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Canada’s Real Estate Market Is a Giant Pyramid Scheme
- uberman 5y agoWhile I appreciate the comparisons, a fairer comparison would be to compare expensive Canadian cities to expensive American cities. A nice condo in SF or NYC is also likely to get you that mansion in Georgia.
- hourislate 5y agoI don't think there are any US Cities where the price of a house or condo doubled to tripled during the pandemic. There is no where in NA where the price of a house is rising at approx 2k a week, The average price of a house in Toronto is predicted to rise by 100k this year. It isn't just Toronto anymore, actually Toronto is super affordable. The prices across the province especially in areas outside of Toronto that have been historically low have sky rocketed. King Township average price is like 2.6 million. https://www.zolo.ca/toronto-real-estate/trends https://www.zolo.ca/toronto-real-estate/trends Thank the Federal Gov/BoC for destroying the dream of ownership for millions.
- throwaway1777 5y agoHousing prices did double in most mid tier cities during the pandemic. Just not the big ones like NYC, SF, Seattle which were already sky high.
- uberman 5y agoWhile I don't live in a big city, a neighbor of mine purchased their ranch for 700k pre-pandemic and have just offered it for sale three years later for 1.5 million so price doubling is not exclusive to Canada nor to "big cities". To be fair, you showcase King, but King is a very affluent community and thanks to the 400 running through the middle of King Township, it is a bedroom community even for downtown Toronto. The homes for sale in King tend to be in the 3500 to 5000 sqft range and while they are super expensive, a 5000 sqft house, an hours drive from Manhattan, with a yard would cost as much or more in USD than a house in King for CAD. You say this is a government / bank problem. Should the Feds (CA and/or USA) have kept interest rates high during COVID to keep house prices low?
- powerslacker 5y agoHousing prices doubled for many places on the US.
- vehemenz 5y agoThere is no apples to apples comparison in the first place. Most of Canada is sparsely inhabited or uninhabitable. Unlike the US, there are far fewer places to live besides the major metro areas. SF and NYC are not good comparisons either. Yes, they are expensive and 90%+ of the country could never afford to live there—that part is the same—but Americans have so many more options. There are small- and medium-sized cities all over the US.
- waterlaw 5y agoExactly. Canada does not* have many cities and much of the nation has little to no infrastructure. Even small towns are well >$600k for rundown detached houses here. There's multiple considerations. For example. If you need access to quality healthcare for certain conditions, you'll need be limited in cities you can reside in/near.
- jiveturkey42 5y agoWhat is the difficulty in developing more housing in less populated regions of Canada? Cost of materials, permitting and regulations, uninhabitable climate?
- theluketaylor 5y agoAll of the above, plus labour costs for building, lack of infrastructure, and most importantly, lack of an economy. Even if someone can survive the isolation living in the north requires (and the $7 heads of lettuce) there often isn't many options for earning an income.
- MattGaiser 5y agoNobody wants to live there. Canada has plenty of cheaper places like Calgary and Edmonton and Regina, but few move.
- Tiktaalik 5y agoAll of the above plus add on the fact that much of what seems like "empty land" on map is not actually viable in any way for housing development. British Columbia is absolutely massive but it's all mountain. The places to build are already built upon.
- digianarchist 5y agoAnecdotally, I bought a townhouse in Durham (East GTA) in December 2019 for $550,000. I’m moving to California later this year and decided to sell. Similar properties are going for $1.2 million. Buyers are waving all conditions. My realtor tells me most places have 20+ blind bids and he hasn’t had a buyer add an inspection condition since the pandemic. If you look at the sales data it makes no sense whatsoever. Sales prices are all over the place. Huge swings of hundreds of thousands of dollars for similar properties. I’m making more money sitting in this house than I do at my well paid tech job.
- voisin 5y agoA relatively small number of multi-unit investors can impact the market when combined with fewer sellers (low supply). It drives the real buyers like a panicked herd into the limited supply.
- digianarchist 5y agoCanada has a “100 million by 2100” goal with absolutely no policies on providing infrastructure to meet that goal.
- DwnVoteHoneyPot 5y agoCanada doesn't have such a plan. One "charity" group is trying to promote it.
- digianarchist 5y agoThank you for the correction. It's not official policy. Just an idea being pushed by a former PM.
- deleted 5y ago[deleted]
- 908B64B197 5y agoHow much of that is completely self-imposed with out of control immigration quotas and a lax policy around foreign money laundering? I wonder which party is supporting these measures and why.
- sleepingadmin 5y agoI am coming around to the opinion that the real estate market isn't out of control at all. The absolute complete opposite of the author here. Doesnt make sense does it? But what if the underlying problem throughout the article? The overall PRICE of housing. What if housing is only just a metric of the problem? Debt is money. Debt is generally speaking housing and transport. They will show the problem quickly. What if it's the currency that's collapsing? https://tradingeconomics.com/canada/central-bank-balance-sheet https://tradingeconomics.com/canada/central-bank-balance-she... https://tradingeconomics.com/canada/money-supply-m0 https://tradingeconomics.com/canada/money-supply-m0 https://tradingeconomics.com/canada/money-supply-m3 https://tradingeconomics.com/canada/money-supply-m3 These are often disregarded as not showing the whole story, but what if they are showing the whole story? https://tradingeconomics.com/canada/private-debt-to-gdp https://tradingeconomics.com/canada/private-debt-to-gdp Canadians are 304% in private debt to gdp. https://tradingeconomics.com/canada/government-debt-to-gdp https://tradingeconomics.com/canada/government-debt-to-gdp Canadian government debt has jumped remarkably, but they also haven't been tabling any budget and reporting on this debt anymore. https://tradingeconomics.com/canada/government-debt https://tradingeconomics.com/canada/government-debt Yes you see that right, the basic income the Canadian government over covid basically increased debt by 50% in a single year? Balance of trade has been negative since the financial crisis: https://tradingeconomics.com/canada/balance-of-trade https://tradingeconomics.com/canada/balance-of-trade Lets not forget our subnational governments are also not reporting on their debt anymore. https://en.wikipedia.org/wiki/Ontario_government_debt https://en.wikipedia.org/wiki/Ontario_government_debt What if the currency is in collapse? The governments would know it and their immediate action would be to stop reporting their financials? Obviously tremendous debt held by everyone and government is the cause.
