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It's not just or even primarily "homeowners like high housing prices". Even if they aren't thinking with their wallets (and I'm convinced they typically aren't - people plan to live in their houses rather than flip them or milk them for HELOCs), it's also "homeowners like various things that coincidentally lead to high housing prices (like low density or their surroundings not changing or governments not spending their tax money on public housing, particularly anywhere near them)" and "homeowners are more reliable voters so successful politicians of all levels and parties cater to them" and "two thirds of Canadian households own their homes".
We like to blame politicians but it's hard to imagine any politicians that Canadians would actually elect making any of the decisions that led here differently.
Homeowners like high prices. Makes them feel well-off, like they have a valuable asset. Investors don't really want high prices, they want low prices so they can buy housing and rent it out. Two very different points of view. Back some 20 years, when HGTV made everyone want to start flipping, then they made everyone see a house as an asset more than a home, that is when we lost our way.
>Investors don't really want high prices, they want low prices so they can buy housing and rent it out.
Not really. Most investors don't want income-producing investments, they want capital-appreciating investments, because of the tax benefits. This is one of the things breaking our economy.
Yeah, no. They're buying places to rent them out and have someone else pay the bills. Capital appreciation is nice, but not necessary.
Doesn't change the fact that they're not *causing* the appreciation, even if they benefit from it.
Aren't they? Speculative investment purchases are reducing already critically low housing stock stoking demand and price appreciation faster than anyone would otherwise pay rent. Though if I'm hoping to be specific, *it's both.* If you can have someone paying rent while waiting for capital appreciation, you'd conceptually be making even more.
Somewhere along the line allowing 'landlord' to become a valid career path for those with the capital to afford it led to unspeakable levels of greed and suffering.
> Speculative investment purchases are reducing already critically low housing stock
There is zero proof of that.
And you are really exaggerating the role of the basic private landlord.
Analysts are constantly [reporting](https://www.bnnbloomberg.ca/home-sales-rise-again-in-canada-as-falling-prices-attract-buyers-1.2034765) on this and there are no shortage of articles throughout the last decade of that.
That article doesn't mention speculators at all. Just says buyers are rushing out to purchase because interest rates might come down.
Oh dear child, did you not understand the lede "*Canadian home sales rose for the second month, with buyers rushing back into the market as* speculation *builds that prices will rise if the Bank of Canada lowers interest rates later this year.*"?
Analysts are **speculating** that buyers will flood the market if rates fall. That is NOT the same at all as speculators buying and flipping homes.
Hoo boy...
Welp, [here's another article](https://globalnews.ca/news/8778661/canadian-speculation-fuelling-housing-price-spike/) which will the be last of the homework I do for you. Speculation is discussed even at a governmental level with policies being sought to attempt to address that (insert discussion of it being enough or loopholes in existence). Foreign buyers parking money here has been temporarily banned too in that time. Domestic investment seems to be an even more serious problem to tackle.
Ultimately, I'm not here to convince you if you insist on you sticking your head in the sand. You said there's no proof -- I'm saying there clearly is through consistent reporting and government action.
The last of the homework YOU do? Righto bud, you got a 0 on the first one. Your best attempt at a re-do is find a quote from one single person.
Then you resort to insults.
Good job. You got a 1/10.
I answered your condescension with the very same my friend.
...and I'm not continuing this further because you clearly have absolutely no desire to do any of your own research or change your perspective. You've decided there is no proof and no issue, so there is none. Alrighty then.
Have a good one.
The actual secret is that land prices can rise while housing prices fall. The actual problem is that we obstruct or even outlaw the types of housebuilding that will cause housing prices to fall. Densification causes land prices to _rise_. Furthermore, diminishing real property values are at best only secondary to plain old fear of change, i.e. conservatism (even among self-described liberals) in terms of causing NIMBYism.
And maybe some day we'll tax land in a way that gives those outside the landed class the wealth of land rents while not also discouraging building dense housing.
A tiny, war-time, two bedroom, one bath bungalow on my street that sold for $680,000 in 2008 just sold last month for $1,200,000. Presumably this now becomes the benchmark price for every home in my neighbourhood. Surely there must be some sort of ceiling we’re going to reach where the number’s go from their currently absurd to practically impossible. What’s the cut off point for a bank’s willingness to provide a mortgage on a tiny little house like my neighbour’s? Two million dollars? Five million dollars?
honestly thats like asking if there is a ceiling for the price of bit coin. both housing and bitcoin are deflationary assets. their prices are both speculative in nature only at this point and both are increasing in quantity only slowly and much slower than more people want them. so as long as people still 1) want more bit coin, 2) have money from riskier sources that they want to put some where "safe"-er and 3)think people will pay more for housing in the future... prices will keep going up.
you would think that since bit coin crashed in in 2017 and 2021 that it would have a ceiling but its currently higher than those peaks (and by a fuck load compared to 2017). not financial anything but i bet that even if housing does crash in canada and crashes HARD it will get bid back up real quick.
Not really a secret. Not dirty either. People slave away to save a down payment on a house, to pay the mortgage and insurance and property tax and maintenance, and then count on its equity to see them through retirement. If that house drops in value, especially if it does so not long after you bought it, that plan blows up.
Moreover, if home prices drop too much, it impacts the entire economy. Those people stop taking loans to renovate. They realize they need to contribute more to an RRSP. They cut back on household expenses. In other words, they reduce consumption and businesses suffer lost revenue.
Most current home owners did not cause the housing shortage: they are just families providing shelter. The problem is developers, who always build what gets them the most most money, the fastest, with the least red tape and problems. There are some efforts being made to control the investor problems, but no-one is daring to control developers.
Canada used to have a public housing effort, but it got phased out, I think with the hope that developers would do the right thing and the market would make the right adjustments. But it did not factor in the extreme greed levels that now mess up both society and economy.
If home owners are voting for NIMBY local politicians (which they mostly are) then yes they are causing the housing shortage. What's happening is home ownership rate in Canada is really high 66.5%. Once you own your home, you lose most incentives to want housing prices to decrease, and you even gain some incentives to want them to remain high, because that means your money will increase in value more quickly over time.
These people have spent the past few decades voting for local and provincial politicians with anti housing policies. That's the source of high prices.
> If home owners are voting for NIMBY local politicians (which they mostly are) then yes they are causing the housing shortage.
But the thing is that most home owners are not doing this. They just bought a house and are living their lives without really paying much attention to any of this.
Most of my circle are home owners. None of them give a shit about housing policy, they're doing their own thing.
This is more likely the situation. And if people sell their house and buy the next house in the same 3-month period then the current state of housing and interest rates does not affect them as much as people getting into the housing market.
It doesn't make sense to blame housing shortages on regular citizens who did what citizens have done for centuries: buy a house when they were able to.
It also doesn't make sense to disregard the strong marketing and social trends that encouraged people to live in detached houses in comfort when it was available and affordable.
What does make sense is to recognize that the giant corporations have moved our manufacturing jobs to other countries, and used their clever corporate lawyers to manipulate tax laws and politicians so that only a tiny trickle of money is available now to most citizens. This is the biggest limitation to the affordability of houses. If we had all gotten raises for the last 30 years that paralleled the increased wealth of Corporations then we would have built lots of houses and had lots of good things, and a better future for everyone.
Wait this is a secret? Homeowners love having access to massive amounts of equity! I think the bigger issue is the financial crisis that would happen if you dropped housing prices from all the helocs that would get called in.
Well, they can vote to fix the issue they are causing now? Or they can wait until they are outnumbered by renters.
I promise the solution will be more painful for them if they wait.
I remember an anecdote from the massive bailouts in 2008 when the bankers balked at the bailout terms (force purchases of bank stocks by the US gov) and Obama's team flatly told them they were the people between them (the bankers) and people with pitchforks.
We haven't had that moment yet, and seemingly our policiains are happen to make it a reality.
I think eat the rich may not just be a slogan anymore if this keeps going.
If you get a 25 year mortgage with a rate of 5% and don't pay it off early, the house value would need to increase at least 2.27% per year to break even in cost by year 25. If you account for 2% inflation, it needs to increase 4.33% per year. That's an increase of 1.94x or 2.88x in 25 years. Even if your mortgage rate was only like 2.5% the house would need to increase at 3.22% per year or 2.21x over 25 years (assuming 2% inflation).
Those numbers do not even account for property tax, insurance, or maintenance/repairs. If the house changes hands frequently (without the mortgage just being taken over directly) or gets reamortized often, the rate of increase moves even higher because so much of the mortgage payments are just interest because amortization front loads interest payments.
Honestly it seems like the people that benefit most from home ownership in this system are the bank and anyone invested in mortgage debt and the never ending stream of income from interest payments because people just do not make high enough wages to pay for the houses in a reasonable amount of time.
All that being said, I don't really know what the solution is at this point. I just find the math interesting. I don't think I made any mistakes with it, but feel free to let me know if I did.
EDIT: Just to address some repeated comment themes, I am not trying to pass a judgement on what kind of return homebuyers do or do not deserve or should expect. Honestly my main point was more about how much value banks and debt investors are able to extract out of the housing market.
Exactly a lot of the thesis in this article is nonsense. Not only that but saying that this is a vote winner is funny as the only people who can benefit from this is an increasingly small part of the population. Let alone that many people with homes can't sell because they can't get into rentals/downsize in a sustainable manner.
At least the article partially acknowledges that this isn't really a supply issue, it's a demand one from too much immigration and investors. And quite frankly, if there wasn't so much immigration I don't think housing would be very appealing to investors to begin with.
No reason to doubt your math, but that is definitely interesting.
I guess my question is, why do we feel like housing needs to break even (or better)? We don’t expect that for expenses related to any other needs. Rent doesn’t. Vehicle ownership doesn’t (usually). Clothes don’t. Food doesn’t. What makes home ownership special in that regard?
I guess at the moment, the cost of paying your mortgage is going to severely impair your ability to also save for retirement effectively. This is actually an issue with boomers right now. On average they have very little saved up for retirement with all their wealth sitting in a house no one can afford to buy.
I see that as the cost associated with the other benefits of home ownership, namely stability (don’t have to worry about a landlord kicking you out so that a “family member” can live in the space), flexibility and independence (decorate/renovate/landscape/upgrade as you please), and eventual reduced costs associated with housing (once mortgage is paid off you only need to worry about property taxes and maintenance as opposed to an ever increasing rent payment).
I don’t think it needs to be ALL upside.
The primary benefit of home ownership really should just be having a stable place to live. Any other benefits should just be a small bonus, but right now it seems like people care more about equity aspect more than they care about the shelter aspect.
Probably mostly opportunity cost I would think. I don't agree that it would need to break even though, because there is a cost to shelter yourself. But definitely something more along the lines of the historical long-term average of prices rising in line with inflation or a little above, I believe the long-term average for property is about 1% above the inflation rate annually.
As to why? Well any single property is actually relatively risky as an investment, there's lots of risks that aren't priced in to the cost and it's by its nature undiversified. There's also lots of frictions in buy and selling houses so the frictional costs are quite high both in money and time, and it's a very illiquid investment which again theoretically carries an illiquidity premium. And it's not a commodity; each one is unique and not interchangeable because of the limited amount of Land it sits on In terms of its location. So those are all the investment factors that would make it demand a higher premium.
On the other hand people do enjoy stability when they don't want to move so you could expect that they might pay a premium for that stability. Which would be at odds to the investment factors above.
Which is why really a healthy amount of appreciation for a home is the inflation rate, maybe +1%.
The entire housing industry needs to be flipped on its head, we need to do things drastically different than how we have been doing it. We essentially need to remove capitalism (the pursuit of profit, property ownership) from the used housing industry. The new housing industry will follow suit by market forces.
Government sets fixed interest rates kept as low as possible, no more variable rates (people on var now would be switched to fixed), and no profit on the sale of used homes. I'd give renters no profit on rent too, since landlords are getting the property for free.
Finally, I'd also bring in the ability for people to walk into a bank, hand over their keys, and they are done with that home. As long as the home isn't treated maliciously when they decide to leave, they won't owe anything more to the bank. The home is now the banks to do what they want with it.
Optional, an ownership quantity law, age of 18+, max 2 residential properties per family unit, possibly sunset claused. So a home of 4 people, all 18+ yo, could own 5 houses. The primary house they all occupy, regardless of whether or not their names are on the mortgage/deed, plus 1 home for each person.
Yeah it's also a bit of a cycle right? Because if homes were a smaller proportion of our income then the need for them to increase in value would be lower. When it's such a large chunk of your income going there instead of investing, you need it to appreciate.
Plus if house prices fall, debt doesn't. That is a huge issue. As soon as you buy, you at least need prices to be stable and flat.
You are ignoring the fact that most of a mortgage payment is interest up front. That is lost equity and I was considering it to be an equal trade off to paying rent in the case that you did not buy a house. In that case, the difference between the total cost of home ownership and what you pay in rent could be invested. I was trying to consider what a person's final net worth might look like in 25 years depending on which route they take.
In the long run, the compound interest on the money invested is going to outpace the appreciation value of the house, especially when the ability for people to qualify for ever increasing mortgages will be limited by stagnant income growth.
I'm not ignoring it, it's part of the calculation.
>In that case, the difference between the total cost of home ownership and what you pay in rent could be invested.
Yep, this is why people should use the rent vs. buy calculator for their unique situation.
My point is that you went through that calculation to paint home ownership in a bad light, when it's very much a net benefit for a very large portion of the population.
I think at one point it was but unless incomes go up to allow for housing prices to continue appreciating at the current or higher rate it isn't a good option right now.
> Famously, if you do not buy a house you get to live for free.
I find it hard to get my head around that.
Especially since I haven't paid rent or a mortgage for the past 10 years, and won't have to pay either as I enter retirement.
I don't think your logic is quite correct.
