dump RE. But that’s not what causes RE busts. What causes busts is when there aren’t enough new buyers who can afford current prices. Investors getting out happens later, when the price decline becomes noticeable.

Frank
Frank
September 2, 2021 5:29 am

All this talk about investing in the stock market is interesting. The recent massive run up, especially in the U.S. was primarily due to the explosive performance of a few high tech stocks( FAANG). If you were lucky to have invested in these stocks, you were a genius. High dividend paying stocks can come back and bite you. A friend of mine lost a lot of money on resource stocks and never recovered. Stocks paying a good dividend are priced for perfection, any bad new and the shares drop, the dividend is cut and everyone rushes for the door. If, when, we do get a correction, maybe 20-25%, many new investors will panic and the correction could be catastrophic. A lot of money in the markets is owned by older people who don’t have the time to wait for a rebound, and they would be quick to liquidate also. Once the big institutional investors decide to dump their holdings, things get ugly quick. Housing, however, remains stable as no one investor can dump their inventory causing prices to drop. Only high interest rates could cause house prices to suffer and given the current government deficits, I don’t see rates increasing any time soon. Canada alone is in the red for 1.6 trillion, if the NDP ever get in power, you can double or triple it.

Marko Juras
September 2, 2021 5:25 am

Nothing wrong except the dividend yield and interest rate, and the stock prices, are not guaranteed going forward.

+1, but the 1 to 2% MER is.

patriotz
patriotz
September 2, 2021 5:23 am

If the Conservatives won the most seats but not a majority, could the Liberals and NDP form government?

You have the perfect example right in BC, in 2017.

patriotz
patriotz
September 2, 2021 5:12 am

However, there is nothing wrong with buying solid stocks that produce 4~6% dividends that more than cover loans at 3% or less.

Nothing wrong except the dividend yield and interest rate, and the stock prices, are not guaranteed going forward.

Not saying never do it – I did it in early 2009. But it’s not a no-brainer.

Marko Juras
September 2, 2021 4:12 am

Let me give you the example of a average household earning 200K gross year, if they can save 25K outside their rrsp every year, why would they not borrow 100 or 200K at 1 or 2 % after tax and pay it off over 4 or 8 years that way the money starts working today, if you think that’s dumb I can’t help you.

You could make the same argument as why not borrow 350k and buy a condo downtown that rents for $1,500 per month. Let’s say $500 for strata fees, taxes, insurance so 3.4% return.

I am sitting on cash right now, not investing (beyond maxed out RRSPs/TSFA) in stock market and not buying any more pre-sale condos; explained here a few months ago -> https://www.youtube.com/watch?v=sZKKTEHLK6Q

Marko Juras
September 2, 2021 4:02 am

every study ever done on investing shows that the average “do it your self investor” dramatically under performs the indexes and professional advisors over time.

Right……just how studies show real estate professionals achieve higher sales prices for properties than comparable FSBO listings, enough to offset their commission fee plus some.

In my opinion the fastest way to get ahead financially in life is to use some common sense, which is not very common at all. Personally I would never ever pay someone 1-2% to manage my investments in this day and age. I’ve been investing in the market since I was 23 yrs old. If I get out at 73 that is 50-100% + compounding. On top of it I’ve been lucky enough to outperform the market. It doesn’t take a genius to buy some Telus, Fortis, CND Bank, CND Rail, etc., etc., just sit back and re-invest the dividends. What is the point of buying Telus with a 4% yield so I can pay someone 1-2% to manage it. Makes zero sense in my mind.

I would also never pay 6%100k+$3%balance for some to list my average house (current average $1.22 million) on a Thursday and take offers on a Monday with input costs for less than $1,000 (photos, floorplan, 3rd tour).

People don’t want to think thought, so they fall for these massive financial service and real estate services fees.

It is not like you need to be an expert in any of these fields. I know nothing about computer science/web development and I met someone 11 years ago that was like “have you looked at wordpress.” I YouTubed wordpress, bought a $49 template the next day, built a website that has served me since while in the same time span I’ve know people in my business that have paid 5k +/- for a website and they need to contact someone whenever there is a problem.

Kenny G
Kenny G
September 1, 2021 9:02 pm

Many professional advisors are just putting their clients into index ETFs. So they will match the indexes. (Less the Costs of the ETF). Then you need to subtract the fees of the advisors (about 1% per year). So a “do it yourself” investor (maybe using a free online robo-advisor site like canadiancouchpotato.com) buying ETFS of the indexes will over perform the professional advisor, because they save the fees.


