Why Toronto and Vancouver have expensive housing

[Nite]

This video perfectly explains why Toronto and Vancouver have high housing prices.

• Video Link

[mhays]

Spoiler alert....the core reason is they're not building enough. (The video's opinion and mine)

[Nite]

Originally Posted by mhays

Spoiler alert....the core reason is they're not building enough. (The video's opinion and mine)

The problem has always been a supply issue and anyone who says different is lying or doesn't understand the problem. no policy designed to reduce demand will work for these reason.
New Zealand is the prefect example of this, they enacted all these policies to reduce demand including banning foreign ownership, the result was even higher hosuing prices.

[mhays]

That sort of approach can have some effect, but you're right. It's mostly about allowing more housing, and shaping policy so it's not so expensive to build.

Those policies can be about upzoning so developable sites are plentiful and therefore cheaper per unit, providing permitting certainty and speed, avoiding giant fees (trying to solve the city's problems by making new and existing housing more expensive!?), allowing little or no parking...

[CaliNative]

Originally Posted by Nite

This video perfectly explains why Toronto and Vancouver have high housing prices.

• Video Link

Demand > Supply, prices rise

[Nouvellecosse]

The information in the video should really be obvious, but unfortunately for some it isn't.

[DCReid]

My question is when did Toronto and Vancouver housing become 'expensive'. Was Toronto reasonable before the 1970s Quebec issues that led many businesses and English residents to relocate to Toronto and western cities? Was Vancouver more reasonable before the large influx of Hong Kong residents before the handover of that city to China?

[SFBruin]

I think it's pretty clear that we need to build more housing. Where / how seems like a pressing question.

[hipster duck]

Originally Posted by DCReid

My question is when did Toronto and Vancouver housing become 'expensive'. Was Toronto reasonable before the 1970s Quebec issues that led many businesses and English residents to relocate to Toronto and western cities? Was Vancouver more reasonable before the large influx of Hong Kong residents before the handover of that city to China?

Going back before 1970 is sort of apples to oranges, because the role real estate played in economies and people's personal wealth was completely different across the world, especially in Canada.

But since the "financialization" of the world toward the end of the 1970s, so to speak, yes, Vancouver and Toronto have always had the #1 and #2 highest housing costs in the country, and this was true before widespread immigration from Hong Kong, let alone China. It's kind of like how San Francisco was always the most expensive real estate market in the US, even before the rise of the internet.

Toronto's fundamentals were due to the fact that it's the largest city with the most diversified economy and, up until the rise of Alberta, the highest incomes. Vancouver's high housing prices were due to a bunch of reasons; it always had high growth and a constrained amount of space to sprawl. The climate/natural beauty/lifestyle aspect sounds like a cliche, but these things did attract people and influence real estate prices too.

[Nite]

Housing shortage 'becoming more and more of a crisis'
Watch: Realtors say Canada's housing inventory is lowest they've seen

[llamaorama]

It's a youtube video, can I expect it to have all factual sources and not just be polemic?

Nah

I think we should increase supply AND curtail demand. If you disagree with me after I gave the first half of my stance, come clean on why you support grotesque inequality, tax avoidance, foreign criminals, etc.

[Qubert]

Originally Posted by llamaorama

It's a youtube video, can I expect it to have all factual sources and not just be polemic?

Nah

I think we should increase supply AND curtail demand. If you disagree with me after I gave the first half of my stance, come clean on why you support grotesque inequality, tax avoidance, foreign criminals, etc.

Because I think foreign criminals are cool. Didn't you ever notice British bad guys always have great accents?

In all seriousness, foreign money and tax issues are a very small part of any city's real estate picture. Here in NY, the most rent burdened neighborhoods are heavily immigrant or filled with transplants in their 20s trying to do the "Friends" thing. What is your plan to curtail either immigration or upwardly mobile young people trying to advice their careers from coming to a city? And if you do succeed, what's the downside?


People drone on and on about "millionaires and billionaires" but at most they are 2-3% of even NYC or SF's population. The main issue is the legion of upper middle class 100-200k professionals or huge immigration flows with people living 5 to a room.

[mhays]

Well, a lot of average-earning workers late in their careers are millionnaires, particularly if you count home equity. But up that to $10 million and the percentage drops to a relatively small number.

[Manitopiaaa]

It's not a supply issue. It's a demand issue and a cultural issue.

Toronto is building a ton of housing, but the Government's weird infatuation with 100 million Canadians by 2100 means it's allowing far more people in than is reasonable. The equivalent would be the U.S. allowing in 4 million people per year, which would be considered politically scandalous. The end result is that supply is insufficient in Canada, but largely because there's no way supply can meet demand even if it tried.

I actually think the biggest issue though is cultural. Americans tend to see the stock market as the "wealth building" vehicle and housing as shelter. You buy a cheap house and that frees up money you can then invest in Alphabet, Amazon, Apple, Microsoft, Tesla, etc. This is also aided by the fact that the U.S. is one of the only countries that provides 30-year fixed loan mortgages, so many Americans buy a home and - over time - their mortgage payments dwindle as a percent of their budget due to inflation.

