May: Strong end to the spring market

May continued the same market trend that we’ve been observing since February in Victoria.  Sales are sluggish but strengthening as buyers adjust to higher rates, while new listings remain low.  That kept inventory low, the market balance in favour of sellers, and prices on an upward trend last month.

Inventory continued to be suppressed in May, down some 30% and 25% from the 10 year May average for single family and condos respectively.  There was some hope on the new listings front, where the rate of new listings recovered somewhat from April compared to normal seasonal levels.  New listings for condos were only 5% below the 10 year average, while detached came in at 15% less.  With some luck, new listings will stay high a bit longer as sales turn down for the year.

In context of the historical range, you can see the same pattern.  We’re well above the 20 year lows, but that is mostly due to the very low listing levels in April and May 2020.  I may revise these charts to show the 25-75% percentile range in the future as well.

Spring market activity (sales and new listings) usually peaks in May, which means we will very likely see both decline for the remainder of the year.  Inventory generally peaks in June, which means that our current stock of 1642 active residential listings is about as good as we’re going to get this year.

In terms of seasonally adjusted sales, the slow increase in sales that we’ve now seen for the past few months continued, with both single family and condo sales reamining on an increasing trend.   We are still way off of the levels we saw post-pandemic, but it’s close to pre-pandemic sales levels which were healthy.

Or if you prefer the un-adjusted data, we are getting closer to the midpoint of the 20 year sales range.  Again the 2020 data distorts this view somewhat.

 

Residential inventory increased from April, but it was less than what we would normally expect for this time of the year, causing seasonally adjusted inventory levels to continue their slide.

Showing it without adjustment, you can see that our current inventory has been moving slowly closer to the bottom of the range in recent months.

Market conditions measured by both the sales to new listings ratio and months of inventory continued to shift towards sellers, though at a somewhat slower pace than earlier in the year.

Over-ask sales remained at about one in five properties, similar to the levels in April.  If we dip below two months of inventory bidding wars would likely explode, but I doubt this will happen now that we’re likely past the peak sales rate for the year.  With market conditions that are both in sellers territory and tightening, it’s no surprise that prices are continuing to increase, up some 2% in every category from April, and up about 5% from the start of the year.

Some believe the strengthening of the market this spring is a dead cat bounce which is now coming to an end and the price declines we saw in 2022 will continue.   It’s true that there are more anecdotes about slowing markets across the country and it’s quite possible we’re seeing early signs of slower here as well with sales starting to decline while new listings remained somewhat stronger to end the month.  But I personally don’t buy the dead cat bounce theory, for several reasons:

  1. Dead cat bounces are wildly over-predicted compared to when we actually see them.  Every time the market has strengthened after a period of weakness someone is calling it a dead cat bounce, but the second drop never happens.  Even during a real price crash like 1981, though prices bounced briefly in 1983 before stagnating for a few more years, that was already very near to the lowest that prices would go.
  2. I expect the market will weaken in the latter half of 2023 due to recession, further rate hikes, more listings, or simply buyer exhaustion from poor affordability.  That would end the price gains we’ve seen, but it would take a pretty severe shock to push us back into rapid price declines.    Possible, but right now I don’t see what would trigger it.  In my opinion, a long period of stagnation as the impact of high debt levels grind on the economy is more likely.
  3. Low inventory is a buffer to shocks.  As mentioned last month, we don’t know what’s coming, but the market becomes more resilient to shocks when market conditions are in favour of sellers.  Last year the market got slammed by rising rates, but only 9 months later it started to recover.  That resilience came largely from how stupidly tilted towards sellers we were at the time.  That’s quite different than 2008 for example, when we had 4300 properties on the market in May due to a slowing market and heading straight for the financial crisis that would crush demand.  If we suddenly ended up with an extra 1000 listings due to some shock later this year it would certainly weaken the market, but we’d still be far from a supply glut.

At the same time, none of the pressure on consumers has really dissipated.  With rates remaining high and prices on the upswing, affordability has at best remained constant and potentially even deteriorated somewhat since the peak of the market.

The Bank of Canada fretted in their recent Financial System Review about high debt levels and what that means for the ability of consumers to withstand a recession.  “Elevated interest rates and declining house prices have reduced the financial flexibility of many households. While most households are proving resilient to increases in debt-servicing costs, early signs of financial stress are emerging. The share of households affected by higher interest rates will continue to rise over the next few years as homeowners renew their mortgages.”  Now declining house prices are in the rearview mirror across the country, but strength there as well as other areas of the economy continuing to outperform may attract another rate hike which will increase the pressure on consumers.  So far only a third of mortgage holders are exposed to higher rates, but the rest will have to deal with them within 3 years.

Those payment increases are not trivial either.  If rates don’t drop in the meantime, fixed mortgage holders that got those ultra low pandemic rates and variable rate holders that have been kicking the can down the road with extended amortizations will face payment increases of 20-40%.  On the one hand that gives borrowers some time to prepare and higher than usual income gains will help, but it’s a huge diversion of cash out of the economy and into debt servicing.

Despite the strength in the market that’s why I’m not changing my forecast for a period of stagnation in the years ahead, especially for attached housing.   Though Victoria real estate has a habit of surprising to the upside, I don’t see how we shake off those conditions with no effect.

Perhaps that’s a good thing for house hunters, since it effectively removes the price issue from consideration.  When prices are boring you can remove them from the equation and focus your decision to buy or wait on personal factors.

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Introvert
Introvert
June 6, 2023 7:27 am
Friendly
Friendly
June 6, 2023 3:31 am

This is a one year old chart , I am trying to delete it before the bear attack.

Toronto Sentiment.png
Frank
Frank
June 5, 2023 8:56 pm

Interesting commentary on airbnbs. The economist they had critique the discussion basically wanted to burn airbnb owners at the stake.

Frank
Frank
June 5, 2023 8:07 pm

CBC evening news bringing attention to airbnbs vs. long term rental. Could be the start of new regulations. Imagine how many properties will come to market and provide long term rental or ownership.

James Soper
James Soper
June 5, 2023 3:38 pm

Housing analyst on BNN- The housing market is on a tear. In Toronto, sales to list ratio higher than during the pandemic.

And yet prices are still down year over year in every category.

Frank
Frank
June 5, 2023 1:34 pm

Housing analyst on BNN- The housing market is on a tear. In Toronto, sales to list ratio higher than during the pandemic. Lots of investors with lots of money. What can the government do about that when they are also willing participants?

patriotz
June 5, 2023 1:03 pm

how is the price to income ratio so much higher?

Here are some factors that come to mind. First Croatia has a very small ratio of workers to pensioners There are only 1.3 workers per 1 pensioner. All of these people get included in the income statistics, but it’s a fair bet that it’s not the pensioners doing the buying. Nor the 3rd world workers noted below.

https://www.euractiv.com/section/politics/news/croatian-companies-import-more-workers-to-tackle-shortages/

Second, Croatia has a very large expat workforce in places like Germany, who are working there because wages are much higher than at home. Goes all the way back to the Yugoslavia era. Undoubtedly a lot of this money goes into the Croatian RE market, but it’s not counted in domestic income stats. There’s also a lot of buying by foreigners.

Third, all the way down the Adriatic coast there’s a substantial amount of private residences partially rented out in the tourist trade. This income might not be reflected in the statistics.

Bottom line if you are going to compare things like price to income you need to look closely at demographics.

Arrow
Arrow
June 5, 2023 10:36 am

As a climate refugee who recently moved to Victoria for its more temperate weather, I do not think that there can ever be enough housing built here to substantially alter the supply/demand problem. Interest rates and realestate cycles may dampen the influx, but growth will be forced; hopefully city councils will be able help with mitigating solutions rather than attempt to stop the tide.

Arrow
Arrow
June 5, 2023 10:23 am

the roadblock the NIMBYs put up to block development.

Yes indeed SaanichAdam. I think that is because NIMBY by itself is an untenable argument and so some value-word such as trees (or in the case of Cottonwood Cove, salmon) must be used in an effort to legitimize the argument whether it is valid & logical, or not .

SaanichAdam
SaanichAdam
June 5, 2023 10:06 am

@James Soper – I agree. It seems it’s often the case that the trees are the roadblock the NIMBYs put up to block development. How about remove the tree, put 3 in it’s place AFTER the build? Why is this so hard. To be clear, I’m a believer in climate change and it’s mitigation but the tree restrictions and rules are a ridiculous bureaucratic barrier.