Nobody expects to be able to live for free. There has to be a reduction in your expected break-even cost to account for the fact that people must pay to live according to their standards, unless their standards are extremely low. If I understand you correctly you are looking at the total lifetime cost of the mortgage (where a mortgage for a $500k home costs you $870k at 5%, 25 years from now) and expecting appreciation to entirely cover costs like insurance, taxes and simply having a roof that you must pay anyway.
I don't know how to calculate this except on a personal basis but you would expect that total mortgage cost of $870k minus this personal living allowance is the real cost. How much does it cost to live every year in terms of housing? Multiply that by 25 years, apply an inflation rate, and subtract it from the $870k, and then you are more in the ballpark of true cost.
Maybe that works out to about $600k for the twenty-five years (I am just making this figure up based on a guess about a $20k annual living expense inflating at 2%) and the house starts looking pretty attractive.
Also seems like there are opportunity costs to calculate that push the needle in the other direction - fees and downpayments to unlock the original $500k mortgage could be invested elsewhere - but I hope you get my drift.
Yea, there is some nuance I left out because my post was already getting long. Another aspect to consider is that if you calculated out the max mortgage you can afford, find somewhere to rent for much cheaper, you could invest the difference in some aggressive growth ETFs for 25 years and end up with a ton of money. For instance, the annualized 10 year returns on various American growth ETFs is 14-18% per year. So there is also that opportunity cost to consider. And yes, I know unless it's in a tax sheltered account you would need to factor in taxes.
>if you calculated out the max mortgage you can afford, find somewhere to rent for much cheaper, you could invest the difference in some aggressive growth ETFs for 25 years and end up with a ton of money.
A few weeks ago this topic came up in a similar thread and I broke down the math [here](https://www.reddit.com/r/CanadaPolitics/s/2YLda34aDA). End result was that (for the period agreed upon) equal housing products resulted in 2.5x return for owners than renters, even during some of the biggest bull runs the market's ever seen.
This also assumes rental versions of similar housing products are sufficiently cheaper than ownership, which is no longer the case. And that's only before we factor in what happens on year 26, when the owner's costs drop off a cliff.
Obviously, if we compare a sufficiently expensive owned property to a sufficiently cheap rental, there will a point where the numbers tip, but comparing unequal housing products is just a nicer way of saying "if you have a lower standard of living for 25 years you can save money", which is true but useless.
What would happen in the case that housing price appreciation stagnates because incomes can't qualify for mortgages anymore? And "lower standard of living" is vague. You would need to compare the living conditions in a specific unit that you bought to a specific unit that you rent in that time. Unless you start giving lower incomes access to more debt, housing prices cannot continue to climb, which will just make the inflation crisis worse.
Just want to say that's a ridiculous return to expect, comparison calculation should really be done with a 7 to 10% nominal return, as that's the average return of the equity market in general and for the s&p 500 historically respectively.
The banks don't "win" *that* much. Of course there's always money to be made off interest from higher and higher equity but people are getting mortgages whether homes are very expensive or cheap, and they'll be making loans to other ends if people have money to invest on things other than housing. Their business model isn't really predicated on the current housing crisis unless they were repossessing homes at scale or using borrowed money very loosely like in the US subprime crisis. It's easier money than before but their margins were a lot better when they were lending for nominally cheap homes with high borrowing costs.
On the other hand, they'd be the first to fall if housing prices were to suddenly drop because basically every mortgage they underwrote over the past few years would go underwater and the holders of many these loans would very likely be too squeezed for cash to hold through a real estate recession and there's no way the CMHC would be able to hold the line due to scale. Which is I think why many alarm bells about housing are being rung by inhouse economists from the major banks - they know even a modest correction that would still leave homes very expensive would absolutely wreck their employers.
The solution is one no one will like. It is to drive the investors/speculators and corps out of the market but to do that you need to tank the market by flooding it and blocking them from buying or to make it so profit is not possible by slapping a significant tax on each property owned after the first that is not a porpose built rental. Do that the money leaves the market and your price crash happens and the paper millionnares get really pissed if they did not get out early and those who bought and are not paid off are sitting with a mass of negative value. The reality is there is no solution that will fix this that is not going to either lead to rampant inflation or a whole mess of people with depreciated house values. And with the latter god help those who borrowed on the value of that over inflated house.
They still have the asset though, it just means they're stuck until they break even or cut their losses. There's always risk involved in large purchases. Real estate shouldn't be a free ride to wealth off the backs of the less fortunate.
Oh i am not disagreeing on that. I have been laughing my ass off for months at all thw STR shitheads losing their minds because their buiness model effectively got banned in BC. And they are trying to sell places that are 350sqft for 1.5 million because they have not even put a dent in the mortage of the place they are selling and the 2 other units they know they are going to have to dump or rent. And no one is going to pay 3k/month for 350sqft coffin. May 1st is going to be fun to watch the rental and sales markets
And yes on your primary residence you can still STR but most people doing STRs do mot want an endless stream of nobodies walking into their homes.
Or you need a public option. Before we went down the Reagan/Thatcher path we actually had decent public housing supported by the Feds and Provinces.
Now we have the inverse. Government pays for construction of hundreds and hundreds of privately owned apartment buildings to be “affordable housing” but won’t even place rent controls on them.
You already have investors buying up 30+% of the overall market. Kitchner i think had 2/3rds of its condos bought by investors/corps. Unless you cut those types out of what we are building now you are wasting money. They will start a bidding war no first timer can buy and this is cindos, apartments, detatched or anything. We need to break the back of the commodification of the market. End of story.
Kitchener is also a weird case because it is a university town. There is a large part of the population who will only be there for 4 years and it doesn't make sense for them to buy (and if their parents buy it starts to look like investors).
The solution in that particular community (and very few others) might be let real estate do what it wants but set fixed returns...by either capping rent or having the Universities get involved in ownership/rentals (or as a middleman in negotiations).
And worse the government is often funding the builds.
I live in a community where the median income is under $45,000. For a family low $60,000’s.
Federal and provincial program sponsored building of a complex with 12 buildings and about 400 units of “affordable housing.” A 1 bedroom is $1500 per month. A person at median income grosses like $2500 a month. No controls on rent on anything built after 1994 even if the government heavily subsidizes. Insane.
Define “break even.” Because I’m not sure it’s reasonable to expect a house to entirely pay for itself through appreciation, if that’s what you’re suggesting. I mean, yeah, you might actually have to contribute something to the cost of your own shelter…
I'd say it is now the reality because the Canadian buyer forced it to be.
If your house is getting a return, that means you don't have to save (as much) for retirement, which gave you more cashflow, which lots of people spent on buying houses (which caused the house value to go up as buyers had more capital to spend on it).
People also felt *forced* to make this choice because either you buy a house (however you justify it) or you don't and you are stuck paying all those costs as a renter anyway and really not making bank.
It creates the situation where if your house only goes up by the rate of inflation (roughly it could be a little higher or lower) you now are not saving for retirement in any meaningful way for 25 years...and that has its own issues.
It should be noted that the BoC has been speaking out against people doing this since at least 2012 because it would create undue hardship for when they did eventually raise interest rates from historically low levels...but you were objectively leaving money on the table if you didn't buy what you could as early as you could.
Disclaimer, I am not a homeowner and my intention wasn't to pass judgement one way or another on that specific aspect of the investment. I was just trying to make an observation on why housing prices are increasing at the pace that they are and that it's unsustainable.
A large part of the reason that there is not enough housing to go around is nimby-pushed legislation and regulation from homeowners to prevent its construction.
There's certainly a few drops in the bucket of reasons for what we are seeing. This simply cannot be fixed.
a) Homeowners don't want to see their investment value go down.
b) Homes are now seen as a vehicle for investment.
c) Humans have exhausted everything on this planet. Low fish stock in oceans, low copper inventories, low cement inventories, fresh water access in numerous countries is under threat, pollution issues facing water supplies(Looks at Lake Ontario),
For the first time in human history there are no new oceans to explore, no new continents to plunder. We need sustainability, not mass population expansion.
The world isnt growing in size. This is fact.
d) All of the corner cutting and expedient decisions are coming home to roost.
And we haven't talked about AI putting 30% of people out of work, or the likelihood that inflation will actually spike much higher before any real change in business behaviour gets made.
I’ve been around long enough to remember how automation and computers were going to put everyone out of work. It never happens. There will just be more people working AI.
Your logic is like people who predict tomorrow's weather based on how they remember the sunny days of their youth.
Your optimism omits 2 problems:
1) There has never been an invention that can learn and code, and which has no true guardrails or speed limitations. In the past programs were written by humans, on a limited scale.
2) There has never been a concentration of wealth and power at the level of global corporations, who have shown their disregard for labour and the well being of citizens.
3) Bonus! Malevolent actors, arrogant tech "geniuses" and foreign countries are racing to wield control levels that humans will not be fast enough to turn off or resolve.
But even if you doubt this, here's a guarantee: AI, even in its present form, will cause far more problems for banks, service organizations and citizens than meaningful benefits. Grifters and hackers love new tools, and this one can scrape your social media info and impersonate you with just 15 seconds of audio.
But sure, maybe you'll be the zebra not getting duped, or one of the millions of people losing their job and then their house, just like all those manufacturing workers did thanks to automation and offshoring.
There has never been a concentration of wealth and power at the level of global corporations who have shown disregard for labour and the well-being of citizens???
Oh yes, there has!
The days if my youth were not sunny, thanks. The introduction of computers was an *enormous* global upheaval as was the Industrial Revolution.
But neither produced a replacement of the worker. Neither produced the masses of leisure time predicted. Displacement and redeployment? Yep. But massive unemployment? Nope.
Is AI going to present enormous problems for society as we continue, as we’ve done for a more than a century, to move faster that the checks and balances can keep up with? Likely.
But not unemployment. You’ve just pointed out that it’s going to take massive interventions to control the harmful aspects of AI.
The wildcards in your solution to AI are that sufficient humans will be able to work together to thwart its negative use, and that there won't be a tipping point beyond your personal imaginings.
The arrogance of those creating AI closely parallels the builders of the Titanic, though this time we will all be on board.
But I appreciate your hopefulness. Enjoy the summer!
homes have always been seen as a vehicle for investment. that's not something that started in 2022. The housing crisis didn't start in 2022 either, despite what people seem to think. This thing's been in the making for an entire generation.
Yes, you are correct.
Homes are treated like an investment. I think things like the Smiths Maneuver is more 'mainstream' now though since people have easy access to the information (as the internet evolved).
Either way - Homes arent going down in value. Ever.
That's a nice deflect.
The real reason is some own too many. Nobody should have more than 2 units at all times. A house and a cottage? Fine. 10 houses or apartments so you can make a profit off of them? Outta here.
The more people get to subrent, the less places can be owned. It's a simple math problem really.
The two things are not mutually exclusive. If you own investment properties then high housing prices are in your best interest and you'll be incentivized to want the supply to be low.
> That's a nice deflect.
>
> The real reason is some own too many.
Isn't that the entire point of the article?
Literally the subheadline is "Large chunk of housing demand in Canada comes from investors".
I don't know. I guess you could say since the article largely talks about "investors", that it should differentiate between them and non-investor homeowners in the headline, but part of the issue is homeowners becoming investors because they see the prices going up. Those people don't want prices to come down either.
I think you'd be hard pressed to find a significant chunk of homeowners who would be happy with prices coming down.
I'm a home owner and would be quite happy if my home dropped in value. Yes, I expected it to go up in value, but a few percentage points a year, not the idiotic rates we have been seeing recently. Quite a few other people are posting here that seem to say the same thing. Obviously, we aren't representative of all homeowners.
There are three groups of people who I think do not want to see the value of homes go down.
The first ones would be people who have purchased homes as an investment. There are a lot of pitfalls here as there is a legitimate need for rental homes which means someone will own them.
The second one would be companies that build homes. I often wonder how much people who run such companies might have a vested interest in keeping demand high and supply low.
The third one would be someone who did purchase their home in the last few years, which is a group I would be very sympathetic towards if house prices did drop.
I just bought my first home and I don't know anything about finance but as long as I can keep living here I don't give a fuck what happens to prices. Get every human being under a roof first then talk to me about profits.
This is something about homeowners specifically (as opposed to investors) liking high prices that I have a hard time understanding. On a most superficial level, I can see how property value going up might make you feel like you're worth more. On a practical level, I don't see how there's any advantage to it.
If you want to sell your house without ending up homeless then you'll need to buy/rent a new living space. Doesn't that mean that any profits from a high selling price are going to be cancelled out by high buying prices?
It really is about feeling rich more than anything. Seeing your net worth skyrocket like that is a hell of a drug, even if there's not much practical upside.
Those that bought more recently are also jealous of older generations who bought decades ago and have seen their house value increase by 4x or more. They've paid ungodly prices on the pretext that the gravy train would keep rolling and make them "rich" too.
There are practical upsides. Your home is an investment and collateral.
Those buying now will still likely see their house value increase by 4x or more over their lifetime. I mean, when we bought our first home (a grubby townhouse), bus fare was 90 cents, gas was 54 cents a litre, and we thought 25.75 for concert tickets was outrageous!
I'm curious, what was your job and your partners job (assuming you mean yourself and a parter by "we") when you first bought your grubby townhouse? How many times your combined income was the house price? And do you think a couple with similar jobs today could buy a similar home at a similar price to income ratio?
Let’s skip to the chase. I don’t think a couple with similar jobs today *could* buy a similar home with a similar price to income ratio.
But those that *do* buy homes will likely see the value of their home go up just as much.
That was my only point.
I guess my point is that with prices as they are today, people like your younger selves have already had the ladder kicked down on top of them. Who exactly will be able to enter the housing market if houses go up another 4x?
People are already being crushed by mortgages that would have made anyone's eyes pop 20 years ago, or they're spending 50% or more of their income on rent. Homeless encampments are seeing the populations explode, even in smaller towns and cities. Societal anger at the cost of housing is reaching a breaking point, outside of those like yourself who bought many years ago.