The Canadian stock market conversely is a poor performer, largely "weighed down" by stable bank stocks (the Big 5), freight, bitumen, and energy. It's great for dividend investors, but wholly inadequate for building wealth. Which is why if you look at r/CanadianInvestor, so many of them invest in American stocks. Other than Shopify, Canada's stock market options are largely underwhelming and limited.

The end result is this:



$1,000 invested in the NASDAQ would have secured 9x the gains as investing in the TSX. Even the S&P 500 has done 4x better. Heck, the Dow Jones Industrial Average - considered by Americans to be the index of extremely moribund, lifeless, and lethargic Boomer stocks - has down far better than the TSX.

The graph above ends in 2019 but the numbers keep going. NASDAQ in the past 5 years has increased by 193%, the S&P 500 has increased by 110% and the TSX has increased by only 40%. Considering the compounding effect of wealth accumulation, and these year-over-year distinctions in capital gains create gargantuan differences over a 30-year investment cycle. Even the TSX's impressive performance from 2020-2021 is still below the NASDAQ/S&P performance for the same time period, so the gaps got even larger.

So of course Canadians are going to flock to the most lucrative wealth-building vehicle. People just didn't know what it was. When it became clear that Real Estate was the Golden Goose, people flocked in.

Add on Canada's penchant for inviting Chinese dark money, and the end result is a predictable housing bubble.

People complain about supply, but Canada actually handles supply very well. Yes, there are major NIMBYs and lots of single-family zoning, but there's also tons of dense infill going up. Building more will definitely lead to smaller increases, but Canada can never keep up with demand if demand isn't just those seeking shelter, but those who see owning 5 homes as their retirement plan. When euphoria takes over - and 50% annual increases in the middle of nowhere is certainly euphoria - then there's no way to contain the Tulip Mania than to wait for the House of Cards to collapse.

[mhays]

So in other words it's a supply issue. The supply isn't covering the demand.

[Manitopiaaa]

Originally Posted by mhays

So in other words it's a supply issue. The supply isn't covering the demand.

Supply can never satisfy demand when you're admitting 500,000 per year. People need to be realistic.

Record household debt levels in Ontario, median home prices reaching $900,000 USD in the Toronto metro area, high inflation eating into already low wages relative to G7 averages. Yet how does the government respond to the crisis of affordability? By wanting to increase migration further: https://www.bloomberg.com/news/artic...-minister-says

The congenital amusia on display in 24 Sussex Drive is downright baffling. Of course this website wants upzoning and thinks more supply would solve things. But it won't. It'll only trim the increases at the margins. Until your immigration intake is reasonable, and your culture doesn't see housing as the Holy Grail, this problem will continue to worsen.

[MolsonExport]

Rock bottom interest rates
High population growth
Constrained supply
Speculation
High development charges/permit fees
Very expensive land
Zoning
NIMBYism

[The North One]

Wow I happened to have just watched this video before even seeing this thread. I didn't know Toronto zoning and land use was so much more regulated than Montreal.

[Nouvellecosse]

Originally Posted by Manitopiaaa

Supply can never satisfy demand when you're admitting 500,000 per year. People need to be realistic.

Record household debt levels in Ontario, median home prices reaching $900,000 USD in the Toronto metro area, high inflation eating into already low wages relative to G7 averages. Yet how does the government respond to the crisis of affordability? By wanting to increase migration further: https://www.bloomberg.com/news/artic...-minister-says

The congenital amusia on display in 24 Sussex Drive is downright baffling. Of course this website wants upzoning and thinks more supply would solve things. But it won't. It'll only trim the increases at the margins. Until your immigration intake is reasonable, and your culture doesn't see housing as the Holy Grail, this problem will continue to worsen.

Canada does not have a notably high growth rate compared to either its historical growth trends or those of many other countries at many points in time. It's important to remember that immigration is simply one potential component of growth, with others being the birth rate, death rate, and emigration. Canada, like many fully developed countries, has a birth rate that has fallen below replacement levels and has chosen to make up the different through immigration to avoid the challenge of a greying and declining population. In other words, the immigration isn't causing the population to grow quickly; it's simply allowing growth to continue at typical rates.

I understand that immigration makes many people uncomfortable for different reasons and they'll use whatever justification they can find to malign it, but feeling a particular way about a topic doesn't justify posting false information about it.

[Crawford]

Originally Posted by Qubert

People drone on and on about "millionaires and billionaires" but at most they are 2-3% of even NYC or SF's population. The main issue is the legion of upper middle class 100-200k professionals or huge immigration flows with people living 5 to a room.

NY and SF have very different RE issues than Toronto and Vancouver.

The U.S. doesn't have favorable laws towards foreign RE investors, while Canada does, so the markets have diverging challenges. It makes zero sense for someone from Hong Kong to own a condo in NYC, unless they wish to have it for personal use. But as a place to park wealth, it's nonsensical.

And I echo the previous comments that it's almost entirely a demand issue and cultural issue. Supply probably irrelevant, given the cultural preferences for new construction. In some extreme markets, you'll probably even increase affordability slightly by reducing supply.