SaanichAdam
SaanichAdam
June 5, 2023 10:04 am

@Marko Juras – You’ve commented here somewhat before on the differences in RE between Canada and Croatia, but how is the price to income ratio so much higher? What is it about Croatia that makes it so expensive or desirable to it’s inhabitants. FWIW there are many more expensive places than Canada, but what are the fundamentals in Croatia that make it so great to live and so expensive? Is Victoria headed this way in your opinion?

James Soper
James Soper
June 5, 2023 9:38 am

And we also learned that he’s against sprawl but had no issue taking down a bunch of trees to build a mansion in Central Saanich a few years back.

I don’t understand this huge thing with trees in Victoria. The province has had lumber as it’s #1 export for a century and people are worried about a couple of trees that are under 50 years old growing in an area that has been completely logged out.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 5, 2023 9:14 am

IMF research indicates that low interest rates contributed to the boom in house prices, as did policy support provided by governments and workers’ greater need to be able to work from home. In many countries, including the United States, online searches for homes reached record levels. Along with these demand factors, house prices also increased as supply chain disruptions raised the costs of several inputs into the construction process.

While fundamentals of demand and supply can account for much of the buoyancy of housing markets during the pandemic, policymakers are nonetheless keeping a close watch on developments in this sector. The increases in house prices relative to incomes makes housing unaffordable to many segments of the population, as highlighted in the IMF’s recent study of housing affordability in Europe. The post-pandemic working arrangements could also exacerbate inequality concerns as high-earners in tele-workable jobs bid for larger homes, making homes less affordable for less affluent residents. The surge in house prices has also had an impact on headline inflation in some countries and could contribute to more persistent inflationary pressures.

Over a decade ago, a turnaround in house prices marked the onset of the Global Financial Crisis. However, the twin booms in household credit and house prices in many countries before that crisis—and many previous housing crashes—appear less prevalent today. Hence, in a plausible scenario, a rise in interest rates, a withdrawal of policy support as economies start to recover, and a restoration of the timely supply of building materials, could lead to some normalization in house prices.

Patrick
Patrick
June 5, 2023 6:29 am

. If P/I is calculated for cities, then the ratio for big cities in places such as the Philippines and Vietnam would be well over 100.

Yes, that sounds right. Numbeo standardizes on a 90 sq meter apartment. (1,000 sq foot)
They do have prices listed for cities. A Canadian city doesn’t make the top 100 by price/income.

https://www.numbeo.com/property-investment/rankings_current.jsp

Manila Philippines is listed with a P/I of 41, but that’s for an average 1,000 sq foot apartment, so it could easily get to >100 for an above average apartment, other dwelling types, nice neighborhood etc.
Dubrovnik Croatia P/I is 17, much higher than any city in Canada.

Frank
Frank
June 5, 2023 5:16 am

Given the relative high prices for a home in Vietnam, it’s no wonder why people want to move here. I doubt more supply would ever fix the problem in many countries. Probably not much room to develop either.

QT
QT
June 4, 2023 11:09 pm

Price to Income Ratio Canada 9 and Croatia 13, lol. Croatia is way way worse than that.

I think the calculation is the average price of city and rural combine. If P/I is calculated for cities, then the ratio for big cities in places such as the Philippines and Vietnam would be well over 100.

PS. My cousin daughter is a licensed pharmacist in Vietnam, and it would take 102 years of her gross income to buy an average house in her home town. That would be 397 years for a small 540 sqf house in Saigon district 1, or 233 years for an average 820 sqf 2br condo.

Marko Juras
June 4, 2023 10:39 pm

Canada is still among the safest, and most affordable place to live in the world, even with a high rate of immigration policy.Property Prices Index by Country 2023 — https://www.numbeo.com/property-investment/rankings_by_country.jsp

This isn’t even close to reality. Price to Income Ratio Canada 9 and Croatia 13, lol. Croatia is way way worse than that. My cousin is a world class oncologist+PHD and his wife is a family doctor+PHD and they barely got into a 1,200 sq/ft condo in Croatia.

Things are bad in Canada, but people just don’t have a good feel for our bad things are elsewhere (in terms of housings). People adapt, make due with less living space, and still live happy productive lives. I have many high educated family members that sometimes speak upwards of 4 languages living in very small spaces and they are perfectly happy.

It is interesting, here I go to a party and everyone wants to talk real estate. Go to a party in Croatia no one cares about real estate. Not sure what the obsession here is.

Marko Juras
June 4, 2023 10:27 pm

Mark my words, the backlash is coming one way or another.

Our healthcare is in shambles. You can’t get any sort of preventitive screening let alone adequate treatment and I don’t see anyone backlashing or protesting and that is kind of life and death at times. So why would someone backlash over having to live in a condo in Langford in one of the best places in the world? You can still buy a SFH in other parts of Canada for under 300k if that floats your boat.

Canada is a rich country but as a society instead of hiring more doctors, nurses, construction workers we opt to hire more tree preservation coordinators at the City of Victoria at $100k/year salary to block and delay development.

What is there to backlash about? We care more about tree branches than health care or housing. Doubt that will change anytime soon.

Marko Juras
June 4, 2023 10:21 pm

Yes, this excerpt from the TC article nicely sums up what we are already seeing in Victoria. That these missing middle multiplexes are providing luxury priced units, not affordable housing. And they’re sold, not rented. Just more gentrification.

If the City of Victoria has a reasonable permits process for the missing middle guaranteed you would see a lot of six plexes built for long term rent.

caveat emptor
caveat emptor
June 4, 2023 10:19 pm

How many properties do agents own? It would be pretty hard not to drink the Kool-Aid you sell.

Zero to many. Not all real estate agents are wildly successful. And they are prone to the same issues as others – overspending, financial hiccups like divorce and crappy investments. I only know three agents in Victoria. #1 – owns zero properties, lives in a rental after a divorce, #2 – owns 2 properties – house they live in plus a rental up down duplex, #3 – owns the half duplex they live in.

Marko Juras
June 4, 2023 10:18 pm

Speaking of easy, blaming politicians is easy. It’s also easy to forget that we’re the people who elected them. We collectively complain about housing affordability, but anytime a politician gets down to specifics, they run the risk of being decapitated. Everyone wants more affordable housing in somebody else’s neighbourhood. This latent selfishness runs across the entire political spectrum, and when a proposal comes to someone’s neighbourhood, their objections are almost always packaged as a faux-altruistic concern for the environment. It’ll be interesting to see how the NDP’s base reacts to being told they need to get off their asses and contribute to the solution. I think I know how it’ll turn out, but since THC gummies are legal, I’d like to leave the door cracked for a tiny sliver of optimism.

wow, well said! As I told Leo last week if Leo and I went door knocking on apartment units in Langford asking those paying $2,600/month for some crappy 2 bed 1 bath wood-framed condo about things like the do you believe in a the new tree bylaw that might restrict development guarnateed everyone would answer along the lines of “yea, of course, just look at all the blasting and clear cutting in Langford, it is disgusting.”

Even those that need housing the most don’t want to listen to reality, or do not understand reality. This is why I think we are so screwed on housing.

You said it perfectly, politicians are a reflection of people who elect them.

Marko Juras
June 4, 2023 10:14 pm

You left out the time machine. I think also that young Canadians are spending more time in school than is economically beneficial and are left with large student debts. When I finished university I owed $3600 and paid it all off before buying my first house in Vancouver.

Not sure it is super wise to pay off student loans quickly. I dragged mine out over 10 years. In 2008 or 2009 I got some millennium bursary or whatever it was called because of my student loans. It was in the thousands of dollars. Then because I had student loans it made my applications for bursaries/funding from VIHA look better when I did my masters. Then I think the interest on the student loans was tax deductible? Etc., etc.

While in 2008 I bought BMO shares at $33 share with a dividend more than double the return of the student loan interest.

Marko Juras
June 4, 2023 10:08 pm

but the paper I read on this demonstrated that tearing down and rebuilding for ex. four units is not that profitable in Victoria. Maybe only for someone with a very special set of skills and circumstances like Marko.

Four units is a no go on profit. Six units barely.