Sorry, that’s not how many professional advisors manage money, clients could do a lot worse though. I totally agree that the couch potato portfolio is a great options for most do it your selfers, the problem is those people who go it alone often try to time the market and make emotional decisions hence why you see the average self managed client greatly underperform the index, but hey they paid lower fee 🙂

Frank
Frank
September 1, 2021 8:44 pm

I tried to research this and only got confused: If the Conservatives won the most seats but not a majority, could the Liberals and NDP form government? Obviously they would need a total exceeding 170 seats. Thanks.

Patrick
Patrick
September 1, 2021 7:54 pm

Seems like they will optimize for the wealthiest immigrants first. Depends on the size of the fee of course, but given they say some won’t be able to afford it, it seems it will be sizable.

True, but it also optimizes it for people who want their case looked at quickly. It could be for various reasons, like a job offer or family issue, which could apply to anyone. In other cases, like getting a birth certificate or a passport, the option for expedited service has been great, and not only rich people use it.

Gwac
Gwac
September 1, 2021 4:27 pm

I am probably the biggest bull on this site the past decade. My view This is just insane. 1.2m average for a freestanding. 3m for a normal house in Oakbay. No logic to any of this.

Wonder what my friend hawk would say about all this.

Patrick
Patrick
September 1, 2021 4:19 pm

every study ever done on investing shows that the average “do it your self investor” dramatically under performs the indexes and professional advisors over time.

.
Many professional advisors are just putting their clients into index ETFs. So they will match the indexes. (Less the Costs of the ETF). Then you need to subtract the fees of the advisors (about 1% per year). So a “do it yourself” investor (maybe using a free online robo-advisor site like canadiancouchpotato.com) buying ETFS of the indexes will over perform the professional advisor, because they save the fees.

QT
QT
September 1, 2021 1:35 pm

Actually the dumber way is to leverage and invest on your own in speculative stocks, every study ever done on investing shows that the average “do it your self investor” dramatically under performs the indexes and professional advisors over time.

It’s true that the indexes out perform most self direct investors over a long period of time. However, for people who worries then it make perfect sense to focus on dividend stocks to pay interests on the loan rather than focus purely on indexes or growth stocks.

why would they not borrow 100 or 200K at 1 or 2 % after tax and pay it off over 4 or 8 years that way the money starts working today

I would’t be bother to pay off the debt as the interest after tax is so low (below inflation) so it make more sense to keep piling on the investment, because in away the bank/government is paying you to invest in stocks and indexes.

QT
QT
September 1, 2021 1:29 pm

It look like the heat still on at 94% sale to active listing ratio. And, it look like the core price growth is slower than the rest of the CRD possibility because the price is beyond reach for many buyers.

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Kenny G
Kenny G
September 1, 2021 1:09 pm

“A dumb idea. The only way to make it dumber would be to invest through a financial planner that is taking 1% of it per year.”

Actually the dumber way is to leverage and invest on your own in speculative stocks, every study ever done on investing shows that the average “do it your self investor” dramatically under performs the indexes and professional advisors over time.

Let me give you the example of a average household earning 200K gross year, if they can save 25K outside their rrsp every year, why would they not borrow 100 or 200K at 1 or 2 % after tax and pay it off over 4 or 8 years that way the money starts working today, if you think that’s dumb I can’t help you.

SomeGuy
SomeGuy
September 1, 2021 1:07 pm

Stroller: “The list of countries where private healthcare is illegal may give you a hint at how badly we’ve gone wrong: North Korea, Cuba, Canada…….”

Hah, man, I’ve suspected you were trolling for awhile now, but this just too obvious.

rush4life
rush4life
September 1, 2021 11:52 am

VREB release for August:

Victoria housing market continues to adapt to long-term lack of supply

September 1, 2021 A total of 831 properties sold in the Victoria Real Estate Board region this August, 15.1 per cent fewer than the 979 properties sold in August 2020 and 0.5 per cent fewer than the previous month of July. Condominium sales were up 31.7 per cent from August 2020 with 345 units sold. 21.5 per cent more condominiums sold in August 2021 than in the previous month of July. Sales of single family homes were down 29.9 per cent from August 2020 with 357 sold. 9.8 per cent fewer single family homes sold in August 2021 than in the previous month of July.

“Year over year numbers might indicate a slowing of our market, but there are two important factors to consider,” said Victoria Real Estate Board President David Langlois. “The first is that our market is starved for inventory. It should come as no surprise that with half the available inventory of last August we sold fewer homes this August. Without the significant lack of inventory we’re experiencing, sales would most certainly have been comparable to, if not greater than, last August. The second factor is that the previous ten-year running average for sales in the month of August is 675 properties, so with 831 properties changing hands this August, it is clear that our market remains very robust and that lack of supply is the biggest issue impacting attainability for our community.”