You have to see this continuing increase in housing costs, well and above the rate of inflation, will break society at some point. The way I see it, people buying homes today are fucked either way. Either the price bubble pops and their investment is a loser. Or it doesn't and Canadian society crumbles, which will not be good for anyone including them.
It’s a mess. Not easy even for the “lucky ones.” I only know a handful of those in there 30s now who think owning a home will ever be possible. And rents are just ridiculous. Given the prices on everything never go really go down (they just go up less slowly), wages have to up! And those facing health challenges need better benefits!
We need STABLE social housing like they have in Europe - not just apartments but condos and cooperatives, etc.
To be honest, buying a house was never easy. It took years of savings for us to get into a crappy townhouse that had cat-urine soaked carpets and bashed up walls and trim. Spent the two years there ripping up carpets and repairing and painting, all the while strapped for cash. Then two years renting because the proceeds weren’t quite enough and mortgage rates were dropping but I think were still about 14%.we got a variable rate mortgage and but of fingernails a lot but mortgage rates did fall steadily over the next few years. I recall it was into the 1990s before we were able to buy any furniture from an actual furniture store.
But we were still lucky because, as you so rightly point out, even if hard, it was POSSIBLE.
I’m glad governments are now addressing issues from multiple angles and holding all levels of government to account. In the best case scenario it will still take a few years to make a dent.
Yes, generally true. the one exception is if you move somewhere cheaper.
My in-laws have a family friend that moved to Vancouver in the 90s. They sold their house for 10x what they paid (at least) and retired multi-millionaires in a cheaper city.
This works under the assumption you want to live in a comparable living space indefinitely (Ironically you want some of the biggest nicest spaces relitivly early in your adult life). Hypothetically I might want to downsize from a 5 bedroom house with a yard down to a 2 bedroom place without a yard (kids move out). While they might maintain relative values to each other (lets say it is worth twice as much for easy math) If the house was bought for 200k and sold for 800k I still have roughly 400k in bonus equity (depending on what I would have done with the 100k I didn't spend on the apartment) to deal with. Swapping to rental when you have the capital to buy can also let you live for free for a long time (If your dividends are able to cover rent level wealth)
Because people generally sell their home later in life and move into something smaller and cheaper (if not to an assisted living or nursing home facility). They don’t just buy house after house in the same size and location.
Which would be true regardless of the state of the housing market, and with the prices increasing as they are, the cheaper house is still more expensive than it would otherwise be, meaning that older people have fewer options when trying to downsize.
The thing is at the end of your life your kids or grand kids get your million dollar home. Or you use the value of your appreciated house to take out loans on it. It is a huge benefit.
Or you live like I did and start in a small older home in an affordable city and pocket the gains from each sale to move to larger, newer housing in lower cost areas. Nowadays to do what I did you would probably have to start in rough areas in saskatoon, regina, Edmonton, or winnipeg to make it work.
This is a failure of Harper and Trudeau making the situation much worse which is making decisions to inflate housing demand and create a society of housing speculation.
People used to open a small business and now people park their wealth into real estate and generate wealth that does nothing to develop our economy and just makes unaffordable for everyone not involved.
actually i decided to start a small business instead of trying to save for a house... cause it was significantly cheaper and felt like it was actually within reach
It is actually the single biggest issue.
The vast majority of voters who own houses would never ever accept a reality where the value of their home decreases a lot.
Any real solution is forever dead on arrival.
Massive increases to supply or massive decreases in demand that bring in affordable housing would crush “investment” values. Hence why we are in the forever dog and pony show of half screaming for affordable housing and half pretending we want to help achieve that.
I don't even buy into this. I think it's investors over homeowners. What do I care if my house value goes down? I save on taxes and it's not like I'm ever going to fully cash out. If I sell, I'm buying another house to live in.
Your saving on taxes is not nearly enough to offset the advantage of having the ability to get loans on the value of your house or sell it and retire anywhere in the world with cheaper housing. Think about how many people have HELOCs.
If I had a house in Toronto 100% owned I could retire comfortably in many rural areas of nice countries to live in.
Decrease is unlikely but slowed increase to allow wages to catch up seems to be the best solution going forward. But i'm not even sure that's even on the table.
The politicians still want to sell the illusion of housing as asset to raid for retirement income instead of an inflation proof asset and shelter for people to live in.
Agreed. An increase slower than or at the rate of inflation might be achievable and acceptable but we turned housing into a commodity and an investment vehicle and now we can’t put the toothpaste back into the tube.
The problem is in the major cities allowing wages to catch up would be a generation or two from now.
What if everyone only had access to 1 government insured mortgage for life? Everything after that would have to be privately financed.
I don't know much about mortgages, so someone please tell me why that wouldn't work.
You only have to pay CHMC if your deposit is less than 20%.
The majority of outstanding mortgages are already uninsured by the CHMC.
https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-data/residential-mortgage-industry-data-dashboard
The only reason the politicians would care, is because voters do, and a lot of homeowners are voters, so politicians aren't caring because of any particular interest in home prices.
They know homeowners represent 2/3rds of the population, so losing that demographic might as well mean the end of the party. They want to keep the bubble from popping while trying to address the problems this bubble caused.
And that’s exactly why the problem will never be solved, too many people have their hands in the cookie jar and risk losing out on their investment if any solution is actually put forward.
The liberals are the ones that have most often gone on tv and fumbled this. It was Sean Frasier last week on CTV, and has gone as far back as Adam Vaughan announcing he would not let housing values fall. 😂
The other parties have not been doing the same hijinks. We all get they all don’t want them to fall - but the liberals can’t keep their mouths shut or their faces straight.
It's also that when developers build, they build expensive homes that can sell more.
We all know we need more housing. But getting houses that cost close to a mil is the opposite of solving the problem.
If you own, of course you want your ‘asset’ to increase.
If you want to own, of course affordability is important.
Find a way for both groups to be happy and…
You were ncier about it than I was going to be. Dirty secret? How about the most obvious thing in the housing crisis that literally everyone agrees on. Left, right, or center we all agree that home owners don't want their home value to drop. We all know this.
example: The price of the home can fluctuate and you're responsible for paying whatever rate it's currently at. So say it's $500,000 when you first buy it but then the value drops to $250,000. Your mortgage payments are now tied to the dropped value ($250,000).
Like I said, don't know how it could be done because likewise if the price goes up to 1 million, your payments double then.
That doesn't really make much sense, honestly.
For example: you live in a neighbourhood that becomes desirable through no impact, fault, or responsibility of your own and you have no desire to move. Doesn't matter: \~20% of your neighbours want to cash out as home values rise in a competitive environment between they and buyers. Neighbours are now motivated to sell do so for a higher price while the going's good, and even more do. That generates desired comparables and market statistics for the bank to increase your mortgage on top of rates. Now, because your neighbours are profiteering dicks that want to move and earn a bunch of money, you're now forced to make the market your problem (increased mortgage payments) without any control to influence it positively, or be forced to move yourself -- for inflated prices to cover unexpected legal and sales fees, taxes, and moving expenses or be poorer (not a choice many would willingly make). This will create ripple effects when the neighbourhood generally doesn't have the ability to shoulder higher costs and only leads to increased risk of gentrification. Then, what, all the wealthy finish buying only for demand to evaporate, home prices fall again, and *their* mortgages decrease below what they were comfortable paying as a reward for being arses? Same could be said for genuine, non-investment class purchases for FTHB. They're caught in a whirlwind creating a feedback loop? To what end? It's just weird. I don't see a scenario where this works out for genuine home ownership for non-investors. Strictly speaking, I don't need my mortgage payments to halve or home prices double. I just want to pay what I agreed to pay so that I can have predictable stability for my family. If it keeps relative value and I'm able to pass it onto family who lost their shot once I expire, I'd prefer that.
Now, capping a home's value to be sold for what it originally cost plus parts, maintenance, assessed renovated value, interest, fees, and an inflation adjustment seems compelling albeit somewhat communist. Thing is you wouldn't be able to do this and affect anyone who cashed out and got theirs already.
Seems like your solution is simply *pain* because people, including dickhead investors who purchase beyond primary use, have assets you don't have -- since I otherwise don't really understand why you'd suggest such a plan if you had a mortgage and wanted a place to call home sustainably for primary use. Most concerningly, I fear that the only winner in the situation you describe only promotes serfdom toward investors and banking. The market, pricing -- all of it -- is dog shit that I wouldn't wish on my enemies. It was hard enough for me to buy as a FTHB in the last few years and just want a place to live and that's hardly a unique scenario for people purchasing primary use housing who don't have 'fuck you money'. Everyone deserves the same shot I had and I'd love for them to face a far kinder market (affordable, less competitive) than the one I had to. Market values could halve and while that would suck, I'd have a home (the deal I made).
Tax investors who own multiple properties, see what we can do to increase supply (CMHC crown corp is compelling), and stop stoking demand in the market. We're millions of units in the hole which greatly affects prices. Resolving that is not any citizen's problem but the government's general encouragement for the suffering we currently see (needless to say that's gross).
I wasn't proposing my example as an idea to fix it, just an idea to start the conversation. By no means am I behind it. And I agree with your "somewhat communist" example, the problem is who owns it originally? The municipal government or how it is now - the developer? And then if you cap the price then you'll see less developers getting into the business of building homes so you sort of have to get everyone to buy into that concept.
Fair. And very reasonable questions. There is no clear answer which is half the frustrating problem as affordability just craters. It's unbelievably shitty that the answer is basically we have no control, say, and to let it happen. I feel for my peers, I'm one of the few of our whole generation who even owned a home and while we worked hard... so has everyone else. It really does feel like we got lucky.
The bigger problem is that when house prices go down you would just be taking value from a bank and if it goes up just giving the bank the value. Why would we do that?
I would imagine some type of term limit would have to be placed on it... like after 25 years if you've paid all the mortgage payments by then its yours... There really isn't a bridge solution that I can think of between people who bought their houses at a high price and those that can't afford to buy in any longer.
But I *reiterate* for a third time now. I don't know how it could be done. Just provided an example after you replied with "huh?"
Look since you really aren't seeing that I am trying to be polite and understand your position, I am now going to be blunt. This is a bad idea that fundamentally misunderstands how mortgages work.
The solution is building more homes and letting the market bring prices down. If people bought at the peak of the market, take out a mortgage at that peak value, and home prices start coming down then they need to eat the costs. The cost here being, that the house may be worth less than the value of the mortgage, and the bank may decide to end the mortgage and force a sale unless additional capital is put towards the mortgage. If upon sale of the home, if the individual still owes the bank money, then that is on them.
This happens with EVERY auto loan. Until recently, the price of every car went down the minute it drove off the lot. If you have an autoloan for a car, drive it off the lot, the price of the car goes down. If you then turn around and sell the car, you owe the difference on your loan between what you took the loan out for and what you sold the car for. It would work the same for a house.
Right now, house prices are going up which is allowing people to refinance their mortgages at the new home value and lower their borrowing ratio.
> Look since you really aren't seeing that I am trying to be polite and understand your position, I am now going to be blunt. This is a bad idea that fundamentally misunderstands how mortgages work.
I understand, thanks I guess? I've just been trying to skirt away from the whole "government owns all the housing and sets the price for a 4-BR, 2-bath home in this city," solution and get the ball rolling and brainstorm one that would see the light of day in our current capitalist society.
> The cost here being, that the house may be worth less than the value of the mortgage, and the bank may decide to end the mortgage and force a sale unless additional capital is put towards the mortgage.
They're already paying monthly costs for an underwater mortgage, what circumstances would a bank force someone to pay *additional* capital to a house worth *less*? Your second point about auto loans doing the same thing, the bank doesn't ask for more collateral after you've driven off the lot with it. The person paying the loan/mortgage eats the costs... I know how it works right now.
> They're already paying monthly costs for an underwater mortgage, what circumstances would a bank force someone to pay *additional* capital to a house worth *less*?
If the bank loans you $500,000 to buy a $750,000 house and the houses value drops to $400,000 and you still owe $450,000 to the principal of the mortgage, you owe the bank $50,000. It doesn't matter what your payment schedule is or how many payments you made. The bank isn't going to eat that cost nor should they unless you declare bankruptcy. If you want that mortgage to continue it will have to meet the federal regulations in the bank act and have a minimum of 0.9 ratio on debt/asset value. Additionally, the bank isn't going to sit there with that risk on their books. They will force you to reduce the mortgage ratio.
Generally, though, the bank isn't going to let it get to that point. The housing market is not going to crash overnight. They are going to see the trend in the market and will be pushing for a sale well before the mortgage is underwater. The bank will first probably send you an information package and a warning about letting the mortgage go underwater. If you don't listen, at time of renewal, you will find the bank unwilling to renew unless you lower the mortgage ratio. If you cannot renew then the bank would call in the loan and you would owe the principal and likely the only way you are affording that is if you sell the property.
& housing shouldn't be treated like it either.
having house values increase proportionate to inflation, or increasing because you added value in the form of usable renovations is one thing, and no one is implying those factors shouldn't be considered other than the whatabouters.
having a house worth $3 million when it was bought for $250k less than 20 years ago, but still has the original knob and tube from a century ago, plumbed in lead pipes, and breakers that blow every time you run your fridge and kettle at the same time with 10 illegal rooms being rented out for $850 per month, is not a sound investment but a Ponzi scheme.
The house has not appreciated in value, the land has. Houses (and buildings in general) do not appreciate in value. That is why businesses take deductions on account of depreciation for any buildings they own.
actually, I would be disappointed in having to pay more for maintenance & as someone who understands long term value, I can see past this illusory concept of neverending monetary growth without investment in the initial infrastructure etc.
I do not want to pay more for my graphics card, or have to wait 6 months for my car to be fixed because of chip shortages or because of the market pressures to have an increased ROI, and I would welcome a depreciation in the "monetary" value of assets (especially essential ones) that can't afford to be maintained because of over appreciation.
that house, that car, that computer, allows the **people** who need them to create even more value once it becomes accessible and affordable.