- RC_ITR 5y agoIf you believe 'The currency is in collapse,' then I suggest you take out as much leverage as you can have to your name (Maybe even raise capital from institutions using your above diligence) and do a Soros-Style short. Here's the playbook: https://theeconreview.com/2018/10/16/how-soros-broke-the-british-pound/ https://theeconreview.com/2018/10/16/how-soros-broke-the-bri... Good luck.
- margofx 5y agoTaking it into perspective, CA real estate might be a good investment if you're rich, but it's pretty punishing if you cannot afford it.
- wnolens 5y agoIn r/Canada every day there is a similar post (though usually from mainstream news outlets) about how housing is broken. And every day it gets several hundred replies. The despair is real. Very depressing as my family is in Canada and I consider moving back, except my cost of living will be comparable (NYC), and my salary takes a 50% cut and becomes the absolute ceiling (in NYC I can still double up). And aside from downtown Toronto, the GTA is a suburban wasteland.
- 908B64B197 5y ago> and my salary takes a 50% cut Why would you do that?
- wnolens 5y agoI haven't yet. But it would be to live among the people I love the most.
- 908B64B197 5y agoYour pay shouldn't change. Same contribution, same value added.
- wnolens 5y agoWouldn't that be nice.
- thatfrenchguy 5y ago> Canadian kids are forced to take thirteen years of (Quebec) French, so they already have a head start at getting fluent in the language of their new adoptive country. Hahahaha. Ask how hard it is to integrate in France when you're from Québec, so someone who's not even speaking French natively? Good luck, you'd have better luck moving to Quebec City. > Location-independent entrepreneur friends can buy a three-story chateau in the French countryside for less than the price of a single-detached house in a steeltown dumping ground like Hamilton. Good luck maintaining that.
- otagekki 5y agoHonestly, the "speaking French" part is overrated. Especially in Paris we have tons of immigrants from all over the (francophone) world and a sizable portion of them have an accent at least to us. Yet people won't look down systematically on you because you're foreign or speak with a foreign accent... And France French is much easier to pronounce.
- 908B64B197 5y ago> thirteen years of (Quebec) French That’s like saying people learn (American) English. At least, from what I was told they don’t differentiate the two at the French schools here in SF. > Ask how hard it is to integrate in France when you're from Québec, so someone who's not even speaking French natively? Good luck People from Quebec told me France was a very welcoming place.
- thatfrenchguy 5y agoIf you do not know you’re learning French from Quebec, you’re learning French from France lol. They are very distinct dialects.
- amscanne 5y agoIt’s not even true. They teach Parisian French (or Standard French) in Canada at schools outside Quebec. I did immersion for 12 years. I think its simply a practical choice: French from France has more standards (set by the Academie Francais), more materials (because it’s the international standard) and therefore more teachers. In SF, they certainly teach Standard French. FWIW, I think that the differences are simply that Quebec uses a lot of old (like 17th Century) pronunciations, and a lot of distinct vocabulary, along with its own regional variations. Consider learning Quebec French equivalent to teaching English exclusively by reading works from around the time of Shakespeare. You could probably get by but you need to adapt if you step out of that world. Walking around saying “thou” would get you strange looks for sure. We would read Quebec literature at school, but there was often new vocabulary.
- panarky 5y agoYogi Berra famously said something like "Nobody goes to that restaurant anymore, it's always too crowded". It takes similar logic to claim there's a mass migration away from places with high housing prices. Prices are high because more people want to live there than want to leave. If more people wanted to leave, prices would fall. That's not a pyramid scheme, it's supply and demand.
- ClumsyPilot 5y ago> Prices are high because more people want to live there than want to leave Or it could be super-low interest rates and banks giving mortgages to every stripper and then flogging them off to clueless investirs as AAA-rated securities like they did before 2008. Or it could be because we allow foreign 'investors' to launder drug-money, blood-money ads tax-avoidance money by buying luxury apartments by the dozens and leaving them empty and unused. Or it could be outright collusion and fraud by developers or market makers. Or a hubdred other things economists write papers about - beloved 'free market' is more than one equasion.
- mtoner23 5y agoThe reality is that's not happening today, the creditworthiness of borrowers in 2021 was higher than it's ever been. Demand is completely outstripping supply right now.
- voisin 5y agoSource re creditworthiness? I’ve seen headlines stating the indebtedness of Canadians relative to income has never been higher.
- DwnVoteHoneyPot 5y agoBoth things are happening. Credit scores have improved during the pandemic. Less missed payments, less spending (maybe because people are home more), plus more government assistance. While credit cards and credit lines are doing better, mortgages have increased, causing debt to income to be very high.
- antoniuschan99 5y agoBrampton Real Estate prices are outpacing Toronto. Also, I remember 2015 Hong Kong and thinking it’s crazy that a small 400 sq ft flat would cost over 1 millions or avg persons income for 18 years. Fast forward now Toronto housing is pretty much at that point. Also keep in mind you get taxed upwards to 56% of your income if you make more than 220k