There were 1,120 active listings for sale on the Victoria Real Estate Board Multiple Listing Service® at the end of August 2021, 56.7 per cent fewer properties than the 2,584 available at the end of August 2020 and 11.8 per cent fewer than the 1,270 active listings for sale at the end of July 2021.

The Multiple Listing Service® Home Price Index benchmark value for a single family home in the Victoria Core in August 2020 was $889,800. The benchmark value for the same home in August 2021 increased by 22.4 per cent to $1,089,400, a 0.7 per cent increase from the previous month of July. The MLS® HPI benchmark value for a condominium in the Victoria Core in August 2020 was $483,400, while the benchmark value for the same condominium in August 2021 was $540,600, an 11.8 per cent increase.

“The federal election will focus on each party’s proposed policies and programs for housing,” added Langlois. “The primary issue for housing attainability has been and remains one of supply. While increasing a consumer’s ability to pay through tax free savings accounts, extended mortgage terms, or altering stress test provisions may assist some buyers to obtain housing, it will do nothing to slow the price appreciation that the systemic lack of housing supply continues to fuel. Specific commitments such as incentivising municipalities with infrastructure grants for density improvements, increasing on-campus housing, supporting co-op and leasehold developments and utilizing surplus federal lands to directly add to housing stock can all provide a path to more supply. Debates about bidding processes and foreign buyers do not offer material solutions to improve supply nor the attainability of housing. The municipal, provincial and federal governments’ failure to support real growth and diversity in housing stocks has created the market conditions we find ourselves in today. Housing policy matters and we hope that all voters consider what each party proposes and the potential impact to our market.”

QT
QT
September 1, 2021 11:09 am

A dumb idea.

I wouldn’t write it off so quickly if the investor is savvy enough with self direct investing. Perhaps, the risk is not for everyone that can’t stomach a leveraging proposition than non leveraging. However, there is nothing wrong with buying solid stocks that produce 4~6% dividends that more than cover loans at 3% or less. And, then there are high risks royalty and income type stocks and funds that produce upward to 20~25% dividend yield.

Dividend yield:
Telus – 4.33%
BCE – 5.34%
Enbridge – 6.70%
TC Energy – 5.78%
Great-West Lifeco – 4.57%
CIBC – 4.02%
Bank of Nova Scotia – 4.61%
Rogers Sugar – 6.58%

Patrick
Patrick
September 1, 2021 10:32 am

It’s very simple to borrow on a secure line of credit to buy stocks and the interest is tax deductible, there is nothing unusual or difficult about it.

A dumb idea. The only way to make it dumber would be to invest through a financial planner that is taking 1% of it per year.

Frank
Frank
September 1, 2021 10:16 am

I’ve actually heard that the health system in Cuba is quite good, if you have the means to access it. Lots of people go to Mexico for dental work (and botched plastic surgery). But when something like covid comes along, the infrastructure can’t support the hospitals with necessary supplies ie. oxygen, drugs, etc… Canada currently has a health care crisis as people needing life saving procedures are being put on hold while we battle the dreaded covid virus. When we look back on the last 2, soon to be 3 years, the collateral devastation from covid restrictions will far outweigh the pandemic’s final affects.

ks112
ks112
September 1, 2021 9:26 am

@ Josh, I agree with your opinion on snowbirds. lol the whole idea of snowbirds is to enjoy sunshine and summer while your primary residence is experiencing winter. I wouldn’t call spending a winter in Victoria or anywhere on the Canadian westcoast sunshine and summer.

Patrick
Patrick
September 1, 2021 8:47 am

Jagmeet Singh just announced that capital gains taxes would be increased to 75% on properties and stocks.

While I don’t agree with that (increasing cap gains tax), it is to be expected from the “tax the rich” party (NDP).
It’s not like they’ve been hiding it.
Remember the NDP’s “tax the rich” chant after the 2019 federal election, and NDP leader Singh just calmly says “that’s exactly what we’re going to do.” OK, fair enough, and kudos to the NDP for letting people know before the election.
https://globalnews.ca/video/6065088/federal-election-2019-tax-the-rich-chant-erupts-at-ndp-headquarters

Stroller
Stroller
September 1, 2021 8:43 am

In the present circumstances I can see why many Canadians who own foreign property would wish to sell up but some of the reasons itemised here are not material:

“The american dollar is an uphill battle”.

At the moment the Canadian dollar is the strongest against the US dollar it has been in almost ten years, so not true in recent history.

” inadequate medical infrastructure is also unnerving in some of these countries”

There are any number of impoverished nations who have health care systems infinitely superior to Canada simply because the leadership has decided to serve their citizens medical needs rather than parade their ideological predilections. The list of countries where private healthcare is illegal may give you a hint at how badly we’ve gone wrong: North Korea, Cuba, Canada…….

patriotz
patriotz
September 1, 2021 6:46 am

Singh has not made any proposals with respect to the TFSA. Why not stick to what he has actually proposed, plenty to criticize there. That goes for the other leaders too.