Marko Juras
June 4, 2023 10:06 pm

a new to town builder sold his all holdings in another province after he built them around 30 single family specs etc, and he said he is regretting not starting out here in YYJ as each single build here could potentially profit at least 15% of total cost( that’s average 400k for each build) where he was only making 70-80k for 10 months work at his home town…..same process, same timeline.

15% profit of 400k is like a $3.5 million new spec? That is insanely risky. Not very many, if any, of those sell each month.

He also shocked for the rent here for a new build home 3500/month for a 1600 sqft newer build

As in he is shocked that the rent is so high for a 1,600 sq/ft new build, or shocked as in the rent is only $3,500 on a million dollar home?

Barrister
Barrister
June 4, 2023 9:42 pm

Everyone should play nice.

airbnb4me
airbnb4me
June 4, 2023 8:48 pm

Rich Clownman is at it again I see. Jealousy is an awful look my “educated” friend. Thanks again for the laughs.

Rich Colemann
Rich Colemann
June 4, 2023 5:16 pm

“Combative stance”

Maybe that’s what’s needed to counter the continuous BS from the local RE industry. Status quo is not good for anyone.

I’m glad MJ is keeping quiet.

Arrow
Arrow
June 4, 2023 4:56 pm

” stick their head in the sand and mute any opinions that they dont like”
–It is your more likely your combative stance than your opinions that some don’t like.

“blocking me so I can’t ask him”
–More likely MJ is filtering you out so he doesn’t have to notice any more of your badgering.

hereweare
hereweare
June 4, 2023 4:55 pm

a new to town builder sold his all holdings in another province after he built them around 30 single family specs etc, and he said he is regretting not starting out here in YYJ as each single build here could potentially profit at least 15% of total cost( that’s average 400k for each build) where he was only making 70-80k for 10 months work at his home town…..same process, same timeline.

He also shocked for the rent here for a new build home 3500/month for a 1600 sqft newer build, and he was also shocked how much locals pay for rent in YYJ downtown around 2600 for a small two bed room. I asked him what is going to do after he moves here, suggested to buy older homes and adding more equity and keep renting all of them out-

maybe that’s another reason why YYJ housing price is not going down- local younger kids are dealing with rich people around canada ( and international buyers) here find a place to live. It’s a good for the ones who already own but not so well for the the ones have less opportunity to make a dime yet( who are less established )

Introvert
Introvert
June 4, 2023 4:53 pm

Does anyone know how many investment properties Marko owns in total? (Here and abroad).

Marko seems to own a handful of condo units in Victoria, which he bought presale. Does he own stuff in Croatia? I dunno; you could probably figure that out by watching his YouTube channel. And we learned he’s building a multiplex in Sooke. And we also learned that he’s against sprawl but had no issue taking down a bunch of trees to build a mansion in Central Saanich a few years back.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 4, 2023 4:43 pm

How many properties do agents own? It would be pretty hard not to drink the Kool-Aid you sell.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 4, 2023 4:39 pm

Singapore and its missing middle approach. Really interesting. Completely different culture. You can find it on youtube.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 4, 2023 4:35 pm

I just finished a seminar on 99 year prepaid leasehold sites to be developed by private construction companies that were and are still being developed by the Musqueam First Nation on 21 acres near the University Endowment Lands. Very interesting topic. It was a bit of a puff piece with little analytical analysis and missing some important details. Eventually it will house about 2,600 people in high rises and townhomes as either rentals or owner occupied leasehold units. I think it is going to be a really nice village of housing distinct from the rest of Vancouver.

Personally, I prefer comprehensive developments like this, instead of the piecemeal approach to housing that the province is attempting.

Rich Colemann
Rich Colemann
June 4, 2023 4:26 pm

I really have no idea how much of the market is owned by workers of the industry. But, when you talk to those people and all you hear is “Prices going up” and “Buy now or regret it” it makes you think they would be following their own advice and putting every penny they have into this risk free and tax free investments.

Rich Colemann
Rich Colemann
June 4, 2023 4:21 pm

Just curious and he’s blocking me so I can’t ask him.

VicREanalyst
VicREanalyst
June 4, 2023 4:20 pm

Why does it matter what Marko or anyone owns?

Rich Colemann
Rich Colemann
June 4, 2023 4:07 pm

Does anyone know how many investment properties Marko owns in total? (Here and abroad).

Rich Colemann
Rich Colemann
June 4, 2023 4:03 pm

“The employees of any given sector don’t have enough demand to support that sector. It’s just simple arithmetic – they are only getting paid a small fraction of what the product sells for.”

I wonder how much of the Victoria housing market is owned by people who build houses for a living, RE agents, mortgage brokers, and developers?

It must be significant share of the market.

Airbnb4me dropped out of school to pursue a career in construction and now owns 5 properties…

Do RE agents make more on commissions or on appreciation of their own investment properties?

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 4, 2023 3:58 pm

No one ever said that increasing supply doesn’t help. It would be nice to increase Non-Market Housing, but someone has to pay to subsidize the renter, as the cost of the land and construction doesn’t change. In the words of our resident curmudgeon. “It’s just simple arithmetic”

What I don’t seem to hear from anyone on this blog are ideas on how to build non-market housing without breaking the provincial piggy bank? And I don’t expect many ideas as providing affordable new housing is only possible when you define affordable as paying above the average rental price. Eventually, these complexes will become affordable in say 25 years. But until someone can figure out how to build a 25 year old building today – it isn’t going to happen.

If a solution is found, it isn’t going to come from the construction industry or a real estate agent. Their faculty for innovative solutions is too narrow. It will likely come from a blogger or student studying real estate that can still draw outside of a box.

totoro
totoro
June 4, 2023 3:10 pm

Here in Canada in 2023, it does seem like increasing supply just increases demand.

I’d disagree. Increasing supply helps. Even if you are building market housing this still helps. However, affordable rentals are where we need to put a lot of time and effort and money IMO if we are going to keep our immigration levels high. If there was secure and affordable family-oriented rental housing available, as well as more townhouse style units that work for families for sale, this would help reduce demand.

I see that Eby is in Singapore right now to review their approach to missing middle housing. Singapore also has a lot of immigrants. They did a bunch of things, including a huge number of subsidized basic rental apartments that were later offered for sale to tenants for a low rate on a 99 year lease.

totoro
totoro
June 4, 2023 2:59 pm

Net worth is what they report to your heirs when they read your will. Net wealth is what you’re worth when you’re living and residing in your house.

This is a Frank definition. This is also a privileged position. Simply writing off your equity/position because you are residing in your asset does not mean it is not real, really hard to attain for others, and provides you with financial security that can be accessed through a HELOC, sale or remortgaging. Plus the reduction in cost of living re. shelter costs over time and the fact that you get a tax-free windfall when you sell whether it goes to you or your heirs.

I’m not sure what is coming for housing in the next 10-20 years but there will need to be more done.

We know there will be a move towards densifying through zoning reforms. Existing homeowners may be incentivized to provide multi-gen housing for family members through this, but the paper I read on this demonstrated that tearing down and rebuilding for ex. four units is not that profitable in Victoria. Maybe only for someone with a very special set of skills and circumstances like Marko.

I suspect we do land at a wealth tax of sorts in the form of capital gains on residential home equity above a certain amount with this going towards affordable purpose-built rentals on public lands. We need a lot more of these and this seems like the fairest place to get the money. Not a popular move but I don’t see where the money comes from otherwise.

Rich Colemann
Rich Colemann
June 4, 2023 1:31 pm

“If increasing the supply of housing led to an equivalent increase in demand the busts circa 2008 in the US, Ireland, Spain etc. never would have happened.”

Way more factors at play with the “bust circa 2008 on the US…”

Here in Canada in 2023, it does seem like increasing supply just increases demand.

patriotz
June 4, 2023 1:19 pm

If increasing the supply of housing led to an equivalent increase in demand the busts circa 2008 in the US, Ireland, Spain etc. never would have happened.

The employees of any given sector don’t have enough demand to support that sector. It’s just simple arithmetic – they are only getting paid a small fraction of what the product sells for.

Rich Colemann
Rich Colemann
June 4, 2023 1:09 pm

Great points whateveriwanttocallmyself. I wish everyone would read what you write, but it seems like some members of this blog would rather stick their head in the sand and mute any opinions that they dont like and that don’t reinforce their preexisting views.