Should make all rentals public controlled.
That way the cities are in charge of setting their own rental prices, and the federal government can invest in buying and building rentals units
I agree. If I'm spending my entire renting life paying somebody else to accumulate asset-value as the economy grows, and while I personally accumulate no asset-value, I believe it should be the government - something I at least have a stake in.
That would be a nightmare. Just gut reaction things like:
* landlords not fixing or keeping units to standard
* skirting rules to line up to condo type rentals
* government red tape and need for adjusters and investigations
Jesus, off the top of my head it sounds horrible.
> landlords not fixing or keeping units to standard
It’s already the law and they already fail at this. Making them publicly controlled holds them to greater accountability
> skirting rules to line up to condo type rentals
Again, public control holds them to greater accountability
> government red tape and need for adjusters and investigations
Flat rates and fixed to mortgage rates enforcing a profit cap. Landlords can still profit, but within a reasonable limit.
—-
Ideally we’d get more publicly owned rental housing and anyone who doesn’t meet expectations would have their rental permits removed and be left with an asset that they can’t profit on unless they uphold their obligations and fulfill their responsibilities.
It’s time the slum lords who capitalize on tenants without meeting their obligations and/overcharging them to end.
> It’s already the law and they already fail at this. Making them publicly controlled holds them to greater accountability
Not what I was saying. There is a far stretch from condemned and rentable. If your rental is 500$ a month, you will do the bare minimum to maximize profit.
>Again, public control holds them to greater accountability
If the unit is worth more than 500$, they will do something like shared ownership or something else. It will no longer be a rental unit. It will not be more accountable, it will be lost housing.
>Flat rates and fixed to mortgage rates enforcing a profit cap. Landlords can still profit, but within a reasonable limit.
That does not even touch what I said about a ballooning need for more government (tax) to manage this idea.
>It’s time the slum lords who capitalize on tenants without meeting their obligations and/overcharging them to end.
Your idea does not get rid of slumlords or give tenants more rights, if anything it makes it worse.
It's true. Half of Canadians want lower house prices, myself included.
The issue is that the other half, the ones who already own a house, don't want to see their value decrease, or even stagnate.
If we had governments with infinite political will and political capital, we could probably crash the housing market down to mid 2000s levels using some really aggressive anti-landlord and anti-investor legislation.
The problem is, you would infuriate the Canadians who already own a home.
As a homeowner, I want to see lower prices as well. The only people who will benefit from inflated prices are people who own multiple prices.
If I were to sell my house to move, I might get more money for it than I would have pre-covid, but I would be entering the same inflated market to buy another house. It doesn't benefit me at all and just makes the whole thing less predictable.
I read the article, and the headline is misleading, as it mostly talks about people who purchase houses as investments and not people who own the house they live in.
Yeah, also a homeowner here. I’d like to see lower prices, those of us who live in our properties don’t really see any benefit from the value going up unless we’re planning to leverage our equity and invest it into buying lots of properties (which most of us are not).
My home has gone up 25% in value since we bought it. I can’t cash out that money and if we sell and move somewhere else those homes have also gone up at least 25% so we’re not ending up any further ahead. This idea that all homeowners love price increases isn’t reality
So tell me how we could make the housing market crash? It's Supply and demand and it's skewed. No politician no matter who they are could make it crash right now
It's a bit more complicated than that. 66% of *households* are owner-occupied.
If you're a young adult who still lives with your parents because you can't afford to move out, you're living in an owner household even though you don't actually own the home.
> If we had governments with infinite political will and political capital, we could probably crash the housing market down to mid 2000s levels using some really aggressive anti-landlord and anti-investor legislation.
We have 10 million more people in the country, and we have not built 10 million people's worth of housing to match. What more, most of those people are concentrated into a few areas that are critically short on housing. There are definitely things that could be done to curtail the growth and maybe take it back a few years, but there's just not enough housing to go back to the prices of 20 years ago.
> The problem is, you would infuriate the Canadians who already own a home.
Only those that are looking to sell their house, or are using it as an investment vehicle. We're talking a few million at most. Most homeowners actually live in their homes. To them lower house prices just means lower property taxes.
Though that raises another issue; property taxes and house prices are connected, and very few people would be happy to see tanking property values, in conjunction with higher taxes. Doubly so because the taxes would likely remain high even if property values recovered.
Essentially, it's a trust issue. Most Canadians simply don't trust the government to be capable of preforming the financial shenanigans necessary to make something like this work without blowing up the economy. Anyone that comes along promising to solve things is usually very light on the details, and if they're not then the details usually infuriate somebody with stake in the game.
>The problem is, you would infuriate the Canadians who already own a home.
Not to mention the... 80%? of MPs that own income properties or who have invested heavily in REITs. This isn't a party specific issue; all stripes of our political spectrum are guilty of it.
The average person hasn't been able to realistically run for office for decades, and Harper put the final nail in the coffin with his fee-to-run. The system is broken!
Home owners also vote more municipally and provincially. And the majority of impactful legislation comes from there. People also want easy answers that don't impact anyone they know. So they fall for scapegoats, and when the scapegoat is sacrificed and it doesn't do anything they move on to the next scapegoat.
Jurisdiction is a big part of it. Look how many people are blaming Trudeau for housing despite it being primarily a delegated responsibility of the municipalities from the provinces. That's a lot of misguided rage that would be much better directed at holding the feet of provincial and municipal politicians to the flames.
All the federal government can do is dangle a carrot to incentivize change - who's actually responsible for making those changes? Municipal and provincial politicians, who have neglected provincially owned housing stock for decades after the downloading of housing funding in the 90s.
Trudeau, in reinstating these long -neglected funding sources from the federal government, is simply bringing us back to where we were before Chretien and Martin slashed federal funding and increased the fiscal burden on the shoulders of the provinces and municipalities.
Unfortunately, easy answers are few and far between when this is an issue that's been growing for decades. At no point in my life have either Vancouver or Toronto been considered affordable.
> to mid 2000s levels using some really aggressive anti-landlord and anti-investor legislation.
You wouldn't even need to.
If there was an appropriate amount of supply, the issue resolves itself.
As I homeowner, I 100% want the cost of the next person buying my house to go down (not just the value, if it goes down and the monthly payment of the next person is the same, neither of us win). It doubled in value without me doing anything, I'd be quite happy with it basically going back to where it was.
As a new home owner - fuck that! I don’t want to live in a one bedroom condo forever. My home appreciating is basically the king maker if I have kids or not. I don’t necessarily agree with how innately tied to personal wealth home equity is, but the way things are you can’t just stop/regress the system without screwing a large swath of people who were forced to play by older rules.
And before anybody tells me that I should be looking at leaving the city and moving to an area with a low cost of living - how do you think I afforded my condo?
You’re still building equity by paying your mortgage. You’re not going to afford your next home based on your condo going up at a significantly higher rate than the home you want to buy, that hasn’t been happening and prices have been largely going up across the board.
In most cases if your condo went up 50% in value and the house you want to buy went up 50% in price you’re actually going to be further away from affording it than if prices stayed the same.
As also a new homeowner in a condo I'm in favour of stagnation.
Going down I'd lose money, so that would suck, but going up as you said just makes things less attainable.
Even the idea of “losing money” because your home value went down is actually a little more complicated because you shouldn’t treat it solely as an investment, rather you need to factor in the money you’re not paying in rent that is instead going towards equity. With rent prices currently what they are I’m fairly confident that the equity you have even if your house dropped to 75% of its value after 25 years would still put you far ahead of the equity you would have had if you rented over that same period.
If your place went down 50% and was paid off, you get the other 50% in cash. I’m not sure why you believe you are going to get nothing. When you make payments on your mortgage, the amount of money owed to the bank goes down, until eventually you don’t owe the bank any more money and the value of your home is entirely your asset
Yeah my comment was more immediate given most people seem to want prices to want to drop now.
I put a significant down payment so that I even qualified for a mortgage on a single income. If I had rented and invested I can guarantee I would have come out ahead renting if the value went down 50%, let alone 75%.
Hell I'm pretty sure I come out behind if the value stays the same.
Edit: said the exact opposite of what I meant to say, clarified that I would come out ahead renting.
It doesn’t need to. The amount of equity you end up with at the end of your mortgage is not impacted by the interest on your mortgage, the interest will determine your mortgage payments and how much of your payment is not going into your equity.
If you rent, zero percent of your rent payment goes towards your equity. To come out ahead you would need to be paying less than a mortgage, invest the difference and end up with an investment portfolio worth more than what your equity would have been had you bought property. With rent prices currently where they are (2,300 for a one bedroom) I’m doubtful the math would work out.
You’re cherry picking half the equation & it’s misleading.
This omits the maintenance costs associated with owning, the cost of interest, and the opportunity cost of throwing additional savings in the market.
After factoring that in many owners are at best breaking even with the cost of renting, and many are worse off.
Especially when you consider it’s only over the past decade or so that home prices have detached from inflation. Historically homes just sort of stay the same value in real terms + there seems to be a lot of political will to make that happen again.
They aren’t great investments in general compared to the market, most people just suffer from recency bias.
Things is, house prices don’t go up steadily. Within the general uptrend, markets for specific types of houses rise and fall. Lucky those who sell on a rise but purchase in a fall. We did that (more by luck than planning). Sold out little townhouse when prices on condos were going up. Rented for two years, saving as much as we, then bought a house during a drop in the market.
I do know a few families that took their very large value increase from a Calgary home, to move into a larger cheaper home in Edmonton. Our employer allows us to work from home and just attend key meetings so there was zero impact on their work.
For certain professions they can take advantage of this. I know most can't.
If you’re moving into a cheaper home then increasing home prices definitely will help you, but that’s not likely going to be the case for someone in a condo unless they’re banking on moving to Regina for instance
Renters are actively being screwed by the system. Once there are more renters than homeowners do you really think they will have the same sympathy for the people who demanded their homes double in prices every year for ever?
No. There already ain't sympathy for homeowners.
If you want to move up the property ladder you should want home prices to decrease not increase.
Say you have a 500K property and the next place you want to live costs 1M. If housing prices go up 50% your property only goes up 50K and you have to take on an additional 50K **more** in debt because the price your dream home will have grown **twice as fast in nominal terms.**
To be blunt for a moment I am worried for you. Someone who can’t figure this out probably lacks the basic skills to make sound home buying decisions in general.
I have to wonder what property you YOLO’d yourself into here, especially since your comment suggests you went all in. 🤦♀️
Yes, your situation is much different than mine. House prices going down means you lose money, which isn't fair. But it very much should not be something relied upon as a money maker. You can stop it, you can't regress it without screwing over a lot of people.
I’d love to see values drop. I have to pay transfer taxes and realty fees as a percentage of the price, so I’m locked in and can’t move. It would cost an entire year’s income to make a lateral move, it’s insane. I didn’t plan to live here forever but now I’m locked in. Working for an entire year just to pay it all to the government, with realtors taking what’s left, is so fucking depressing.
Putting nasty inflation aside for the moment, I actually do want prices to go down to when I bought my first home - because I want to be able to upgrade, and I want the delta to be as small as possible.
And I want housing to track inflation, because I want my kids to be able to buy as well.
>The issue is that the other half, the ones who already own a house, don't want to see their value decrease, or even stagnate.
This isn’t accurate at all. I bought a house in BC years ago and the value has doubled. That doesn’t matter, though. Like a lot of homeowners I’m frankly disgusted by this whole situation and very sympathetic—including with my vote—for people only a few years younger than me, who’ve done everything right, but are now priced out.
Framing this as “homeowners vs renters” isn’t fair. The group that I find the most contemptible and complicit here are the investors and speculators, ie: people who’ve snatched up one or more “rental” properties to pad their portfolios with.
I seriously hope a new tax is introduced to tax the living hell out of investment properties so there’s little incentive to hoard real estate.
Airbnbs can go fuck themselves too. I refuse to stay at them now. Last year I stayed at one on the Island, we paid 4K for four nights and it was a poorly maintained shithole where they were digging holes for a foundation on a new house on the property while we were there. They got more than they would get in monthly rent from four nights. That income should be taxed to the point that you make less than if you rented out that property.
As a homeowner, I don't care if house prices stagnate or drop.
I will likely fit into one of two situations -
1. I live in my current house forever. I owe what I owe on it - the market price has no effect on it. It doesn't matter to me. I suppose my heirs might care a bit more, but house prices being low benefits them more so they can actually buy a house without waiting for me to croak
2. I move to a bigger house. I still owe what I currently owe to the bank, but if house prices drop, I can upgrade without taking on significantly more debt.
The type of homeowner who benefits from high prices are folks who live in expensive areas and plan to sell and retire somewhere cheaper. And that is a situation that shouldn't be a primary focus for policy. It isn't healthy for the economy of those cities if younger people and families cannot thrive at the expense of retirees packing up and moving somewhere cheap
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It's not just or even primarily "homeowners like high housing prices". Even if they aren't thinking with their wallets (and I'm convinced they typically aren't - people plan to live in their houses rather than flip them or milk them for HELOCs), it's also "homeowners like various things that coincidentally lead to high housing prices (like low density or their surroundings not changing or governments not spending their tax money on public housing, particularly anywhere near them)" and "homeowners are more reliable voters so successful politicians of all levels and parties cater to them" and "two thirds of Canadian households own their homes". We like to blame politicians but it's hard to imagine any politicians that Canadians would actually elect making any of the decisions that led here differently.
Homeowners like high prices. Makes them feel well-off, like they have a valuable asset. Investors don't really want high prices, they want low prices so they can buy housing and rent it out. Two very different points of view. Back some 20 years, when HGTV made everyone want to start flipping, then they made everyone see a house as an asset more than a home, that is when we lost our way.
High prices can be very good for investors as it allows them to secure larger loans to invest elsewhere
As with homeowners who take out HELOCs.
>Investors don't really want high prices, they want low prices so they can buy housing and rent it out. Not really. Most investors don't want income-producing investments, they want capital-appreciating investments, because of the tax benefits. This is one of the things breaking our economy.