Frank
Frank
September 1, 2021 6:08 am

Singh could take away the TSFA, since mostly “wealthy” people ( who scrimped and saved) own them. Increasing a tax 50% that would negatively impact people that are all eligible voters, isn’t going to impress anyone. I’m a firm believer that money is better spent when it remains in the economy and not squandered by political idealism.

patriotz
patriotz
September 1, 2021 5:35 am

It could also be political suicide as most people over 50 have substantial investment in stocks.

Not in taxable accounts though. Stock ownership in taxable accounts (i.e. other than pension plan, RRSP, TFSA, etc) is highly skewed toward the wealthy. As is taxable RE ownership.

The longstanding NDP policy is for capital gains to be taxed the same as employment income, i.e. 100% inclusion, so Singh is going easy on it. 🙂

Frank
Frank
August 31, 2021 8:47 pm

Jagmeet Singh just announced that capital gains taxes would be increased to 75% on properties and stocks. I think that will blow up in their face as investors elect to hold onto their investments, reducing the supply of houses being brought onto the market, waiting for another government to reverse the tax. It could also be political suicide as most people over 50 have substantial investment in stocks. Trying to solve problems of one group at the expense of another, is not a good idea. People hate losing money.

Frank
Frank
August 31, 2021 8:32 pm

Josh- I’ve been saying that all along, snowbirds have reassessed their U.S., Mexican and other Central American/ Caribbean destinations. I would never feel comfortable owning property in a foreign country, especially one that is not that politically stable. I have friends who sold their U.S. properties a few years ago thanks to Trump. Not only is insurance expensive as you grow older, inadequate medical infrastructure is also unnerving in some of these countries. Covid has made jumping on a plane more complicated and the prospect of isolating after every trip is a real pain. Then there’s the ever increasing weather disasters that we rarely experience in Canada. Your friends are not alone, more seniors are opting to stay close to home. Winters are getting milder thanks to climate change. Living in these exotic places sure is enticing, but not without their drawbacks.

Josh
Josh
August 31, 2021 5:21 pm

Had an interesting conversation with friends of my parents. They’re Florida snowbirds looking into converting to Victoria snowbirds. The american dollar is an uphill battle and the difference in insurance pays for the difference in living costs by itself. I didn’t think Victoria was competing against Florida for snowbirds but there’s one anecdote saying it does.

Deb
Deb
August 31, 2021 1:52 pm

As for the hikers and bikers using the Goose, now, they’d probably be only to glad to ride a comfy train istead.

You really don’t get exercising for enjoyment & health do you?

QT
QT
August 31, 2021 1:00 pm

It’s not really so good, as the people who purchased in ’94, built a new house, currently valued at around $400K. However, to compare the return with other opportunities, I suppose one should add in the actual or potential rental income over the 27 years.

What I meant was that people treat a house as an investment instead of a home, therefore you can’t expect it not move up and down like the stock market.

It all about supply and demand, so houses price are go up in more desirable cites where people move to, over that of small towns that is experiencing stagnant or decline in population.

As an example China/Shanghai population growth and migration vs housing price.

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Kenny G
Kenny G
August 31, 2021 9:14 am

“Leveraging stocks psychologically and practically is much more difficult and generally is not advisable.”


It’s very simple to borrow on a secure line of credit to buy stocks and the interest is tax deductible, there is nothing unusual or difficult about it. As long as your buying high quality stocks, have stable employment and a long time horizon you’d be crazy not to at current interest rates.

The other option is to take a mortgage against a fully paid for house to invest, this is how the rich get richer. Some people say they can’t sleep at night borrowing to invest, i couldn’t sleep at night not taking advantage of these low rates to borrow. Our savings are being devalued due to inflation, this is a way to help keep up.

Vic&van
Vic&van
August 31, 2021 7:57 am

Re 7 percent annual return over decades for Heron vs 9 percent for TSX and 10 for the S&P 500. The house can be leveraged for long periods of time. Even at average 50 percent dow assuming a gradual pay down, your annual rate of return will be for like 15 percent. Leveraging stocks psychologically and practically is much more difficult and generally is not advisable.

patriotz
patriotz
August 31, 2021 4:30 am

Well what about the City of Langford, BC

As I said previously, not a “new town” in my view as it’s just another suburb of Victoria. Doesn’t appear to fit in your view of one either:

Creating some new towns instead of continually expanding Toronto and a handful of other cities, would be a good idea too

CanSpeccy
August 30, 2021 8:35 pm

Also, in calculating the return on the investment in 2720 Heron St since 1994, one should add in the return on the imputed rent if invested in similar rental housing.