Arrow
Arrow
June 4, 2023 12:32 pm

long term continuous commitment by governments to build rentals

There we have an answer to my earlier question: governments need to assist the building of housing over the long term to keep it affordable, but that is not a recipe for reelection and so we get pendulum type changes.

Arrow
Arrow
June 4, 2023 12:20 pm

retracted comment

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 4, 2023 12:19 pm

Basic supply and demand illustrates if you build more then prices are most likely to decrease.

However, real estate is unlike other commodities such as cans of soup. where you can keep the factory running for an extra hour and the only increase is in the variable costs of production in order to meet demand.

In contrast, the act of building more housing also increases demand and this effect on demand is magnified in periods of low vacancy rates as you need to import more workers. New workers that need a place to rent or purchase. By increasing supply you are also increasing demand. This is exacerbated in that investors seeing prices and rents increasing will also enter into the market place and that increases demand for new construction and the need to import more workers. In the short term you will not be able to meet demand and prices will continue to rise.

In the long term, as the rental market is saturated with newer construction, vacancy rates will start to rise and construction will slow as investors that are no longer seeing gains begin to opt out of the rental market. The demand for new projects slows due to fewer investors, unemployment rises and the transient labor force leaves the city for other opportunities . The vacancy rate continues to climb and there is increased competition in the rental market with the older stock of rentals having to reduce rental rates to attract renters away from the newer stock.

Because of the way we chose to build housing, in a free market system with profit incentives, we are forever caught up in this boom/bust cycle. And governments tend to come late into the boom/bust cycle as they are reacting to shortages rather than being proactive and not allowing shortages to occur. In order to sustain affordable housing there has to be a long term continuous commitment by governments to build rentals in both the good times and the bad times so that shortages do not occur. That’s not likely to happen when we change governments every four years.

Most of us are locked into the idea that the free enterprise system left to its own will solve all problems. But that is not always true. From the first day we opened up our first lemonade stand we quickly came to the realization that if we put less sugar and lemons into our lemonade we would increase profits. Left to its own we end up selling more water than lemonade and we go out of business. That’s the free enterprise system left on its own without any checks or balances. We get inferior quality projects that have cut costs and buildings that begin to topple over or the windows start popping out onto the streets below.

But we can not get off this construction train as there are few if any options left but to build until we saturate the market place or the economy goes into a recession first or a black swan event happens. All markets come to an end.

Arrow
Arrow
June 4, 2023 12:12 pm

…but when it works, it saves me from being influenced by your insulting tone.

Rich Colemann
Rich Colemann
June 4, 2023 12:02 pm

Arrow, don’t hide behind you mute button. That really is pathetic.

patriotz
June 4, 2023 12:00 pm

That’s one way of looking at it,

According to the study that O’Toole himself commissioned Harper’s biggest blunder was the dog whistles that cost the Conservatives 905 and the Vancouver suburbs, which they have yet to recover.

And don’t underestimate the impact of the NDP losing Jack Layton. He drew a lot of votes from the Liberals and the party hasn’t been able to get them back since.

Rich Colemann
Rich Colemann
June 4, 2023 11:59 am

Good point James. It was actually a majority of voters who voted against JT for the popular vote in 2015.

I don’t disagree with the notion that many Canadians were looking for change after many years of fiscal prudence with Harper.

But nearly a decade later, are those people happy with the result? Are you satisfied with the work the JT team has done since being elected in 2015?

Arrow
Arrow
June 4, 2023 11:58 am

A mute-filter malfunction has me responding to a muted entity:
A Protestant work ethic may help some adherents afford a house, but it isn’t “a solution to housing affordability” overall.

James Soper
James Soper
June 4, 2023 11:50 am

It’s also easy to forget that we’re the people who elected them.

That’s not actually how the system works. We elect representatives. Liberal party didn’t even get a 1/3 of the vote. The conservatives under Erin O’Toole actually got 200 thousand more votes than the Liberals in the last election. The majority of the votes get thrown out.

patriotz
June 4, 2023 11:45 am

You left out the time machine. I think also that young Canadians are spending more time in school than is economically beneficial and are left with large student debts. When I finished university I owed $3600 and paid it all off before buying my first house in Vancouver.

Frank
Frank
June 4, 2023 11:29 am

Here’s a solution to housing affordability- Stay in school longer, pay attention, study hard, work harder, and don’t waste valuable time on stupidity.

Arrow
Arrow
June 4, 2023 11:11 am

I think he was chosen based on his looks…

That’s one way of looking at it, another is that enough voters were looking for a change (from the Harper years’ neoliberal policies of deregulation, privatization, rolling tax cuts, and public-sector austerity).

Rich Colemann
Rich Colemann
June 4, 2023 10:52 am

What we need is a political LEADER. Someone who is not afraid to make the tough decisions that we need. We need our politicians to show strength and LEADERSHIP.

Rich Colemann
Rich Colemann
June 4, 2023 10:49 am

“Speaking of easy, blaming politicians is easy. It’s also easy to forget that we’re the people who elected them.”

Who’s “we?” I didn’t vote for JT. The people who did vote for him can take the blame. I think he was chosen based on his looks and because who his daddy was. He wasn’t elected based on his brains or work experience.

Rich Colemann
Rich Colemann
June 4, 2023 10:40 am

Who knows what the conservatives would have done if they had been elected in 2013, rather than our ridiculous pm. However, I think we should be able to agree that Harper did a relatively good job with the economy and conservatives generally tend to be fiscally prudent and relatively good at managing taxpayer money.

Maggie
Maggie
June 4, 2023 10:40 am

To see what I mean, you can simply observe the 2 biggest differences in housing economics between cities that have expensive versus inexpensive market housing. Typically, these 2 features are land use policy and property tax. Places with inexpensive market housing have few to no restrictions on land use and home construction as well as high property taxes; versus all of the expensive coastal markets do exactly the opposite.

Places like Alabama have very low property taxes and very low property values, so I don’t think it’s as simple as you’d like to believe. The fact is, the west coast is expensive because it has nice weather and is generally a desirable place to live. But I agree that reducing restrictions on land use would help, which is what Eby is currently attempting to do. Whether it works is another question, because I’m sure the NIMBYish jurisdictions like Oak Bay and North Saanich will be looking for other ways to throw sand in the gears. I’ve heard nothing substantive from B.C. United about housing affordability. I doubt they will campaign on the ideas of higher property taxes and land use liberalization.

Speaking of easy, blaming politicians is easy. It’s also easy to forget that we’re the people who elected them. We collectively complain about housing affordability, but anytime a politician gets down to specifics, they run the risk of being decapitated. Everyone wants more affordable housing in somebody else’s neighbourhood. This latent selfishness runs across the entire political spectrum, and when a proposal comes to someone’s neighbourhood, their objections are almost always packaged as a faux-altruistic concern for the environment. It’ll be interesting to see how the NDP’s base reacts to being told they need to get off their asses and contribute to the solution. I think I know how it’ll turn out, but since THC gummies are legal, I’d like to leave the door cracked for a tiny sliver of optimism.

patriotz
June 4, 2023 10:37 am

The original housing strategy suffers a fatal flaw because it never mentions the word “wealth.” It depicts rising home prices only as an affordability problem for vulnerable populations – ignoring those same prices has been a boon for homeowners like me.
.
Housing price inflation delivers easy wealth windfalls for owners, which is why politicians of all stripes have tolerated rising home prices for so long.
.
But the current owner’s gain is a loss for their children and grandchildren. Home prices rising faster than earnings, by definition, erodes affordability for those who follow. The National Housing Strategy 2.0 must start with this recognition.
.
This doesn’t mean we can no longer count on growing wealth by paying off a mortgage. It does mean that we should critique any policy that incentivizes us to bank on home prices surging faster than local incomes.
.
Older Canadians like me who have benefited from surging home prices must actively join the fight to restore housing affordability for those who follow. We must use our voices to help champion an upgrade to the housing strategy, and be open to a modest price on housing inequity to help pay for it.
.
If we remain on the sidelines, or sustain the myth that older people are especially vulnerable in the housing market, we should not expect history books to write well of our generations, nor be surprised when our children write those critiques.

https://www.theglobeandmail.com/investing/personal-finance/young-money/article-canada-housing-strategy-price-inflation/

patriotz
June 4, 2023 10:29 am

If you take a look at that graph I posted below you’ll find that Canadian housing prices started taking off from the US around 2006 and had a very brief decline in 2008. The latter was due to a deliberate move by the Harper government to keep mortgage lending available to stave off a US-style bust, and of course also due to the big drop in interest rates which persisted for over a decade.