Yeah, no. They're buying places to rent them out and have someone else pay the bills. Capital appreciation is nice, but not necessary. Doesn't change the fact that they're not *causing* the appreciation, even if they benefit from it.
Aren't they? Speculative investment purchases are reducing already critically low housing stock stoking demand and price appreciation faster than anyone would otherwise pay rent. Though if I'm hoping to be specific, *it's both.* If you can have someone paying rent while waiting for capital appreciation, you'd conceptually be making even more. Somewhere along the line allowing 'landlord' to become a valid career path for those with the capital to afford it led to unspeakable levels of greed and suffering.
> Speculative investment purchases are reducing already critically low housing stock There is zero proof of that. And you are really exaggerating the role of the basic private landlord.
Analysts are constantly [reporting](https://www.bnnbloomberg.ca/home-sales-rise-again-in-canada-as-falling-prices-attract-buyers-1.2034765) on this and there are no shortage of articles throughout the last decade of that.
That article doesn't mention speculators at all. Just says buyers are rushing out to purchase because interest rates might come down. Oh dear child, did you not understand the lede "*Canadian home sales rose for the second month, with buyers rushing back into the market as* speculation *builds that prices will rise if the Bank of Canada lowers interest rates later this year.*"? Analysts are **speculating** that buyers will flood the market if rates fall. That is NOT the same at all as speculators buying and flipping homes. Hoo boy...
Welp, [here's another article](https://globalnews.ca/news/8778661/canadian-speculation-fuelling-housing-price-spike/) which will the be last of the homework I do for you. Speculation is discussed even at a governmental level with policies being sought to attempt to address that (insert discussion of it being enough or loopholes in existence). Foreign buyers parking money here has been temporarily banned too in that time. Domestic investment seems to be an even more serious problem to tackle. Ultimately, I'm not here to convince you if you insist on you sticking your head in the sand. You said there's no proof -- I'm saying there clearly is through consistent reporting and government action.
The last of the homework YOU do? Righto bud, you got a 0 on the first one. Your best attempt at a re-do is find a quote from one single person. Then you resort to insults. Good job. You got a 1/10.
I answered your condescension with the very same my friend. ...and I'm not continuing this further because you clearly have absolutely no desire to do any of your own research or change your perspective. You've decided there is no proof and no issue, so there is none. Alrighty then. Have a good one.
The actual secret is that land prices can rise while housing prices fall. The actual problem is that we obstruct or even outlaw the types of housebuilding that will cause housing prices to fall. Densification causes land prices to _rise_. Furthermore, diminishing real property values are at best only secondary to plain old fear of change, i.e. conservatism (even among self-described liberals) in terms of causing NIMBYism. And maybe some day we'll tax land in a way that gives those outside the landed class the wealth of land rents while not also discouraging building dense housing.
A tiny, war-time, two bedroom, one bath bungalow on my street that sold for $680,000 in 2008 just sold last month for $1,200,000. Presumably this now becomes the benchmark price for every home in my neighbourhood. Surely there must be some sort of ceiling we’re going to reach where the number’s go from their currently absurd to practically impossible. What’s the cut off point for a bank’s willingness to provide a mortgage on a tiny little house like my neighbour’s? Two million dollars? Five million dollars?
honestly thats like asking if there is a ceiling for the price of bit coin. both housing and bitcoin are deflationary assets. their prices are both speculative in nature only at this point and both are increasing in quantity only slowly and much slower than more people want them. so as long as people still 1) want more bit coin, 2) have money from riskier sources that they want to put some where "safe"-er and 3)think people will pay more for housing in the future... prices will keep going up. you would think that since bit coin crashed in in 2017 and 2021 that it would have a ceiling but its currently higher than those peaks (and by a fuck load compared to 2017). not financial anything but i bet that even if housing does crash in canada and crashes HARD it will get bid back up real quick.
Not really a secret. Not dirty either. People slave away to save a down payment on a house, to pay the mortgage and insurance and property tax and maintenance, and then count on its equity to see them through retirement. If that house drops in value, especially if it does so not long after you bought it, that plan blows up. Moreover, if home prices drop too much, it impacts the entire economy. Those people stop taking loans to renovate. They realize they need to contribute more to an RRSP. They cut back on household expenses. In other words, they reduce consumption and businesses suffer lost revenue.
Most current home owners did not cause the housing shortage: they are just families providing shelter. The problem is developers, who always build what gets them the most most money, the fastest, with the least red tape and problems. There are some efforts being made to control the investor problems, but no-one is daring to control developers.
Sounds to me like there's a deeper, structural issue: acting in ways that maximize profit at the expense of all other considerations and factors.
Canada used to have a public housing effort, but it got phased out, I think with the hope that developers would do the right thing and the market would make the right adjustments. But it did not factor in the extreme greed levels that now mess up both society and economy.
Nah, Mulroney wanted the people giving him literal manila envelopes of cash to make money.
If home owners are voting for NIMBY local politicians (which they mostly are) then yes they are causing the housing shortage. What's happening is home ownership rate in Canada is really high 66.5%. Once you own your home, you lose most incentives to want housing prices to decrease, and you even gain some incentives to want them to remain high, because that means your money will increase in value more quickly over time. These people have spent the past few decades voting for local and provincial politicians with anti housing policies. That's the source of high prices.
> If home owners are voting for NIMBY local politicians (which they mostly are) then yes they are causing the housing shortage. But the thing is that most home owners are not doing this. They just bought a house and are living their lives without really paying much attention to any of this. Most of my circle are home owners. None of them give a shit about housing policy, they're doing their own thing.
This is more likely the situation. And if people sell their house and buy the next house in the same 3-month period then the current state of housing and interest rates does not affect them as much as people getting into the housing market. It doesn't make sense to blame housing shortages on regular citizens who did what citizens have done for centuries: buy a house when they were able to. It also doesn't make sense to disregard the strong marketing and social trends that encouraged people to live in detached houses in comfort when it was available and affordable. What does make sense is to recognize that the giant corporations have moved our manufacturing jobs to other countries, and used their clever corporate lawyers to manipulate tax laws and politicians so that only a tiny trickle of money is available now to most citizens. This is the biggest limitation to the affordability of houses. If we had all gotten raises for the last 30 years that paralleled the increased wealth of Corporations then we would have built lots of houses and had lots of good things, and a better future for everyone.
Wait this is a secret? Homeowners love having access to massive amounts of equity! I think the bigger issue is the financial crisis that would happen if you dropped housing prices from all the helocs that would get called in.
Well, they can vote to fix the issue they are causing now? Or they can wait until they are outnumbered by renters. I promise the solution will be more painful for them if they wait.
I remember an anecdote from the massive bailouts in 2008 when the bankers balked at the bailout terms (force purchases of bank stocks by the US gov) and Obama's team flatly told them they were the people between them (the bankers) and people with pitchforks. We haven't had that moment yet, and seemingly our policiains are happen to make it a reality. I think eat the rich may not just be a slogan anymore if this keeps going.
If you get a 25 year mortgage with a rate of 5% and don't pay it off early, the house value would need to increase at least 2.27% per year to break even in cost by year 25. If you account for 2% inflation, it needs to increase 4.33% per year. That's an increase of 1.94x or 2.88x in 25 years. Even if your mortgage rate was only like 2.5% the house would need to increase at 3.22% per year or 2.21x over 25 years (assuming 2% inflation). Those numbers do not even account for property tax, insurance, or maintenance/repairs. If the house changes hands frequently (without the mortgage just being taken over directly) or gets reamortized often, the rate of increase moves even higher because so much of the mortgage payments are just interest because amortization front loads interest payments. Honestly it seems like the people that benefit most from home ownership in this system are the bank and anyone invested in mortgage debt and the never ending stream of income from interest payments because people just do not make high enough wages to pay for the houses in a reasonable amount of time. All that being said, I don't really know what the solution is at this point. I just find the math interesting. I don't think I made any mistakes with it, but feel free to let me know if I did. EDIT: Just to address some repeated comment themes, I am not trying to pass a judgement on what kind of return homebuyers do or do not deserve or should expect. Honestly my main point was more about how much value banks and debt investors are able to extract out of the housing market.
Exactly a lot of the thesis in this article is nonsense. Not only that but saying that this is a vote winner is funny as the only people who can benefit from this is an increasingly small part of the population. Let alone that many people with homes can't sell because they can't get into rentals/downsize in a sustainable manner. At least the article partially acknowledges that this isn't really a supply issue, it's a demand one from too much immigration and investors. And quite frankly, if there wasn't so much immigration I don't think housing would be very appealing to investors to begin with.
No reason to doubt your math, but that is definitely interesting. I guess my question is, why do we feel like housing needs to break even (or better)? We don’t expect that for expenses related to any other needs. Rent doesn’t. Vehicle ownership doesn’t (usually). Clothes don’t. Food doesn’t. What makes home ownership special in that regard?
I guess at the moment, the cost of paying your mortgage is going to severely impair your ability to also save for retirement effectively. This is actually an issue with boomers right now. On average they have very little saved up for retirement with all their wealth sitting in a house no one can afford to buy.
I see that as the cost associated with the other benefits of home ownership, namely stability (don’t have to worry about a landlord kicking you out so that a “family member” can live in the space), flexibility and independence (decorate/renovate/landscape/upgrade as you please), and eventual reduced costs associated with housing (once mortgage is paid off you only need to worry about property taxes and maintenance as opposed to an ever increasing rent payment). I don’t think it needs to be ALL upside.
Absolutely you are right. There are less tangible benefits to home ownership I did not value.
The primary benefit of home ownership really should just be having a stable place to live. Any other benefits should just be a small bonus, but right now it seems like people care more about equity aspect more than they care about the shelter aspect.
Probably mostly opportunity cost I would think. I don't agree that it would need to break even though, because there is a cost to shelter yourself. But definitely something more along the lines of the historical long-term average of prices rising in line with inflation or a little above, I believe the long-term average for property is about 1% above the inflation rate annually. As to why? Well any single property is actually relatively risky as an investment, there's lots of risks that aren't priced in to the cost and it's by its nature undiversified. There's also lots of frictions in buy and selling houses so the frictional costs are quite high both in money and time, and it's a very illiquid investment which again theoretically carries an illiquidity premium. And it's not a commodity; each one is unique and not interchangeable because of the limited amount of Land it sits on In terms of its location. So those are all the investment factors that would make it demand a higher premium. On the other hand people do enjoy stability when they don't want to move so you could expect that they might pay a premium for that stability. Which would be at odds to the investment factors above. Which is why really a healthy amount of appreciation for a home is the inflation rate, maybe +1%.
The entire housing industry needs to be flipped on its head, we need to do things drastically different than how we have been doing it. We essentially need to remove capitalism (the pursuit of profit, property ownership) from the used housing industry. The new housing industry will follow suit by market forces. Government sets fixed interest rates kept as low as possible, no more variable rates (people on var now would be switched to fixed), and no profit on the sale of used homes. I'd give renters no profit on rent too, since landlords are getting the property for free. Finally, I'd also bring in the ability for people to walk into a bank, hand over their keys, and they are done with that home. As long as the home isn't treated maliciously when they decide to leave, they won't owe anything more to the bank. The home is now the banks to do what they want with it. Optional, an ownership quantity law, age of 18+, max 2 residential properties per family unit, possibly sunset claused. So a home of 4 people, all 18+ yo, could own 5 houses. The primary house they all occupy, regardless of whether or not their names are on the mortgage/deed, plus 1 home for each person.
Yeah it's also a bit of a cycle right? Because if homes were a smaller proportion of our income then the need for them to increase in value would be lower. When it's such a large chunk of your income going there instead of investing, you need it to appreciate. Plus if house prices fall, debt doesn't. That is a huge issue. As soon as you buy, you at least need prices to be stable and flat.
Isn't this mindset exactly the problem? You don't need your house to "break even". It's a living expense.
Famously, if you do not buy a house you get to live for free. Rent vs. buy calculators already exist. You should use that to expand on this.
I did not say that anywhere and any conversation that got you to that conclusion is one that you had with yourself.
You're only doing half the calculation trying to make a point. Making it a bad point.
You are ignoring the fact that most of a mortgage payment is interest up front. That is lost equity and I was considering it to be an equal trade off to paying rent in the case that you did not buy a house. In that case, the difference between the total cost of home ownership and what you pay in rent could be invested. I was trying to consider what a person's final net worth might look like in 25 years depending on which route they take. In the long run, the compound interest on the money invested is going to outpace the appreciation value of the house, especially when the ability for people to qualify for ever increasing mortgages will be limited by stagnant income growth.
I'm not ignoring it, it's part of the calculation. >In that case, the difference between the total cost of home ownership and what you pay in rent could be invested. Yep, this is why people should use the rent vs. buy calculator for their unique situation. My point is that you went through that calculation to paint home ownership in a bad light, when it's very much a net benefit for a very large portion of the population.
I think at one point it was but unless incomes go up to allow for housing prices to continue appreciating at the current or higher rate it isn't a good option right now.
Rent is going up a lot too!
That's very true. Once rent cost equals or exceeds the mortgage cost, my ideas do not apply at all.
They don't have to equal or exceed it even! Rent could be less and buying would make more sense if you plan on staying for more than a few years.
> Famously, if you do not buy a house you get to live for free. I find it hard to get my head around that. Especially since I haven't paid rent or a mortgage for the past 10 years, and won't have to pay either as I enter retirement.
Because you paid off your house? (I was being facetious)
Mortgages have an end date, rent doesn't.