CanSpeccy
August 30, 2021 7:12 pm

” re Heron. It last sold in 1994 for $215,000 so a nice run for whomever has resided there for 27 years.
8.95 X return isn’t bad, however for the same period, the Dow Jones Index grew 10.05 X”

It’s not really so good, as the people who purchased in ’94, built a new house, currently valued at around $400K. However, to compare the return with other opportunities, I suppose one should add in the actual or potential rental income over the 27 years.

CanSpeccy
August 30, 2021 7:09 pm

“Sooke Hills is a park and is part of the watershed.”

The park and the watershed do not occupy the entire space. A high density, traffic-free, energy-efficient city for 100 thousand people could be accommodated on a mere 800 hectares, as proposed here.

But a 3 km diameter parcel of land in Saanich, or a floating platform in Saanich inlet might be better locations.

QT
QT
August 30, 2021 5:36 pm

Further re Heron. It last sold in 1994 for $215,000 so a nice run for whomever has resided there for 27 years.

8.95 X return isn’t bad, however for the same period, the Dow Jones Index grew 10.05 X, and the NASDAQ Index grew 20.01 X.

QT
QT
August 30, 2021 5:18 pm

On crown land. Out in the Sooke Hills for example.

Good luck with that, Sooke Hills is a park and is part of the watershed.

Kenny G
Kenny G
August 30, 2021 5:01 pm

Further re Heron. It last sold in 1994 for $215,000 so a nice run for whomever has resided there for 27 years.


Assuming no renovations over that time, which it appears there wasn’t, that’s about a 7% rate of return, of course it helps when someone pays you 300K or 400K over expected value.

Stroller
Stroller
August 30, 2021 3:02 pm

Further re Heron. It last sold in 1994 for $215,000 so a nice run for whomever has resided there for 27 years.

“Give you joy of it” as an Austen character might say.

CanSpeccy
August 30, 2021 3:01 pm

“How would new towns and cities be created”

On crown land. Out in the Sooke Hills for example. Connect to Victoria with high speed rail along the Goose right of way, and it would disturb no one. As for the hikers and bikers using the Goose, now, they’d probably be only to glad to ride a comfy train istead.

CanSpeccy
August 30, 2021 2:58 pm

“New towns created from scratch haven’t had much success in Canada”

Well what about the City of Langford, BC, founded in 1992. Rated this yearthe most livable community in Canada .

As someone said:

“when a man is tired of Langford he is tired of life for Langford provides all that life has to offer. ”

Or at least it has much to offer, including the “Langford Llamas” and more, including building lots for a third the price of an Oak Bay lot.

Introvert
Introvert
August 30, 2021 2:56 pm

Canada tax agency reveals secret study linking home prices to millionaire migration, five years after freedom-of-information request

https://www.scmp.com/news/china/diplomacy/article/3146957/canada-tax-agency-reveals-secret-study-linking-home-prices

QT
QT
August 30, 2021 2:28 pm

How would new towns and cities be created if we have town councils and NIMBYs protests at any type of development at every chance they get?

patriotz
patriotz
August 30, 2021 2:01 pm

Creating some new towns instead of continually expanding Toronto and a handful of other cities, would be a good idea too.

New towns created from scratch haven’t had much success in Canada (or a lot of other countries) in modern times (I’m not talking about “new towns” that are actually suburbs, like Kanata).

But there are already towns in pretty well every place in Canada where it makes sense to have one, and people have been moving to them from the big cities lately. How has that been working out?

canspeccy
August 30, 2021 10:52 am

Re: House on Heron St

Kenny, thanks very much for the info.

Yes, at almost 40% over assessment (July 2020), the price seems amazing, although pretty much in line with other sales no more than a block away: 2768 Dunlevy went for 28% above assessment and 2664 Dunlevy went for 65% above assessment. And these numbers are consistent with the national trend with prices reported by the CBC in April to be up 31% year over year.

One has to suspect that there is something not very bright about Justin Trudeau, a man who expects public endorsement for pouring gasoline on the housing fire, while doing his best to shutter the economy and destroy the currency with no better pretext than a rather nasty variant of one of the common cold viruses.

Kenny G
Kenny G
August 30, 2021 10:06 am

2720 Heron sold for almost 2MM at 1.925, I can’t believe it, small lot and home is close to being a tear down or complete gut. Unbelievable

canspeccy
August 30, 2021 9:59 am

What about demand, as in lowering immigration rate from 1% of population per year to, say, 0.1%, until housing demand eases. That’s actually the very sensible policy of Maxime Bernier’s People’s Party.