By all means you can blame the Liberals for letting this trend continue but I see no reason to blame one party over the other.

Rich Colemann
Rich Colemann
June 4, 2023 10:19 am

“And as I’ve said before, the people who benefit, or think they benefit, from high property prices are simply existing homeowners. That right there is the major political obstacle to making housing more affordable. Nothing to do with “liberals” versus “conservatives”.

I agree that existing homeowners benefit greatly from high prices and it may be politically challenging to do anything that will upset them. But as for the liberals versus conservatives, I would argue that the gutless federal Liberals have shown them selves to be incompetent with their priorities and spending. Perhaps in the future the conservatives or a yet to be founded/announced political party will be able to make tougher decisions that benefit our country as a whole and not just individual interest groups and property owners.

Rich Colemann
Rich Colemann
June 4, 2023 10:08 am

“But the truth is that the economics of our housing market are extremely simple, and it’s the political environment that makes enacting effective policy solutions difficult.”

Well said Zach. 100% agree. Our unaffordable housing market is a political problem. Make it easier for developers to build and they will just build luxury properties that will be more profitable for them. Investors will buy these new luxury properties and either keep them vacant, flip them or put them on Airbnb. Theres big money to be made. That’s capitalism. Not that capitalism is bad per se, but housing is now a highly valuable commodity in short supply and the government needs to put restrictions in place or heavy taxes to ensure that all Canadians can have a stable roof over their heads and a bright future.

patriotz
June 4, 2023 10:04 am

Places with inexpensive market housing have few to no restrictions on land use and home construction as well as high property taxes; versus all of the expensive coastal markets do exactly the opposite.

Seems to me your viewpoint is rather US-based. Of course in Canada, the east coast is relatively inexpensive and the west coast is very expensive. Plus interior markets can be very expensive (e.g. Toronto) or relatively inexpensive (e.g. Winnipeg). Also I think you’ll find markets that are relatively inexpensive but have lots of bureaucracy (e.g. Montreal).

And as I’ve said before, the people who benefit, or think they benefit, from high property prices are simply existing homeowners. That right there is the major political obstacle to making housing more affordable. Nothing to do with “liberals” versus “conservatives”.

Patrick
Patrick
June 4, 2023 9:58 am

TC article “ Developers are going to produce the type of housing that gives them the greatest profit. So just because you remove regulations, it doesn’t mean it’s going to produce more affordable housing. What it’s going to do is encourage developers to buy undervalued property that used to be single-family zoned and then flip it into high-end more-expensive housing.” said Schultz, a former director of planning in New York State”

Yes, this excerpt from the TC article nicely sums up what we are already seeing in Victoria. That these missing middle multiplexes are providing luxury priced units, not affordable housing. And they’re sold, not rented. Just more gentrification.

Dee
Dee
June 4, 2023 9:41 am

“Mark my words, the backlash is coming one way or another.”

Unless the largest inter-generational transfer of wealth has the effect of enriching just enough of the younger generations so as to protect the status quo.

https://www.forbes.com/sites/markhall/2019/11/11/the-greatest-wealth-transfer-in-history-whats-happening-and-what-are-the-implications/?sh=2af62c504090

It’s really really hard to change a status quo. Things tend to change very quickly (in response to significant disruptions) or so slowly so as to not be perceptible over short/medium time frames. Also, it seems that only a relatively small percent of the population needs to be placated to avoid something like a major backlash (since so many people disengage and there is fractioning within the displeased).

Arrow
Arrow
June 4, 2023 9:33 am

Hey Zach, how did you get your link to be active & blue?

Arrow
Arrow
June 4, 2023 9:30 am

what’s needed is a shift in the political base and a changing of the guard. Otherwise, expect the status quo to continue.

Thank you for that ZS…I agree that housing affordability it is pretty much a political problem that will change as voter demographics change.

Zach S
Zach S
June 4, 2023 9:21 am

One other point that I’ll just make about changing political headwinds and property taxes. It is often said in this country — my the media and political establishment — that solving Canada’s housing problem is difficult. Usually they say “we’ve tried so many things and nothing has worked!” to prove this.

But the truth is that the economics of our housing market are extremely simple, and it’s the political environment that makes enacting effective policy solutions difficult.

To see what I mean, you can simply observe the 2 biggest differences in housing economics between cities that have expensive versus inexpensive market housing. Typically, these 2 features are land use policy and property tax. Places with inexpensive market housing have few to no restrictions on land use and home construction as well as high property taxes; versus all of the expensive coastal markets do exactly the opposite. This is a feature, not a bug: expensive cities, run by liberal governments, want high property prices because the people who benefit are some of their biggest political supporters.

If you want to see a good example of this discussion, check out this little-watched debate between Tom Davidoff and David Eby. The Tl;Dr is that David Eby didn’t listen one lick, because the economic solutions discussed are not palatable to his voting base. My main summary of the key arguments from when I watched this a while back are: 1. David Eby waxes poetic about non-market housing. 2. Tom Davidoff explains how a tiny droplet of non-market housing creates a lottery, which helps almost no one. 3. Tom Davidoff explains how liberalized property construction and higher property taxes lower the cost of non-market housing.

https://www.youtube.com/watch?v=WLRTsSpbnc0

It’s a really good watch if only to realize that our political leaders know exactly what they would need to do to short circuit the housing crisis, but they are not politically willing to sacrifice their personal political fortunes to achieve this.

So what’s needed is a shift in the political base and a changing of the guard. Otherwise, expect the status quo to continue.

Arrow
Arrow
June 4, 2023 9:15 am

…”There’s an important distinction between affordability — bringing real estate prices within reach of the working and middle class — and affordable housing, which often includes below-market or government-subsidized housing.

I am still curious to hear opinions on whether gov’t subsidized housing would be politically acceptable in these times??

Arrow
Arrow
June 4, 2023 9:07 am

This morning the TC has a good piece on Missing Middle zoning results:
“Christina Plerhoples Stacy, a researcher with Washington, D. C.-based think-tank Urban Institute, was part of a team that analyzed zoning reforms in hundreds of cities across the U.S. and the impact on rent prices.
The report found that while upzoning leads to about a one per cent increase in housing supply within three to nine years, the majority of new housing created is at the higher end of the rent price spectrum.
“We did find that the increase [in supply] occurred predominantly for rental units that are affordable to households with higher-than-middle incomes in the short and medium term,” she said.
This is consistent with anecdotal evidence in Victoria — the first B.C. municipality to allow up to six units on a single-family lot — that these missing-middle homes are still out of reach for working and middle-class families.
…The long-term hope, she said, is that working professionals will move into new-build multiplex housing, freeing up some of the more affordable rental units for people with lower incomes.

“Developers are going to produce the type of housing that gives them the greatest profit. So just because you remove regulations, it doesn’t mean it’s going to produce more affordable housing. What it’s going to do is encourage developers to buy undervalued property that used to be single-family zoned and then flip it into high-end more-expensive housing.” said Schultz, a former director of planning in New York state

-https://www.timescolonist.com/local-news/missing-affordability-the-promise-and-pitfalls-of-densifying-single-family-lots-7094862

Zach S
Zach S
June 4, 2023 7:57 am

The way I look at it is… The over 55 demographic is looking very good. It is the under 55 demographic group that is in trouble. Further, the over 55 demographic is doing well by exploiting the under 55 demographic.

Full speed ahead. But, well see how the over 55 demographic gets taken care of when they get to the dementia/residential care stage of their lives.

This is a good point. There’s really only so many ways that a country like Canada can fix the housing problem. Rosenberg already said this best, to return to a normal price cycle we need to see either a 30% price reduction, a 40% income increase or interest rates at 2% or less, all else being equal.

It’s starting to look like prices will not fall nearly so much, which means either the BoC has to create a permanent low rate environment, or there’s going to be a long period of rapid wage inflation in this country.

And if none of that happens, but immigration continues unabated? Expect to see the growing population of renters capture the popular vote, and push for hefty wealth and property taxes to pay for all of the government programs that are needed.

Mark my words, the backlash is coming one way or another.

Frank
Frank
June 4, 2023 4:48 am

Net worth is what they report to your heirs when they read your will. Net wealth is what you’re worth when you’re living and residing in your house.

totoro
totoro
June 4, 2023 2:18 am

Net worth and net wealth are two different things.