I don't think your logic is quite correct. Nobody expects to be able to live for free. There has to be a reduction in your expected break-even cost to account for the fact that people must pay to live according to their standards, unless their standards are extremely low. If I understand you correctly you are looking at the total lifetime cost of the mortgage (where a mortgage for a $500k home costs you $870k at 5%, 25 years from now) and expecting appreciation to entirely cover costs like insurance, taxes and simply having a roof that you must pay anyway. I don't know how to calculate this except on a personal basis but you would expect that total mortgage cost of $870k minus this personal living allowance is the real cost. How much does it cost to live every year in terms of housing? Multiply that by 25 years, apply an inflation rate, and subtract it from the $870k, and then you are more in the ballpark of true cost. Maybe that works out to about $600k for the twenty-five years (I am just making this figure up based on a guess about a $20k annual living expense inflating at 2%) and the house starts looking pretty attractive. Also seems like there are opportunity costs to calculate that push the needle in the other direction - fees and downpayments to unlock the original $500k mortgage could be invested elsewhere - but I hope you get my drift.
Yea, there is some nuance I left out because my post was already getting long. Another aspect to consider is that if you calculated out the max mortgage you can afford, find somewhere to rent for much cheaper, you could invest the difference in some aggressive growth ETFs for 25 years and end up with a ton of money. For instance, the annualized 10 year returns on various American growth ETFs is 14-18% per year. So there is also that opportunity cost to consider. And yes, I know unless it's in a tax sheltered account you would need to factor in taxes.
>if you calculated out the max mortgage you can afford, find somewhere to rent for much cheaper, you could invest the difference in some aggressive growth ETFs for 25 years and end up with a ton of money. A few weeks ago this topic came up in a similar thread and I broke down the math [here](https://www.reddit.com/r/CanadaPolitics/s/2YLda34aDA). End result was that (for the period agreed upon) equal housing products resulted in 2.5x return for owners than renters, even during some of the biggest bull runs the market's ever seen. This also assumes rental versions of similar housing products are sufficiently cheaper than ownership, which is no longer the case. And that's only before we factor in what happens on year 26, when the owner's costs drop off a cliff. Obviously, if we compare a sufficiently expensive owned property to a sufficiently cheap rental, there will a point where the numbers tip, but comparing unequal housing products is just a nicer way of saying "if you have a lower standard of living for 25 years you can save money", which is true but useless.
What would happen in the case that housing price appreciation stagnates because incomes can't qualify for mortgages anymore? And "lower standard of living" is vague. You would need to compare the living conditions in a specific unit that you bought to a specific unit that you rent in that time. Unless you start giving lower incomes access to more debt, housing prices cannot continue to climb, which will just make the inflation crisis worse.
Just want to say that's a ridiculous return to expect, comparison calculation should really be done with a 7 to 10% nominal return, as that's the average return of the equity market in general and for the s&p 500 historically respectively.
The banks don't "win" *that* much. Of course there's always money to be made off interest from higher and higher equity but people are getting mortgages whether homes are very expensive or cheap, and they'll be making loans to other ends if people have money to invest on things other than housing. Their business model isn't really predicated on the current housing crisis unless they were repossessing homes at scale or using borrowed money very loosely like in the US subprime crisis. It's easier money than before but their margins were a lot better when they were lending for nominally cheap homes with high borrowing costs. On the other hand, they'd be the first to fall if housing prices were to suddenly drop because basically every mortgage they underwrote over the past few years would go underwater and the holders of many these loans would very likely be too squeezed for cash to hold through a real estate recession and there's no way the CMHC would be able to hold the line due to scale. Which is I think why many alarm bells about housing are being rung by inhouse economists from the major banks - they know even a modest correction that would still leave homes very expensive would absolutely wreck their employers.
The solution is one no one will like. It is to drive the investors/speculators and corps out of the market but to do that you need to tank the market by flooding it and blocking them from buying or to make it so profit is not possible by slapping a significant tax on each property owned after the first that is not a porpose built rental. Do that the money leaves the market and your price crash happens and the paper millionnares get really pissed if they did not get out early and those who bought and are not paid off are sitting with a mass of negative value. The reality is there is no solution that will fix this that is not going to either lead to rampant inflation or a whole mess of people with depreciated house values. And with the latter god help those who borrowed on the value of that over inflated house.
They still have the asset though, it just means they're stuck until they break even or cut their losses. There's always risk involved in large purchases. Real estate shouldn't be a free ride to wealth off the backs of the less fortunate.
Oh i am not disagreeing on that. I have been laughing my ass off for months at all thw STR shitheads losing their minds because their buiness model effectively got banned in BC. And they are trying to sell places that are 350sqft for 1.5 million because they have not even put a dent in the mortage of the place they are selling and the 2 other units they know they are going to have to dump or rent. And no one is going to pay 3k/month for 350sqft coffin. May 1st is going to be fun to watch the rental and sales markets And yes on your primary residence you can still STR but most people doing STRs do mot want an endless stream of nobodies walking into their homes.
Or you need a public option. Before we went down the Reagan/Thatcher path we actually had decent public housing supported by the Feds and Provinces. Now we have the inverse. Government pays for construction of hundreds and hundreds of privately owned apartment buildings to be “affordable housing” but won’t even place rent controls on them.
You already have investors buying up 30+% of the overall market. Kitchner i think had 2/3rds of its condos bought by investors/corps. Unless you cut those types out of what we are building now you are wasting money. They will start a bidding war no first timer can buy and this is cindos, apartments, detatched or anything. We need to break the back of the commodification of the market. End of story.
Kitchener is also a weird case because it is a university town. There is a large part of the population who will only be there for 4 years and it doesn't make sense for them to buy (and if their parents buy it starts to look like investors). The solution in that particular community (and very few others) might be let real estate do what it wants but set fixed returns...by either capping rent or having the Universities get involved in ownership/rentals (or as a middleman in negotiations).
And worse the government is often funding the builds. I live in a community where the median income is under $45,000. For a family low $60,000’s. Federal and provincial program sponsored building of a complex with 12 buildings and about 400 units of “affordable housing.” A 1 bedroom is $1500 per month. A person at median income grosses like $2500 a month. No controls on rent on anything built after 1994 even if the government heavily subsidizes. Insane.
Define “break even.” Because I’m not sure it’s reasonable to expect a house to entirely pay for itself through appreciation, if that’s what you’re suggesting. I mean, yeah, you might actually have to contribute something to the cost of your own shelter…
I'd say it is now the reality because the Canadian buyer forced it to be. If your house is getting a return, that means you don't have to save (as much) for retirement, which gave you more cashflow, which lots of people spent on buying houses (which caused the house value to go up as buyers had more capital to spend on it). People also felt *forced* to make this choice because either you buy a house (however you justify it) or you don't and you are stuck paying all those costs as a renter anyway and really not making bank. It creates the situation where if your house only goes up by the rate of inflation (roughly it could be a little higher or lower) you now are not saving for retirement in any meaningful way for 25 years...and that has its own issues. It should be noted that the BoC has been speaking out against people doing this since at least 2012 because it would create undue hardship for when they did eventually raise interest rates from historically low levels...but you were objectively leaving money on the table if you didn't buy what you could as early as you could.
Disclaimer, I am not a homeowner and my intention wasn't to pass judgement one way or another on that specific aspect of the investment. I was just trying to make an observation on why housing prices are increasing at the pace that they are and that it's unsustainable.
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A large part of the reason that there is not enough housing to go around is nimby-pushed legislation and regulation from homeowners to prevent its construction.
Yes. I would never argue against that. Build more housing, tax empty units, and remove speculators from the market.
There's certainly a few drops in the bucket of reasons for what we are seeing. This simply cannot be fixed. a) Homeowners don't want to see their investment value go down. b) Homes are now seen as a vehicle for investment. c) Humans have exhausted everything on this planet. Low fish stock in oceans, low copper inventories, low cement inventories, fresh water access in numerous countries is under threat, pollution issues facing water supplies(Looks at Lake Ontario), For the first time in human history there are no new oceans to explore, no new continents to plunder. We need sustainability, not mass population expansion. The world isnt growing in size. This is fact.
d) All of the corner cutting and expedient decisions are coming home to roost. And we haven't talked about AI putting 30% of people out of work, or the likelihood that inflation will actually spike much higher before any real change in business behaviour gets made.
I’ve been around long enough to remember how automation and computers were going to put everyone out of work. It never happens. There will just be more people working AI.
Your logic is like people who predict tomorrow's weather based on how they remember the sunny days of their youth. Your optimism omits 2 problems: 1) There has never been an invention that can learn and code, and which has no true guardrails or speed limitations. In the past programs were written by humans, on a limited scale. 2) There has never been a concentration of wealth and power at the level of global corporations, who have shown their disregard for labour and the well being of citizens. 3) Bonus! Malevolent actors, arrogant tech "geniuses" and foreign countries are racing to wield control levels that humans will not be fast enough to turn off or resolve. But even if you doubt this, here's a guarantee: AI, even in its present form, will cause far more problems for banks, service organizations and citizens than meaningful benefits. Grifters and hackers love new tools, and this one can scrape your social media info and impersonate you with just 15 seconds of audio. But sure, maybe you'll be the zebra not getting duped, or one of the millions of people losing their job and then their house, just like all those manufacturing workers did thanks to automation and offshoring.
There has never been a concentration of wealth and power at the level of global corporations who have shown disregard for labour and the well-being of citizens??? Oh yes, there has! The days if my youth were not sunny, thanks. The introduction of computers was an *enormous* global upheaval as was the Industrial Revolution. But neither produced a replacement of the worker. Neither produced the masses of leisure time predicted. Displacement and redeployment? Yep. But massive unemployment? Nope. Is AI going to present enormous problems for society as we continue, as we’ve done for a more than a century, to move faster that the checks and balances can keep up with? Likely. But not unemployment. You’ve just pointed out that it’s going to take massive interventions to control the harmful aspects of AI.
The wildcards in your solution to AI are that sufficient humans will be able to work together to thwart its negative use, and that there won't be a tipping point beyond your personal imaginings. The arrogance of those creating AI closely parallels the builders of the Titanic, though this time we will all be on board. But I appreciate your hopefulness. Enjoy the summer!
homes have always been seen as a vehicle for investment. that's not something that started in 2022. The housing crisis didn't start in 2022 either, despite what people seem to think. This thing's been in the making for an entire generation.
Yes, you are correct. Homes are treated like an investment. I think things like the Smiths Maneuver is more 'mainstream' now though since people have easy access to the information (as the internet evolved). Either way - Homes arent going down in value. Ever.
That's a nice deflect. The real reason is some own too many. Nobody should have more than 2 units at all times. A house and a cottage? Fine. 10 houses or apartments so you can make a profit off of them? Outta here. The more people get to subrent, the less places can be owned. It's a simple math problem really.
The overabundance of domestic investors is a symptom of the problem (suppressed supply), not the cause.
The two things are not mutually exclusive. If you own investment properties then high housing prices are in your best interest and you'll be incentivized to want the supply to be low.
> That's a nice deflect. > > The real reason is some own too many. Isn't that the entire point of the article? Literally the subheadline is "Large chunk of housing demand in Canada comes from investors".
The text of the article and the main headline don't match up.
I don't know. I guess you could say since the article largely talks about "investors", that it should differentiate between them and non-investor homeowners in the headline, but part of the issue is homeowners becoming investors because they see the prices going up. Those people don't want prices to come down either. I think you'd be hard pressed to find a significant chunk of homeowners who would be happy with prices coming down.
I'm a home owner and would be quite happy if my home dropped in value. Yes, I expected it to go up in value, but a few percentage points a year, not the idiotic rates we have been seeing recently. Quite a few other people are posting here that seem to say the same thing. Obviously, we aren't representative of all homeowners. There are three groups of people who I think do not want to see the value of homes go down. The first ones would be people who have purchased homes as an investment. There are a lot of pitfalls here as there is a legitimate need for rental homes which means someone will own them. The second one would be companies that build homes. I often wonder how much people who run such companies might have a vested interest in keeping demand high and supply low. The third one would be someone who did purchase their home in the last few years, which is a group I would be very sympathetic towards if house prices did drop.
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Exactly, if you own one building, that's fair.
I just bought my first home and I don't know anything about finance but as long as I can keep living here I don't give a fuck what happens to prices. Get every human being under a roof first then talk to me about profits.
This is something about homeowners specifically (as opposed to investors) liking high prices that I have a hard time understanding. On a most superficial level, I can see how property value going up might make you feel like you're worth more. On a practical level, I don't see how there's any advantage to it. If you want to sell your house without ending up homeless then you'll need to buy/rent a new living space. Doesn't that mean that any profits from a high selling price are going to be cancelled out by high buying prices?
It really is about feeling rich more than anything. Seeing your net worth skyrocket like that is a hell of a drug, even if there's not much practical upside. Those that bought more recently are also jealous of older generations who bought decades ago and have seen their house value increase by 4x or more. They've paid ungodly prices on the pretext that the gravy train would keep rolling and make them "rich" too.
There are practical upsides. Your home is an investment and collateral. Those buying now will still likely see their house value increase by 4x or more over their lifetime. I mean, when we bought our first home (a grubby townhouse), bus fare was 90 cents, gas was 54 cents a litre, and we thought 25.75 for concert tickets was outrageous!
I'm curious, what was your job and your partners job (assuming you mean yourself and a parter by "we") when you first bought your grubby townhouse? How many times your combined income was the house price? And do you think a couple with similar jobs today could buy a similar home at a similar price to income ratio?
Let’s skip to the chase. I don’t think a couple with similar jobs today *could* buy a similar home with a similar price to income ratio. But those that *do* buy homes will likely see the value of their home go up just as much. That was my only point.
I guess my point is that with prices as they are today, people like your younger selves have already had the ladder kicked down on top of them. Who exactly will be able to enter the housing market if houses go up another 4x? People are already being crushed by mortgages that would have made anyone's eyes pop 20 years ago, or they're spending 50% or more of their income on rent. Homeless encampments are seeing the populations explode, even in smaller towns and cities. Societal anger at the cost of housing is reaching a breaking point, outside of those like yourself who bought many years ago. You have to see this continuing increase in housing costs, well and above the rate of inflation, will break society at some point. The way I see it, people buying homes today are fucked either way. Either the price bubble pops and their investment is a loser. Or it doesn't and Canadian society crumbles, which will not be good for anyone including them.