And why not restrict borrowing in the way it was limited a generation ago. As I recall, in the 70’s mortgage payments were restricted to one third of income with only half of a wife’s income being counted. That would surely put the skids under prices.

Creating some new towns instead of continually expanding Toronto and a handful of other cities, would be a good idea too.

PS, If anyone can tell me what 2720 Heron St sold for, I’d be most grateful.

freedom_2008
freedom_2008
August 30, 2021 7:40 am

With news of delta virus spreading and 22 infected people in the sunset lodge, I can’t blame anyone who stopped renting room out to strangers, be it student or not. Maybe UVic can setup some portable housing on their parking lots/vacant land for their homeless students? They knew their on campus housing size, and they knew about Covid and it’s impact for over a year, how can they just have 2100 on campus beds for 21,000 students?

patriotz
patriotz
August 30, 2021 7:14 am

Why giving people more money to buy homes won’t make homes more affordable

We get it of course, but it’s good to see that someone else does.

Marko Juras
August 30, 2021 1:23 am

Yes. That’s another point in favour of building more long term quality rentals (ie purpose built rentals). Until then everything helps

Yes which Saanich takes 5 years to approve and then it takes another two years to build.

Developments are being blocked over one stupid tree and then we are surprised there is no housing.

Frank
Frank
August 29, 2021 8:45 pm

If I was going to school in a strange place I’d look into housing before enrolling. What person with half a brain wouldn’t. Victoria is notorious for tight vacancy rates. The weather is mild, they can live in a tent.

totoro
totoro
August 29, 2021 5:10 pm

why do they insist on going to school there.

Did you miss the bit about how this year is much harder than it has been in the past?

How do you suppose students were supposed to know about the housing issue? They will have missed the enrollment date for other institutions. Usually the deadline is the preceding January 31. Far too late to just apply somewhere else.

UVic provided no warning that housing would be in such short supply, probably because they didn’t realize either until it became apparent that people were not renting rooms like they used to pre-pandemic.

Frank
Frank
August 29, 2021 12:03 pm

If it is so difficult for students to find accommodations in Victoria, why do they insist on going to school there. What’s wrong with the other schools across Canada? I went to school outside of Atlanta 40 years ago and accommodations were plentiful. I actually bought a mobile home and was white trailer trash for 3.5 years, best time of my life.

Patrick
Patrick
August 29, 2021 11:37 am

A bad combination of higher than usual enrolment due to covid delay last year, people not renting rooms due to virus exposure fears, and the increased conversion of guest rooms to home offices.

Yes. That’s another point in favour of building more long term quality rentals (ie purpose built rentals). Until then everything helps

totoro
totoro
August 29, 2021 9:34 am

If you have a room to rent to a student they sure are needed at the moment. You can post here: https://www.places4students.com/Places/School?SchoolID=oYgon4Kqkp0%3d

A bad combination of higher than usual enrolment due to covid delay last year, people not renting rooms due to virus exposure fears, and the increased conversion of guest rooms to home offices.

https://www.timescolonist.com/news/local/most-difficult-year-for-uvic-students-hunting-for-housing-as-landlords-stay-on-sidelines-1.24354317

Introvert
Introvert
August 28, 2021 5:46 pm
Introvert
Introvert
August 27, 2021 8:44 pm
Introvert
Introvert
August 27, 2021 8:43 pm

Multi-building proposal pitched for Capital Iron area; could include a new art gallery

Reliance Properties … is reimagining 6.7 acres of Victoria’s downtown in what would be one of the biggest developments in the city.

https://www.timescolonist.com/real-estate/multi-building-proposal-pitched-for-capital-iron-area-could-include-a-new-art-gallery-1.24353975

Patrick
Patrick
August 27, 2021 12:29 pm

Apologies to all for a short highjack: Does anyone in the group have experience of getting a PCR in Victoria? Where?
As of August 30, you can get a same day PCR at the Victoria Aiport. https://vancouverisland.ctvnews.ca/covid-19-testing-site-to-open-at-victoria-airport-1.5562554

Stroller
Stroller
August 27, 2021 9:33 am

Apologies to all for a short highjack: Does anyone in the group have experience of getting a PCR in Victoria? Where?

Rush4life
Rush4life
August 27, 2021 8:42 am

Steve Saretsky echoing on twitter what Leo has been saying about September. ‘lots of listings coming’. Could be a very hot sales month.

patriotz
patriotz
August 27, 2021 6:59 am
Frank
Frank
August 27, 2021 5:30 am

What happened to all the cities China built that were uninhabited? Have they been filled or are they still empty? Haven’t heard anything about this lately.

QT
QT
August 27, 2021 2:15 am

del

mover
mover
August 26, 2021 10:01 pm

Shenzhen average salary is 33% lower than Hong Kong, but housing price is 60% lower, so who is worse?