How so?

Rich Colemann
Rich Colemann
June 4, 2023 1:43 am

“All the world’s a stage, and all the men and women merely players.”

As You Like It, Act II, Scene VII

Rich Colemann
Rich Colemann
June 4, 2023 1:41 am

“I’m sure while I was busting my ass working and you were in school learning about Shakespeare you really thought things would turn out differently.”

You may be right. You must have dropped out of elementary school to start your career. I recall Shakespeare being covered in grade 7, 8, 9, 10, 11, and even 12 English classes. You could of benefited from that wise chap.

VicREanalyst
VicREanalyst
June 3, 2023 11:13 pm

I got the Hudson information off of Craigslist. You are free to look for yourself. Actual listings not advertising. So turn down your own BS meter.

So the actual apartment website is not where one would go to apply for a rental but instead they would resort to craigslist ads?? What world do you live in??

airbnb4me
airbnb4me
June 3, 2023 11:06 pm

Ohh so I run airbnbs and automatically im a pervert? This is why I pointed out how mentally incompetent you are. To actually just pull this garbage out of thin air because you read a headline about this somewhere is ignorant. You’re a goof and most of all your a clown people laugh at on this blog. Keep posting for our entertainment, my gf and i honestly laugh at some of the comments here (guy on my construction site told me about this blog and how it’s so funny we all own houses and there’s a place where people that think they deserve a house speculate on when a good time to buy a home was. It was yesterday in case you were wondering ) also I just checked and I’m full up in parksville but you’ll be happy to know I just put a offer on a place in Tofino so you too could be paying my salary soon! Also yes I am a construction guy and that must hurt the most, I’m sure while I was busting my ass working and you were in school learning about Shakespeare you really thought things would turn out differently

Rich Colemann
Rich Colemann
June 3, 2023 8:54 pm

No thanks Airbnb4me. One of the problems I have with airbnb is that they can be run by anyone. Any perverted creep can run an airbnb and hide spy cams in the showers, toilets, bedrooms etc.

I’m not risking my life or privacy to save a few dollars on accommodation. I’m happy to pay alot more to stay at a well run hotel.

Also, I’m not a fan of Parksville, sorry. Why would I go to Parksville when I can go to Tofino or Ucluelet and stay at some of the nicest hotels in Canada and enjoy some of the best restaurants in Canada as well.

5 properties and 4 of them airbnb. You are the problem. From the way you write, I’m guessing you are either a real estate agent or a construction worker. Am I right?

airbnb4me
airbnb4me
June 3, 2023 8:02 pm

Oh jeez I struck a nerve with Rich. And sorry you don’t like being called mentally incompetent however your comprehension seems to being lacking as I did say that about you but the delusional and dull witted comment was a general statement about this comment section so feel free to project all you want about that but that’s on you. Also I’m not going to lose any sleep because you loathe me for having 5 properties and 4 are air bnbs. There’s a phrase that says don’t hate the player hate the game and you seem to hate the player the game the refs and the concession stand when they don’t serve non gluten options. I’m also not sorry and I’m definitely not upset and will give you a discount if you want to stay up in parksville for a weekend (one up there, two in Vic and one in van) ✌️

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 3, 2023 7:21 pm

VicReAnalyst , I got the Hudson information off of Craigslist. You are free to look for yourself. Actual listings not advertising.

So turn down your own BS meter.

Marko Juras
June 3, 2023 6:59 pm

Leo, just a shout out for that age restriction white paper you wrote! I’ve been getting emails from people living in stratas trying to vote in the 55+ bylaw asking for help, and I’ve been firing off that paper for them to distribute to other owners.

QT
QT
June 3, 2023 6:52 pm

Canada is still among the safest, and most affordable place to live in the world, even with a high rate of immigration policy.

Property Prices Index by Country 2023 — https://www.numbeo.com/property-investment/rankings_by_country.jsp

Price to income ratio:
86.7 Syria
34.6 China
30.1 Philippines
12.2 Ukraine
9.4 Canada
8.4 Mexico
4.5 United States
3.0 Saudi Arabia

Frank
Frank
June 3, 2023 6:35 pm

Net worth and net wealth are two different things.

VicREanalyst
VicREanalyst
June 3, 2023 6:30 pm

Using Warren’s disposable discretionary income alone, Buffet would not even be a millionaire.

Forgot to include liquid assets. Cash in a savings account at the bank is technically an asset too albeit liquid

VicREanalyst
VicREanalyst
June 3, 2023 6:26 pm

A one-bedroom in the Hudson is around $2,250 to $2,400 per month or $3.60 to $3.80 per square foot. Storage lockers are another $50; parking is an additional $200 per month.

Do you even bother checking before posting random bs? No wonder ppl mute you…. go filter 1 bedroom, the cheapest one bed room is 1650 and majority are under 2250.

https://hudsonhouse.townline.com/floorplans

patriotz
June 3, 2023 5:20 pm

Buffett has a personal stock portfolio outside of BRK and presumably makes money from it, although he’s not required to divulge the results.

https://www.forbes.com/sites/gurufocus/2016/06/01/what-warren-buffett-owns-in-his-personal-portfolio/?sh=606b92f64ba7

Barrister
Barrister
June 3, 2023 4:50 pm

I dont think that Buffets principle residence is even worth a million. I guess he is still working because he cannot afford to retire yet.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 3, 2023 4:37 pm

As of June 2023, Buffett’s net worth is $112.8 billion, making him the sixth-richest man in the world (he was #2 in 2015). At 92, Buffett shows no signs of stopping anytime soon. And while he might have an 11-figure fortune, Buffett reportedly earns only $100,000 a year at Berkshire Hathaway and spends it frugally.

Using Warren’s disposable discretionary income alone, Buffet would not even be a millionaire.

totoro
totoro
June 3, 2023 4:12 pm

net wealth usually doesn’t include primary residence

Net worth is assets minus debt. For most Canadians, their primary residence makes up the vast majority of their net worth and funds a lot of discretionary spending, move up home purchases, first-time home purchases by young adult children, and retirement lifestyles.

The median net worth in Canada is about 330k for economic families, and in BC it is 423k due to higher RE values.

Over the years on this site many people have stated that house equity “doesn’t count”. This position is ludicrous.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 3, 2023 3:25 pm

Information from Craigslist as at June 2, 2023

There were 301 rentals listed within a 6 kilometer radius of the Central Business District

141 One-bedrooms at an average price of $1,811 per month with an approximate range between $1,500 and $2,200

A one-bedroom in the Hudson is around $2,250 to $2,400 per month or $3.60 to $3.80 per square foot. Storage lockers are another $50; parking is an additional $200 per month.

92 two-bedrooms at an average rent of $2,413 per month with an approximate range between $1,950 to $2,800
30 three-bedrooms at an average rent of $3,330 per month with an approximate range between $3,100 to $3,500

four-bedroom and up ranged between $3,450 to $6,000

patriotz
June 3, 2023 2:21 pm
  • comparing New Zealand’s net migration of 33,000 people is a joke compared to the crush of immigrants Canada gets.

NZ has a population of 5 million – about the same as BC – so most recent net foreign migration of 52,000 is about 1%.

Like Canada, that’s above the norm as non-permanent residents who declined under Covid are replaced.

Do note that net migration is not the same as immigration.

https://www.stats.govt.nz/information-releases/international-migration-february-2023/

Patrick
Patrick
June 3, 2023 2:10 pm

It’s so great that we have strong evidence from New Zealand that it does so that we don’t need to have this argument anymore

Hardly.

Auckland city center became a ghost town during COVID, with loss of foreign students, workers and tourists, and trend to remote work. As we remember, New Zealand had severe restrictions, including a long complete border closure. Auckland population fell by 1% (17,000 people equivalent to 7,000 dwellings). This is as likely an explanation for the 7% drop in Auckland rents 2020-22 as zoning changes. Moreover, as we all know, correlation is not causation, so your claim that this study means “we don’t need to have this argument anymore” seems to come more from “desperation” than data.
https://www.stuff.co.nz/national/300485246/inner-city-pressure-lower-rent-more-rentals-in-auckland-cbd-in-pandemic-nz
“ Covid-19 has wrought big change in Auckland’s city centre. With international students and foreign workers nowhere to be seen, concerns are mounting that it’s becoming a crime-ridden ghost town. ”

VicREanalyst
VicREanalyst
June 3, 2023 1:38 pm

To calculate your net worth, you subtract your total liabilities from your total assets.