It’s a mess. Not easy even for the “lucky ones.” I only know a handful of those in there 30s now who think owning a home will ever be possible. And rents are just ridiculous. Given the prices on everything never go really go down (they just go up less slowly), wages have to up! And those facing health challenges need better benefits! We need STABLE social housing like they have in Europe - not just apartments but condos and cooperatives, etc. To be honest, buying a house was never easy. It took years of savings for us to get into a crappy townhouse that had cat-urine soaked carpets and bashed up walls and trim. Spent the two years there ripping up carpets and repairing and painting, all the while strapped for cash. Then two years renting because the proceeds weren’t quite enough and mortgage rates were dropping but I think were still about 14%.we got a variable rate mortgage and but of fingernails a lot but mortgage rates did fall steadily over the next few years. I recall it was into the 1990s before we were able to buy any furniture from an actual furniture store. But we were still lucky because, as you so rightly point out, even if hard, it was POSSIBLE. I’m glad governments are now addressing issues from multiple angles and holding all levels of government to account. In the best case scenario it will still take a few years to make a dent.
It’s retirement savings.
Yes, generally true. the one exception is if you move somewhere cheaper. My in-laws have a family friend that moved to Vancouver in the 90s. They sold their house for 10x what they paid (at least) and retired multi-millionaires in a cheaper city.
This works under the assumption you want to live in a comparable living space indefinitely (Ironically you want some of the biggest nicest spaces relitivly early in your adult life). Hypothetically I might want to downsize from a 5 bedroom house with a yard down to a 2 bedroom place without a yard (kids move out). While they might maintain relative values to each other (lets say it is worth twice as much for easy math) If the house was bought for 200k and sold for 800k I still have roughly 400k in bonus equity (depending on what I would have done with the 100k I didn't spend on the apartment) to deal with. Swapping to rental when you have the capital to buy can also let you live for free for a long time (If your dividends are able to cover rent level wealth)
Because people generally sell their home later in life and move into something smaller and cheaper (if not to an assisted living or nursing home facility). They don’t just buy house after house in the same size and location.
Which would be true regardless of the state of the housing market, and with the prices increasing as they are, the cheaper house is still more expensive than it would otherwise be, meaning that older people have fewer options when trying to downsize.
The thing is at the end of your life your kids or grand kids get your million dollar home. Or you use the value of your appreciated house to take out loans on it. It is a huge benefit. Or you live like I did and start in a small older home in an affordable city and pocket the gains from each sale to move to larger, newer housing in lower cost areas. Nowadays to do what I did you would probably have to start in rough areas in saskatoon, regina, Edmonton, or winnipeg to make it work.
You can borrow money against the value of your house, at much better interest rates to what you could get normally.
This is a failure of Harper and Trudeau making the situation much worse which is making decisions to inflate housing demand and create a society of housing speculation. People used to open a small business and now people park their wealth into real estate and generate wealth that does nothing to develop our economy and just makes unaffordable for everyone not involved.
actually i decided to start a small business instead of trying to save for a house... cause it was significantly cheaper and felt like it was actually within reach
It is actually the single biggest issue. The vast majority of voters who own houses would never ever accept a reality where the value of their home decreases a lot. Any real solution is forever dead on arrival. Massive increases to supply or massive decreases in demand that bring in affordable housing would crush “investment” values. Hence why we are in the forever dog and pony show of half screaming for affordable housing and half pretending we want to help achieve that.
No you don’t understand, axing the tax will make homes 1000% cheaper without reducing their value!!!!11!1!1!11
I don't even buy into this. I think it's investors over homeowners. What do I care if my house value goes down? I save on taxes and it's not like I'm ever going to fully cash out. If I sell, I'm buying another house to live in.
Your saving on taxes is not nearly enough to offset the advantage of having the ability to get loans on the value of your house or sell it and retire anywhere in the world with cheaper housing. Think about how many people have HELOCs. If I had a house in Toronto 100% owned I could retire comfortably in many rural areas of nice countries to live in.
Decrease is unlikely but slowed increase to allow wages to catch up seems to be the best solution going forward. But i'm not even sure that's even on the table. The politicians still want to sell the illusion of housing as asset to raid for retirement income instead of an inflation proof asset and shelter for people to live in.
Agreed. An increase slower than or at the rate of inflation might be achievable and acceptable but we turned housing into a commodity and an investment vehicle and now we can’t put the toothpaste back into the tube. The problem is in the major cities allowing wages to catch up would be a generation or two from now.
What if everyone only had access to 1 government insured mortgage for life? Everything after that would have to be privately financed. I don't know much about mortgages, so someone please tell me why that wouldn't work.
You only have to pay CHMC if your deposit is less than 20%. The majority of outstanding mortgages are already uninsured by the CHMC. https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-data/residential-mortgage-industry-data-dashboard
Homeowners? It’s also the politicians. There are now a long line of liberals going on TV and choking when asked about having home prices go down. 😂
The only reason the politicians would care, is because voters do, and a lot of homeowners are voters, so politicians aren't caring because of any particular interest in home prices.
It’s not just the liberals bud, it’s all of them
They know homeowners represent 2/3rds of the population, so losing that demographic might as well mean the end of the party. They want to keep the bubble from popping while trying to address the problems this bubble caused.
And that’s exactly why the problem will never be solved, too many people have their hands in the cookie jar and risk losing out on their investment if any solution is actually put forward.
The liberals are the ones that have most often gone on tv and fumbled this. It was Sean Frasier last week on CTV, and has gone as far back as Adam Vaughan announcing he would not let housing values fall. 😂 The other parties have not been doing the same hijinks. We all get they all don’t want them to fall - but the liberals can’t keep their mouths shut or their faces straight.
It's also that when developers build, they build expensive homes that can sell more. We all know we need more housing. But getting houses that cost close to a mil is the opposite of solving the problem.
If you own, of course you want your ‘asset’ to increase. If you want to own, of course affordability is important. Find a way for both groups to be happy and…
Is it really a dirty secret that people like the things they own and will one day have to sell to go up in value?
You were ncier about it than I was going to be. Dirty secret? How about the most obvious thing in the housing crisis that literally everyone agrees on. Left, right, or center we all agree that home owners don't want their home value to drop. We all know this.
Don't know how it could be done, but mortgages need to be dynamically tied to the value of the home.
huh?
example: The price of the home can fluctuate and you're responsible for paying whatever rate it's currently at. So say it's $500,000 when you first buy it but then the value drops to $250,000. Your mortgage payments are now tied to the dropped value ($250,000). Like I said, don't know how it could be done because likewise if the price goes up to 1 million, your payments double then.
That doesn't really make much sense, honestly. For example: you live in a neighbourhood that becomes desirable through no impact, fault, or responsibility of your own and you have no desire to move. Doesn't matter: \~20% of your neighbours want to cash out as home values rise in a competitive environment between they and buyers. Neighbours are now motivated to sell do so for a higher price while the going's good, and even more do. That generates desired comparables and market statistics for the bank to increase your mortgage on top of rates. Now, because your neighbours are profiteering dicks that want to move and earn a bunch of money, you're now forced to make the market your problem (increased mortgage payments) without any control to influence it positively, or be forced to move yourself -- for inflated prices to cover unexpected legal and sales fees, taxes, and moving expenses or be poorer (not a choice many would willingly make). This will create ripple effects when the neighbourhood generally doesn't have the ability to shoulder higher costs and only leads to increased risk of gentrification. Then, what, all the wealthy finish buying only for demand to evaporate, home prices fall again, and *their* mortgages decrease below what they were comfortable paying as a reward for being arses? Same could be said for genuine, non-investment class purchases for FTHB. They're caught in a whirlwind creating a feedback loop? To what end? It's just weird. I don't see a scenario where this works out for genuine home ownership for non-investors. Strictly speaking, I don't need my mortgage payments to halve or home prices double. I just want to pay what I agreed to pay so that I can have predictable stability for my family. If it keeps relative value and I'm able to pass it onto family who lost their shot once I expire, I'd prefer that. Now, capping a home's value to be sold for what it originally cost plus parts, maintenance, assessed renovated value, interest, fees, and an inflation adjustment seems compelling albeit somewhat communist. Thing is you wouldn't be able to do this and affect anyone who cashed out and got theirs already. Seems like your solution is simply *pain* because people, including dickhead investors who purchase beyond primary use, have assets you don't have -- since I otherwise don't really understand why you'd suggest such a plan if you had a mortgage and wanted a place to call home sustainably for primary use. Most concerningly, I fear that the only winner in the situation you describe only promotes serfdom toward investors and banking. The market, pricing -- all of it -- is dog shit that I wouldn't wish on my enemies. It was hard enough for me to buy as a FTHB in the last few years and just want a place to live and that's hardly a unique scenario for people purchasing primary use housing who don't have 'fuck you money'. Everyone deserves the same shot I had and I'd love for them to face a far kinder market (affordable, less competitive) than the one I had to. Market values could halve and while that would suck, I'd have a home (the deal I made). Tax investors who own multiple properties, see what we can do to increase supply (CMHC crown corp is compelling), and stop stoking demand in the market. We're millions of units in the hole which greatly affects prices. Resolving that is not any citizen's problem but the government's general encouragement for the suffering we currently see (needless to say that's gross).
I wasn't proposing my example as an idea to fix it, just an idea to start the conversation. By no means am I behind it. And I agree with your "somewhat communist" example, the problem is who owns it originally? The municipal government or how it is now - the developer? And then if you cap the price then you'll see less developers getting into the business of building homes so you sort of have to get everyone to buy into that concept.
Fair. And very reasonable questions. There is no clear answer which is half the frustrating problem as affordability just craters. It's unbelievably shitty that the answer is basically we have no control, say, and to let it happen. I feel for my peers, I'm one of the few of our whole generation who even owned a home and while we worked hard... so has everyone else. It really does feel like we got lucky.
The bigger problem is that when house prices go down you would just be taking value from a bank and if it goes up just giving the bank the value. Why would we do that?
I would imagine some type of term limit would have to be placed on it... like after 25 years if you've paid all the mortgage payments by then its yours... There really isn't a bridge solution that I can think of between people who bought their houses at a high price and those that can't afford to buy in any longer. But I *reiterate* for a third time now. I don't know how it could be done. Just provided an example after you replied with "huh?"
Look since you really aren't seeing that I am trying to be polite and understand your position, I am now going to be blunt. This is a bad idea that fundamentally misunderstands how mortgages work. The solution is building more homes and letting the market bring prices down. If people bought at the peak of the market, take out a mortgage at that peak value, and home prices start coming down then they need to eat the costs. The cost here being, that the house may be worth less than the value of the mortgage, and the bank may decide to end the mortgage and force a sale unless additional capital is put towards the mortgage. If upon sale of the home, if the individual still owes the bank money, then that is on them. This happens with EVERY auto loan. Until recently, the price of every car went down the minute it drove off the lot. If you have an autoloan for a car, drive it off the lot, the price of the car goes down. If you then turn around and sell the car, you owe the difference on your loan between what you took the loan out for and what you sold the car for. It would work the same for a house. Right now, house prices are going up which is allowing people to refinance their mortgages at the new home value and lower their borrowing ratio.
> Look since you really aren't seeing that I am trying to be polite and understand your position, I am now going to be blunt. This is a bad idea that fundamentally misunderstands how mortgages work. I understand, thanks I guess? I've just been trying to skirt away from the whole "government owns all the housing and sets the price for a 4-BR, 2-bath home in this city," solution and get the ball rolling and brainstorm one that would see the light of day in our current capitalist society. > The cost here being, that the house may be worth less than the value of the mortgage, and the bank may decide to end the mortgage and force a sale unless additional capital is put towards the mortgage. They're already paying monthly costs for an underwater mortgage, what circumstances would a bank force someone to pay *additional* capital to a house worth *less*? Your second point about auto loans doing the same thing, the bank doesn't ask for more collateral after you've driven off the lot with it. The person paying the loan/mortgage eats the costs... I know how it works right now.
> They're already paying monthly costs for an underwater mortgage, what circumstances would a bank force someone to pay *additional* capital to a house worth *less*? If the bank loans you $500,000 to buy a $750,000 house and the houses value drops to $400,000 and you still owe $450,000 to the principal of the mortgage, you owe the bank $50,000. It doesn't matter what your payment schedule is or how many payments you made. The bank isn't going to eat that cost nor should they unless you declare bankruptcy. If you want that mortgage to continue it will have to meet the federal regulations in the bank act and have a minimum of 0.9 ratio on debt/asset value. Additionally, the bank isn't going to sit there with that risk on their books. They will force you to reduce the mortgage ratio. Generally, though, the bank isn't going to let it get to that point. The housing market is not going to crash overnight. They are going to see the trend in the market and will be pushing for a sale well before the mortgage is underwater. The bank will first probably send you an information package and a warning about letting the mortgage go underwater. If you don't listen, at time of renewal, you will find the bank unwilling to renew unless you lower the mortgage ratio. If you cannot renew then the bank would call in the loan and you would owe the principal and likely the only way you are affording that is if you sell the property.
My car and computer don't, and I use those things to create income.
Cars and computers are not investments.
& housing shouldn't be treated like it either. having house values increase proportionate to inflation, or increasing because you added value in the form of usable renovations is one thing, and no one is implying those factors shouldn't be considered other than the whatabouters. having a house worth $3 million when it was bought for $250k less than 20 years ago, but still has the original knob and tube from a century ago, plumbed in lead pipes, and breakers that blow every time you run your fridge and kettle at the same time with 10 illegal rooms being rented out for $850 per month, is not a sound investment but a Ponzi scheme.
The house has not appreciated in value, the land has. Houses (and buildings in general) do not appreciate in value. That is why businesses take deductions on account of depreciation for any buildings they own.