The entire Chinese real estate is leasehold, but the definition of their leasehold is completely different than ours. (my last post said Mumbai, not Dubai)

QT
QT
August 26, 2021 9:22 pm

I’d say these measures are effetely slow down their housing price to the moon. Shenzhen quoted by Frank is a perfect example. That city is right beside Hong Kong, with higher GDP, IT booming, middle class salary had increased a lot since 2016, but their housing price is still 60% lower than Hong Kong. When compare to Mumbai, I’d say housing price in Shenzhen is smoking cheap.

Shenzhen average salary is 33% lower than HK, and Shenzhen built up only in the last 2 decades compare to over a century of development in HK.
There is a big different between Shenzhen and Dubai, because Shenzhen residential are 70 leased (Leasehold) by the Chinese government (40 years for commercial, 50 years for industrial) and UAE property are Freehold. Unlike the UAE foreigner are not allow to own real estate in China, thus Dubai prices skyrocketed was due to more than 80% of the real estate was own and build by foreigner cash.

Patrick
Patrick
August 26, 2021 5:13 pm

Banks already offer terms up to 7-10 years at rates determined by the open market. And the rates look pretty reasonable to me. A lot less than I ever paid when I had a mortgage.

The existing 10 year term mortgages are a bad deal, for reasons described below and explained further in the linked article.
The PC promise to implement them would presumably solve the issues raised by BOC Governor Poloz. – changing regulations, stress test rules, and facilitating longer term funding by creating new markets which requires legislation This isn’t me saying this, it’s the BOC Governor (Poloz).

The BOC wants them, but to become popular they need legislation to make them work like they do in the USA. Mortgages in the USA are a great deal for buyers, as it protects them from inflation and provides certainty of the monthly payment for 25 or 30 years.

In short, there is a lot of work for the government to do to make ten year mortgages happen on a wide scale. For example, it is HARDER to pass the stress test for a 10 year rate than a 5 year fixed or variable rate.

These points are discussed in the article.

https://www.canadianmortgagetrends.com/2019/05/bocs-call-for-longer-mortgage-terms-raises-questions/

“I found it interesting that Poloz is calling on others to make this happen when, in my opinion, it’s the policy-makers in Ottawa who have actually completely taken away any incentive to lock into a longer-term fixed rate,” Laird said, pointing to the stress test’s added qualification burden on longer term rates.

For a 10-year rate at 4.00%, the borrower instead needs to qualify at 6.00% vs. a qualification rate of 5.34% for a shorter term fixed or variable rate, Laird noted. “In my opinion, the tools are in (Poloz’s) hands and the other regulatory bodies in Ottawa. If they’re thinking, ‘Let’s get more borrowers into longer-term fixed rates,’ they can make that happen.”

McLister added that if the government is serious about this, it would also ave to facilitate cost-effective long-term funding to support those mortgages.

“Government-sponsored funding vehicles (like the NHA MBS and Canada Mortgage Bond programs) currently only support up to 10-year terms and are dominated by 5-year securities,” he noted. “Private mortgage-backed securities, in their current incarnation, would not have tight enough spreads to allow for competitive 30-year rates.”

Butler agreed, saying, “Vast changes would be required in our mortgage financing system.”

Tyler
Tyler
August 26, 2021 4:49 pm

Leo,
Great article. Is it possible part of the increase in prices is a permanent and unavoidable outcome of ever-higher density levels in North America? The middle class of Europe hasn’t been able to afford single family for generations.

mover
mover
August 26, 2021 4:14 pm

“So far none of the measures slow down the ascending housing price in China.”

I’d say these measures are effetely slow down their housing price to the moon. Shenzhen quoted by Frank is a perfect example. That city is right beside Hong Kong, with higher GDP, IT booming, middle class salary had increased a lot since 2016, but their housing price is still 60% lower than Hong Kong. When compare to Mumbai, I’d say housing price in Shenzhen is smoking cheap.

“work around on high down payment is borrowing from shadow lenders.”

There may be few people using shadow lenders for their unique situations, but not the most because they charge 15-30% or even higher interest rate.

patriotz
patriotz
August 26, 2021 2:52 pm

So far none of the measures slow down the ascending housing price in China.

Maybe because the government doesn’t really want prices to go down? Much has been written about the shaky financial system behind China’s RE market. Makes the US in 2008 look rock solid.

patriotz
patriotz
August 26, 2021 2:49 pm

. Encouraging longer term mortgages (7-10 years instead of 5) by “creating a new market” for them

What does that mean exactly? Sounds to me like the government intervening in the mortgage market to keep rates down. No thank you.