Net worth and disposable discreationary income is different.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 3, 2023 12:28 pm

“You’re richer than you think.”

To calculate your net worth, you subtract your total liabilities from your total assets. Total assets will include your investments, savings, cash deposits, and any equity that you have in a home, car, or other similar assets. Total liabilities would include any debt, such as student loans and credit card debt.

Frank
Frank
June 3, 2023 11:36 am

Owning a house worth over a million dollars does not make one a millionaire, net wealth usually doesn’t include primary residence.
Leo- comparing New Zealand’s net migration of 33,000 people is a joke compared to the crush of immigrants Canada gets. Let’s look at other more densely populated regions for a more accurate assessment. The New Zealand example proves nothing.

VicREanalyst
VicREanalyst
June 3, 2023 11:31 am

Rich doesn’t think he pays to go see the dr! This comment section is a high speed collision of delusion and dull witted sometimes, but it’s good for a laugh, thanks y’all

Big psychological and behavioural difference of paying directly vs indirectly, lots of examples in the real world for this.

Dad
Dad
June 3, 2023 11:29 am

“If” or when we’re in a recession, with the Government hiring as they have the past couple of years, do we think we’ll be seeing a lot of layoffs within? “If” the Conservatives gain power, do they focus on trimming down Government workers?

Probably a hiring freeze without any significant layoffs.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 3, 2023 11:09 am

Lots of millionaires here too Frank. Victoria has a lot of paper millionaires. If 40 percent of Victorians own their home outright – they are millionaires.

Frank
Frank
June 3, 2023 9:59 am

In Canada, an ever growing proportion of the buyers are getting their money from overseas. Millions of wealthy people out there.

patriotz
June 3, 2023 9:09 am

Hopefully there are hard assets to back that debt. I’m sure in most cases it is.

If an asset – and for most highly indebted households that’s just their residence – is sold off to pay back the debt where is the buyer getting the money from? Musical debt.

What matters is ability to pay interest – at least – on the debt and that means debt versus income.

Rich Colemann
Rich Colemann
June 3, 2023 8:32 am

“Whether it’s a problem depends on how you look at it.”

Of course…

The way I look at it is… The over 55 demographic is looking very good. It is the under 55 demographic group that is in trouble. Further, the over 55 demographic is doing well by exploiting the under 55 demographic.

Full speed ahead. But, well see how the over 55 demographic gets taken care of when they get to the dementia/residential care stage of their lives.

Rich Colemann
Rich Colemann
June 3, 2023 8:24 am

“I think we all know which of the two is visiting the dr more and it’s Rich thinking that he’s not paying obviously lol. This constant story of housing collapse from him and others is a Huge example of mental incompetence.”

First of all, please don’t assume my gender. My pronouns are the following: It. Please use my proper pronouns or I will contact the Canadian human rights center.

Secondly, I dont appreciate being called “mentally incompetent, dillusuonal, and dull-witted.”

As your name is “Airbnb4me” I’m assuming I upset you with my comments about how much I hate Airbnb and how much I loathe the people profiteering from it. I’m not sorry.

Thanks!

Introvert
Introvert
June 3, 2023 8:05 am

Leo, maybe you missed it, but I wanted to get your take on a quote by Tom Davidoff that I posted below.

Frank
Frank
June 3, 2023 7:05 am

Hopefully there are hard assets to back that debt. I’m sure in most cases it is.

Frank
Frank
June 3, 2023 6:41 am

There’s also people waiting for increased density to make housing more affordable. Everyone’s a dreamer.

airbnb4me
airbnb4me
June 2, 2023 10:24 pm

FL ,
I think we all know which of the two is visiting the dr more and it’s Rich thinking that he’s not paying obviously lol. This constant story of housing collapse from him and others is a Huge example of mental incompetence. I look forwards to his posts in 2029 when there’s another dip and he’s convinced a house will only costs $450,000 again

Island girl
Island girl
June 2, 2023 10:09 pm

“If” or when we’re in a recession, with the Government hiring as they have the past couple of years, do we think we’ll be seeing a lot of layoffs within? “If” the Conservatives gain power, do they focus on trimming down Government workers?

Former Landlord
Former Landlord
June 2, 2023 8:53 pm

Too funny, Rich doesn’t think he pays to go see the dr!

I think he means, in BC we don’t pay incrementally for each doctor’s visit. As a society as a whole through taxes we obviously pay for the health system.
In BC someone unemployed with a chronic health condition is probably paying very minimally towards their doctors visits (maybe just indirectly through PST on goods they purchase and through property taxes on the place they live).
In the US if you are unemployed without health insurance and have a chronic condition, you will be paying considerably more per doctor’s visit

Which of the 2 do you think is visiting the doctor more?

airbnb4me
airbnb4me
June 2, 2023 7:55 pm

Too funny, Rich doesn’t think he pays to go see the dr! This comment section is a high speed collision of delusion and dull witted sometimes, but it’s good for a laugh, thanks y’all

Frank
Frank
June 2, 2023 7:32 pm

Even 30 years ago I had no desire to live in Vancouver. That’s why I sold on the mainland and bought on the island. I’m not a big fan of density. The less the merrier.

patriotz
June 2, 2023 5:22 pm

Is this because people are more likely to make appointments and seek medical attention if they don’t have to pay for it?

Well sort of. In the US doctors can refuse to see patients who don’t have insurance or can’t pay, but hospitals have to admit patients who are in a critical state. So the hospitals end up treating a lot of people with conditions that could have been treated at much lower cost earlier on.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 2, 2023 5:11 pm

The bucket of those that want to live in Vancouver extends through out Canada.

But can they afford to?

Average rent for a one bedroom within 6 kilometers of downtown Vancouver is $2,563 per month or $30,756 a year. The average two-bedroom is $41,550 a year. Minimum wage is $32,000 per year.

This is why there is a labor shortage.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 2, 2023 4:59 pm

Oh you still pay for it!

Rich Colemann
Rich Colemann
June 2, 2023 4:50 pm

“Average Canadian still manages to see the Doctor 7 times per year. Compared to 4 in USA.”

Is this because people are more likely to make appointments and seek medical attention if they don’t have to pay for it?

Patrick
Patrick
June 2, 2023 4:40 pm

Vancouver got shortages of nurses and doctors because the population grew faster than the health system could manage.

Average Canadian still manages to see the Doctor 7 times per year. Compared to 4 in USA. We’ve got “two tier” medicine – people with no Family Doctor and others with a Family Doctor seeing a doctor 7+ times per year!

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Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 2, 2023 4:22 pm

Vancouver got shortages of nurses and doctors because the population grew faster than the health system could manage.

Dad
Dad
June 2, 2023 4:17 pm

Take these numbers with a grain of salt, especially month-to-month data.

100%. I’ve made the point on here that single jobs reports aren’t particularly useful because the data is subject to revision and noisy. Problem is when you look back at the last 12 months of BLS jobs data and see 200k+ in employment gains each month. The trend is undeniable, and I do not take it with a grain of salt. Nor would I take with a grain of salt, the 10 months of disinflationary CPI reports, or the other economic data that points to surprisingly strong and resilient economy.

That and the disinflationary trend that started last summer is why I don’t buy the stagflation narrative. Could happen, anything can, but it doesn’t look good for the doomers and ultrabears.

Patrick
Patrick
June 2, 2023 4:07 pm

Sure, because for some years Squamish has effectively been absorbed into the metro Vancouver RE market and that 15% is just a drop in the bucket metro wide.

The potential “bucket” that wants to live in metro Vancouver extends to much of Canada. If they built 200k more units, they’d get filled with immigrants and transplanted ROCers, and rents would rise further. We don’t need to speculate on that, as this is what has already happened in Vancouver over the last 15 years. https://www12.statcan.gc.ca/census-recensement/2021/as-sa/fogs-spg/page.cfm

Rodger
Rodger
June 2, 2023 3:50 pm

Meh, I’ll believe it when I see it. Growth, employment and unemployment continue beating expectations.