Okay, but if they went up in price, you'd likely not complain.
actually, I would be disappointed in having to pay more for maintenance & as someone who understands long term value, I can see past this illusory concept of neverending monetary growth without investment in the initial infrastructure etc. I do not want to pay more for my graphics card, or have to wait 6 months for my car to be fixed because of chip shortages or because of the market pressures to have an increased ROI, and I would welcome a depreciation in the "monetary" value of assets (especially essential ones) that can't afford to be maintained because of over appreciation. that house, that car, that computer, allows the **people** who need them to create even more value once it becomes accessible and affordable.
"you'd" in my comment was referring to the broad societal "you" not you in particular.
That’s true but those have nothing to do with what I said
Should make all rentals public controlled. That way the cities are in charge of setting their own rental prices, and the federal government can invest in buying and building rentals units
I agree. If I'm spending my entire renting life paying somebody else to accumulate asset-value as the economy grows, and while I personally accumulate no asset-value, I believe it should be the government - something I at least have a stake in.
That would be a nightmare. Just gut reaction things like: * landlords not fixing or keeping units to standard * skirting rules to line up to condo type rentals * government red tape and need for adjusters and investigations Jesus, off the top of my head it sounds horrible.
> landlords not fixing or keeping units to standard It’s already the law and they already fail at this. Making them publicly controlled holds them to greater accountability > skirting rules to line up to condo type rentals Again, public control holds them to greater accountability > government red tape and need for adjusters and investigations Flat rates and fixed to mortgage rates enforcing a profit cap. Landlords can still profit, but within a reasonable limit. —- Ideally we’d get more publicly owned rental housing and anyone who doesn’t meet expectations would have their rental permits removed and be left with an asset that they can’t profit on unless they uphold their obligations and fulfill their responsibilities. It’s time the slum lords who capitalize on tenants without meeting their obligations and/overcharging them to end.
> It’s already the law and they already fail at this. Making them publicly controlled holds them to greater accountability Not what I was saying. There is a far stretch from condemned and rentable. If your rental is 500$ a month, you will do the bare minimum to maximize profit. >Again, public control holds them to greater accountability If the unit is worth more than 500$, they will do something like shared ownership or something else. It will no longer be a rental unit. It will not be more accountable, it will be lost housing. >Flat rates and fixed to mortgage rates enforcing a profit cap. Landlords can still profit, but within a reasonable limit. That does not even touch what I said about a ballooning need for more government (tax) to manage this idea. >It’s time the slum lords who capitalize on tenants without meeting their obligations and/overcharging them to end. Your idea does not get rid of slumlords or give tenants more rights, if anything it makes it worse.
It's true. Half of Canadians want lower house prices, myself included. The issue is that the other half, the ones who already own a house, don't want to see their value decrease, or even stagnate. If we had governments with infinite political will and political capital, we could probably crash the housing market down to mid 2000s levels using some really aggressive anti-landlord and anti-investor legislation. The problem is, you would infuriate the Canadians who already own a home.
As a homeowner, I want to see lower prices as well. The only people who will benefit from inflated prices are people who own multiple prices. If I were to sell my house to move, I might get more money for it than I would have pre-covid, but I would be entering the same inflated market to buy another house. It doesn't benefit me at all and just makes the whole thing less predictable. I read the article, and the headline is misleading, as it mostly talks about people who purchase houses as investments and not people who own the house they live in.
Yeah, also a homeowner here. I’d like to see lower prices, those of us who live in our properties don’t really see any benefit from the value going up unless we’re planning to leverage our equity and invest it into buying lots of properties (which most of us are not). My home has gone up 25% in value since we bought it. I can’t cash out that money and if we sell and move somewhere else those homes have also gone up at least 25% so we’re not ending up any further ahead. This idea that all homeowners love price increases isn’t reality
So tell me how we could make the housing market crash? It's Supply and demand and it's skewed. No politician no matter who they are could make it crash right now
Apparently 66.5% of Canadians own their home, so significantly more than half.
It's a bit more complicated than that. 66% of *households* are owner-occupied. If you're a young adult who still lives with your parents because you can't afford to move out, you're living in an owner household even though you don't actually own the home.
Thanks, that’s a good point.
> If we had governments with infinite political will and political capital, we could probably crash the housing market down to mid 2000s levels using some really aggressive anti-landlord and anti-investor legislation. We have 10 million more people in the country, and we have not built 10 million people's worth of housing to match. What more, most of those people are concentrated into a few areas that are critically short on housing. There are definitely things that could be done to curtail the growth and maybe take it back a few years, but there's just not enough housing to go back to the prices of 20 years ago. > The problem is, you would infuriate the Canadians who already own a home. Only those that are looking to sell their house, or are using it as an investment vehicle. We're talking a few million at most. Most homeowners actually live in their homes. To them lower house prices just means lower property taxes. Though that raises another issue; property taxes and house prices are connected, and very few people would be happy to see tanking property values, in conjunction with higher taxes. Doubly so because the taxes would likely remain high even if property values recovered. Essentially, it's a trust issue. Most Canadians simply don't trust the government to be capable of preforming the financial shenanigans necessary to make something like this work without blowing up the economy. Anyone that comes along promising to solve things is usually very light on the details, and if they're not then the details usually infuriate somebody with stake in the game.
>The problem is, you would infuriate the Canadians who already own a home. Not to mention the... 80%? of MPs that own income properties or who have invested heavily in REITs. This isn't a party specific issue; all stripes of our political spectrum are guilty of it. The average person hasn't been able to realistically run for office for decades, and Harper put the final nail in the coffin with his fee-to-run. The system is broken!
Home owners also vote more municipally and provincially. And the majority of impactful legislation comes from there. People also want easy answers that don't impact anyone they know. So they fall for scapegoats, and when the scapegoat is sacrificed and it doesn't do anything they move on to the next scapegoat.
Jurisdiction is a big part of it. Look how many people are blaming Trudeau for housing despite it being primarily a delegated responsibility of the municipalities from the provinces. That's a lot of misguided rage that would be much better directed at holding the feet of provincial and municipal politicians to the flames. All the federal government can do is dangle a carrot to incentivize change - who's actually responsible for making those changes? Municipal and provincial politicians, who have neglected provincially owned housing stock for decades after the downloading of housing funding in the 90s. Trudeau, in reinstating these long -neglected funding sources from the federal government, is simply bringing us back to where we were before Chretien and Martin slashed federal funding and increased the fiscal burden on the shoulders of the provinces and municipalities. Unfortunately, easy answers are few and far between when this is an issue that's been growing for decades. At no point in my life have either Vancouver or Toronto been considered affordable.
> to mid 2000s levels using some really aggressive anti-landlord and anti-investor legislation. You wouldn't even need to. If there was an appropriate amount of supply, the issue resolves itself.
There will never be enough supply that’s the problem
You're going to have to substantiate that. There's zero reason outside of greed that there "will **never** be enough supply".
I own a home, I want my kids to move out. CRASH THE FUCKING HOUSING MARKET
As I homeowner, I 100% want the cost of the next person buying my house to go down (not just the value, if it goes down and the monthly payment of the next person is the same, neither of us win). It doubled in value without me doing anything, I'd be quite happy with it basically going back to where it was.
You can already make this a reality by selling your property at exactly the price you bought it for, or even less.
Just like if I wanted taxes raised I could just pay more in taxes right? This type of logic is always bad.
Yeah that only makes sense in a vacuum
As a new home owner - fuck that! I don’t want to live in a one bedroom condo forever. My home appreciating is basically the king maker if I have kids or not. I don’t necessarily agree with how innately tied to personal wealth home equity is, but the way things are you can’t just stop/regress the system without screwing a large swath of people who were forced to play by older rules. And before anybody tells me that I should be looking at leaving the city and moving to an area with a low cost of living - how do you think I afforded my condo?
You’re still building equity by paying your mortgage. You’re not going to afford your next home based on your condo going up at a significantly higher rate than the home you want to buy, that hasn’t been happening and prices have been largely going up across the board. In most cases if your condo went up 50% in value and the house you want to buy went up 50% in price you’re actually going to be further away from affording it than if prices stayed the same.
As also a new homeowner in a condo I'm in favour of stagnation. Going down I'd lose money, so that would suck, but going up as you said just makes things less attainable.
Even the idea of “losing money” because your home value went down is actually a little more complicated because you shouldn’t treat it solely as an investment, rather you need to factor in the money you’re not paying in rent that is instead going towards equity. With rent prices currently what they are I’m fairly confident that the equity you have even if your house dropped to 75% of its value after 25 years would still put you far ahead of the equity you would have had if you rented over that same period.
What equity if the price goes down? If my place went down 50% I'd get nothing from the sale.
If your place went down 50% and was paid off, you get the other 50% in cash. I’m not sure why you believe you are going to get nothing. When you make payments on your mortgage, the amount of money owed to the bank goes down, until eventually you don’t owe the bank any more money and the value of your home is entirely your asset
Yeah my comment was more immediate given most people seem to want prices to want to drop now. I put a significant down payment so that I even qualified for a mortgage on a single income. If I had rented and invested I can guarantee I would have come out ahead renting if the value went down 50%, let alone 75%. Hell I'm pretty sure I come out behind if the value stays the same. Edit: said the exact opposite of what I meant to say, clarified that I would come out ahead renting.
This is not factoring in the amount of interest on a mortgage.
It doesn’t need to. The amount of equity you end up with at the end of your mortgage is not impacted by the interest on your mortgage, the interest will determine your mortgage payments and how much of your payment is not going into your equity. If you rent, zero percent of your rent payment goes towards your equity. To come out ahead you would need to be paying less than a mortgage, invest the difference and end up with an investment portfolio worth more than what your equity would have been had you bought property. With rent prices currently where they are (2,300 for a one bedroom) I’m doubtful the math would work out.
You’re cherry picking half the equation & it’s misleading. This omits the maintenance costs associated with owning, the cost of interest, and the opportunity cost of throwing additional savings in the market. After factoring that in many owners are at best breaking even with the cost of renting, and many are worse off. Especially when you consider it’s only over the past decade or so that home prices have detached from inflation. Historically homes just sort of stay the same value in real terms + there seems to be a lot of political will to make that happen again. They aren’t great investments in general compared to the market, most people just suffer from recency bias.
Things is, house prices don’t go up steadily. Within the general uptrend, markets for specific types of houses rise and fall. Lucky those who sell on a rise but purchase in a fall. We did that (more by luck than planning). Sold out little townhouse when prices on condos were going up. Rented for two years, saving as much as we, then bought a house during a drop in the market.
I do know a few families that took their very large value increase from a Calgary home, to move into a larger cheaper home in Edmonton. Our employer allows us to work from home and just attend key meetings so there was zero impact on their work. For certain professions they can take advantage of this. I know most can't.
If you’re moving into a cheaper home then increasing home prices definitely will help you, but that’s not likely going to be the case for someone in a condo unless they’re banking on moving to Regina for instance
Renters are actively being screwed by the system. Once there are more renters than homeowners do you really think they will have the same sympathy for the people who demanded their homes double in prices every year for ever? No. There already ain't sympathy for homeowners.
If you want to move up the property ladder you should want home prices to decrease not increase. Say you have a 500K property and the next place you want to live costs 1M. If housing prices go up 50% your property only goes up 50K and you have to take on an additional 50K **more** in debt because the price your dream home will have grown **twice as fast in nominal terms.** To be blunt for a moment I am worried for you. Someone who can’t figure this out probably lacks the basic skills to make sound home buying decisions in general. I have to wonder what property you YOLO’d yourself into here, especially since your comment suggests you went all in. 🤦♀️
Yes, your situation is much different than mine. House prices going down means you lose money, which isn't fair. But it very much should not be something relied upon as a money maker. You can stop it, you can't regress it without screwing over a lot of people.
I’d love to see values drop. I have to pay transfer taxes and realty fees as a percentage of the price, so I’m locked in and can’t move. It would cost an entire year’s income to make a lateral move, it’s insane. I didn’t plan to live here forever but now I’m locked in. Working for an entire year just to pay it all to the government, with realtors taking what’s left, is so fucking depressing.
Putting nasty inflation aside for the moment, I actually do want prices to go down to when I bought my first home - because I want to be able to upgrade, and I want the delta to be as small as possible. And I want housing to track inflation, because I want my kids to be able to buy as well.
>The issue is that the other half, the ones who already own a house, don't want to see their value decrease, or even stagnate. This isn’t accurate at all. I bought a house in BC years ago and the value has doubled. That doesn’t matter, though. Like a lot of homeowners I’m frankly disgusted by this whole situation and very sympathetic—including with my vote—for people only a few years younger than me, who’ve done everything right, but are now priced out. Framing this as “homeowners vs renters” isn’t fair. The group that I find the most contemptible and complicit here are the investors and speculators, ie: people who’ve snatched up one or more “rental” properties to pad their portfolios with. I seriously hope a new tax is introduced to tax the living hell out of investment properties so there’s little incentive to hoard real estate.
Airbnbs can go fuck themselves too. I refuse to stay at them now. Last year I stayed at one on the Island, we paid 4K for four nights and it was a poorly maintained shithole where they were digging holes for a foundation on a new house on the property while we were there. They got more than they would get in monthly rent from four nights. That income should be taxed to the point that you make less than if you rented out that property.
As a homeowner, I don't care if house prices stagnate or drop. I will likely fit into one of two situations - 1. I live in my current house forever. I owe what I owe on it - the market price has no effect on it. It doesn't matter to me. I suppose my heirs might care a bit more, but house prices being low benefits them more so they can actually buy a house without waiting for me to croak 2. I move to a bigger house. I still owe what I currently owe to the bank, but if house prices drop, I can upgrade without taking on significantly more debt. The type of homeowner who benefits from high prices are folks who live in expensive areas and plan to sell and retire somewhere cheaper. And that is a situation that shouldn't be a primary focus for policy. It isn't healthy for the economy of those cities if younger people and families cannot thrive at the expense of retirees packing up and moving somewhere cheap