Banks already offer terms up to 7-10 years at rates determined by the open market. And the rates look pretty reasonable to me. A lot less than I ever paid when I had a mortgage.

https://www.ratehub.ca/best-mortgage-rates/10-year/fixed

Garden Suitor
Garden Suitor
August 26, 2021 2:03 pm

Lots of people and politicians would include your “fair share” to include an annual capital tax on your assets, and full taxation of any stock profits or dividends. Are you “more than happy” to pay that too?

Sure, provided that we use progressive asset taxation brackets. Someone with a $100k net worth should have their assets taxed less as a percentage than someone with a $1B net worth.

Same thing for yearly cap gains. There should be a 100% exemption until some basic threshold (ex. $1000) and goes through brackets to 0% exemption at another threshold (ex. $100k).

If the rich are contributing back to the society from which they’ve gained so much, I’m happy to do so as well with my relatively meagre assets/income/cap gains.

QT
QT
August 26, 2021 12:30 pm

Don’t let the party leaders see this.

So far none of the measures slow down the ascending housing price in China.

Many cities only allow maximum of 3 home per family, hence people are getting divorced on paper so they can get around this, and the work around on high down payment is borrowing from shadow lenders.

QT
QT
August 26, 2021 12:24 pm

Like you said all parties are hellbent on pouring more gas into the fire, so to me not one party is better than the others.

As for student housing. I think reeling back the quantity of education and focus on the much needed quality of education will stem the student housing shortage.

Frank
Frank
August 26, 2021 12:10 pm

Don’t let the party leaders see this.

D72073FA-224C-49E2-AF4F-18478414E87C.png
Patrick
Patrick
August 26, 2021 11:40 am

The conservatives have some good ideas that could help all homeowners, not just first time buyers.
1. Encouraging longer term mortgages (7-10 years instead of 5) by “creating a new market” for them, which would reduce the need for stress tests and keep mortgage payments stable. The USA has markets like this for much longer mortgages, so hopefully doing this in Canada means better rates and more availability for 10 year terms.
2. Remove stress test on renewal.
3. Promising not to touch the personal residence exemption.

And others … Here is the text from their plan…

https://cpcassets.conservative.ca/wp-content/uploads/2021/08/25132033/5ea53c19b2e3597.pdf

To make mortgages more affordable, we will:
• Encourage a new market in seven- to ten-year mortgages to provide stability both for first-time home buyers and lenders, opening another secure path to homeownership for Canadians, and reducing the need for mortgage stress tests.
• Remove the requirement to conduct a stress test when a homeowner renews a mortgage with another lender instead of only when staying with their current lender, as is the case today. This will increase competition and help homeowners access more affordable options.
• Increase the limit on eligibility for mortgage insurance and index it to home price inflation, allowing those in high-priced real estate markets with less than a 20% down-payment an opportunity at home-ownership.
• Fix the mortgage stress test to stop discriminating against small business owners, contractors and other non-permanent employees including casual workers.
Canada’s Conservatives will never tax Canadians’ capital gains on the sale of their principal residence, something many within the Liberal party are threatening to do.

Commentator
Commentator
August 26, 2021 10:52 am

Allow more CMHC 0% construction loans for below market housing. Currently the application criteria are evaluated in a bureaucratic form with over a hundred bullet points that the developer must meet to qualify.

patriotz
patriotz
August 26, 2021 10:44 am

I expected the usual nonsense and contradictions from the Liberals and Conservatives but I’m disappointed by the NDP. It’s not even debatable that extending mortgage amortizations will push prices up – it’s exactly what happened under Harper and he was criticized for it. Ditto home buyers credit.

The rise in house prices over the past year has greatly contributed to rising inequality in Canada. If the NDP aren’t willing or able to promote policies to bring prices down, they should simply focus on increasing supply of secure, affordable rentals. That in itself may help cool the buying market if there’s a feasible alternative.

rush4life
rush4life
August 26, 2021 10:34 am

Leo on chart comparison it says under Conservatives: “Relax mortgage stress test for self employed and” – incomplete sentence – maybe ‘non salaried’? Cheers.

Patrick
Patrick
August 26, 2021 10:06 am

the NDP’s plan to give rental households in core housing need up to $5000/year is not actually a bad idea.

If they raise your taxes to do this giveaway, is it still a good idea? If so, if the government have more good ideas like this, is there an upper limit on raising your taxes?

Silky
Silky
August 26, 2021 9:59 am

Don’t forget the PPC’s housing policy.

Do Nothing

Patrick
Patrick
August 26, 2021 9:57 am

I am more then happy to pay my fair share.

That’s based on your assumption of what your “fair share” is. Lots of people and politicians would include your “fair share” to include an annual capital tax on your assets, and full taxation of any stock profits or dividends. Are you “more than happy” to pay that too?