After today’s US jobs report, headlines screamed > 330K jobs created. These numbers are all based on surveys with a small sample size extrapolated and subject to huge revisions and seasonal adjustments. The same report said the unemployment went up to 3.7% from 3.4%. As part of the same report, the household survey based employment report said 310K jobs were LOST in the same month. Take these numbers with a grain of salt, especially month-to-month data.

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James Soper
James Soper
June 2, 2023 3:35 pm

Sure, because for some years Squamish has effectively been absorbed into the metro Vancouver RE market and that 15% is just a drop in the bucket metro wide.

It’s exactly why you need places like West Van & Oak Bay to also do their part.

Less trades people also means less dentists, doctors, nurses, etc that were needed to support a growing population.

We didn’t get more doctors/nurses/dentists, we just got shortages.

patriotz
June 2, 2023 3:26 pm

Squamish increased number of rentals by 15% in a single year, but it didn’t help ultra low <1% vacancy rate or prevent large rent increases.

Sure, because for some years Squamish has effectively been absorbed into the metro Vancouver RE market and that 15% is just a drop in the bucket metro wide.

Once again, what matters for RE is metro wide numbers.

Frank
Frank
June 2, 2023 3:09 pm

On BNN- Some major insurance companies are not accepting insurance applications in California due to the crazy weather and high construction costs. So if new buyers can’t get insurance, very can’t get a mortgage. I guess people will have to leave the state.

VicREanalyst
VicREanalyst
June 2, 2023 2:39 pm

Most people are making more than the minimum wage so they won’t likely see an increase in their pay checks.

Hence the comment about the government union wage increases of 6.5%. Insider contacts tells me that management level government employees can get as high as 8.75% this year with the average being 6.75%.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 2, 2023 2:35 pm

The increase in the minimum wage is likely not that inflationary. Most people are making more than the minimum wage so they won’t likely see an increase in their pay checks.

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 2, 2023 2:33 pm

What would Vancouver look like if it hadn’t built as many homes?

First of all it wouldn’t have needed all the trades people that moved there to take advantage of the construction boom. Less trades people also means less dentists, doctors, nurses, etc that were needed to support a growing population.

Dad
Dad
June 2, 2023 2:30 pm

You literally just had the majority of government having their wages go up about 6.5% in April and the rest will get it in July + you have minimum wage earners getting a 7% increase as well & i seriously doubt that businesses are going to eat that cost.

In a recession with rising unemployment you would expect downward pressure on wages and reduced demand for goods and services putting downward pressure on prices. Companies may have no choice but to eat the extra cost, assuming they don’t fold.

And in any event, I don’t think raising the minimum wage from $10.45 in 2015 to $15.20 in 2021 proved to be very inflationary.

As for public sector raises, I doubt that is representative of wage growth for the majority of workers, including federal workers, or public employees of other Provinces.

I can see inflation getting hung up in the 3 to 4% range for an extended period, but only if the economy dodges a recession and keeps humming along. Can’t see it if we suddenly enter into a moderate/severe recession.

Patrick
Patrick
June 2, 2023 2:25 pm

Squamish increased number of rentals by 15% in a single year, but it didn’t help ultra low <1% vacancy rate or prevent large rent increases.
https://www.squamishchief.com/local-news/squamish-increases-rentals-but-vacancy-rate-stays-low-6443053#:~:text=“Growth%20in%20demand%20outpaced%20strong,been%20in%20Canada%20since%202001.

Consensus is it just made more people move to Squamish. This makes sense. If there’s no vacancies, people won’t move there and if rentals are added, they will.

Same is happening to Victoria. Thousands move here, settle temporarily for condos, but this further increases the demand to ultimately buy SFH when they can afford to.

Introvert
Introvert
June 2, 2023 2:14 pm

Leo, I’d love your reaction to the Davidoff quote below.

Introvert
Introvert
June 2, 2023 2:14 pm

comment image

B.C. housing experts question why smaller municipalities selected for ‘naughty list’

https://vancouversun.com/news/local-news/housing-experts-question-why-smaller-municipalities-selected-for-the-naughty-list

James Soper
James Soper
June 2, 2023 2:02 pm

inflation would suddenly pick up again when it’s already managed to slow to the 3-4% range in a hot economy with a hot labour market.

You literally just had the majority of government having their wages go up about 6.5% in April and the rest will get it in July + you have minimum wage earners getting a 7% increase as well & i seriously doubt that businesses are going to eat that cost.

Dad
Dad
June 2, 2023 1:49 pm

I should have written “and that coming storm has a name” in reference to Deryk’s comment, “Definitely a storm coming”

Meh, I’ll believe it when I see it. Growth, employment and unemployment continue beating expectations. I wouldn’t expect that trend to continue, but I also wouldn’t have expected house prices to rise 40% during a global pandemic. Hard to imagine that if growth stalls and unemployment spikes, inflation would suddenly pick up again when it’s already managed to slow to the 3-4% range in a hot economy with a hot labour market.

Arrow
Arrow
June 2, 2023 1:06 pm

Pardon me Dad.
I should have written “and that coming storm has a name” in reference to Deryk’s comment, “Definitely a storm coming”

Whateveriwanttocallmyself
Whateveriwanttocallmyself
June 2, 2023 12:55 pm

I would agree with Arrow on the property ladder thing. The price difference between a condominium and a single family home has gotten wider. It’s much more difficult to make the move from condo to a house if you want to stay in the Victoria Core. The average single family house in the core is now about the same cost as 2.4 condos.

In Langford / Colwood it’s 2.0

As a side note that some may find interesting. Just looking at prices alone, the average price of a condo in the core is the same as that in Langford /Colwood. Of course if you factor in the average age (quality) in the two areas then Langford / Colwood having a larger stock of newer condos is less as buyers are getting higher quality, on average, for their spending dollar.

Dad
Dad
June 2, 2023 12:48 pm

…and that storm has a name: Stagflation.

Zero evidence of this yet.

Arrow
Arrow
June 2, 2023 10:35 am

I am still surprised as to how few listings there are.

The whole property ladder cycle seems to be grinding to a halt, reminiscent of a game of musical chairs.
Career mortgage lender (and former CIBC exec) Vince Gaetano sums it up well:
“The move up buyer has become extinct. With the qualifying stress test and higher rates, the majority can’t qualify for the current mortgage they have. And fixed rates are moving higher….”

Arrow
Arrow
June 2, 2023 10:15 am

Definitely a storm coming in the next few years.

…and that storm has a name: Stagflation. The only thing keeping the stagnation part out of sight has been “Quantitative Easing” but now the piper must be paid.

Frank
Frank
June 2, 2023 10:07 am

Just got the property tax bill for one place, up a few hundred dollars from last year, maybe 5% increase. Not much difference from senior rate with basic grant and the no grant rate, $850.

SaanichAdam
SaanichAdam
June 2, 2023 9:11 am

Great post, as usual Leo. I’m wondering about a couple of things – as mortgage holders renew at higher rates over the next few years (a friend of mine is going from 3.1% to 5.3% right now and it’s a huge increase), does this affect the CPI and inflation measures as more of consumer’s income goes to servicing house debt?

Secondly, would a metric that looks at total demand for housing be available somewhere or could it be looked at? I was thinking something like houses for sale per person in the Victoria metro area to look at housing availability first, and then something like offers per week divided by number of houses to try to understand demand? I feel like the industry need some metric to be able to look at the number of people looking/offering/buying vs the total number of people in an area or the total population. I realize I may be off the mark here because some of this data likely does not exist, but does such a thing in any form exist somewhere?

VicREanalyst
VicREanalyst
June 2, 2023 8:10 am

we’re seeing early signs of slower here as well with sales starting to decline while new listings remained somewhat stronger to end the month.

Well looks like that is pretty consistent with what my insider contacts told me a week and half ago 🙂

Deryk Houston
Deryk Houston
June 2, 2023 7:33 am

I am advising my kids to get rid of debt where possible. ( Downsize and pull everything together and keep things simple. )
We have done that with our own situation but mostly because of our age and stage of life.
I believe that mortgages will rise quite a bit further over the coming years.
The States is in trouble and the dollar will continue to be dumped in trade.
They will have to offer higher rates to draw that money back in my opinion.
That’s just how I feel.
I can’t see how it can be avoided.
Definitely a storm coming in the next few years. Time to hunker down.

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Barrister
Barrister
June 1, 2023 11:31 pm

Fantastic work with the numbers. I am still surprised as to how few listings there are.