National Economy

[thewave46]

Essentially, the path out of this would be as such:

1. Bring government spending and taxation into balance with a focus to retiring debt at all levels of government. Bonus if one can simplify the tax code at the same time.

2. Re-evaluate the assumptions of life expectancy and cost of government services/benefits over a lifespan and account properly for expected future payouts.

3. A increasingly firm line on ability to accumulate mortgage debt (and other debt) at a personal level. I dislike paternalistic government, but people don't seem to be capable of restraint in this country. This would be done via banking regulation.

4. A stronger mandate to the Bank of Canada to provide price stability.

5. A pro-development housing regime to relieve the existing pressures of housing prices without causing a catastrophic housing price deflation in the short-to medium term. By making the asset class deflate relative to other options (stocks/bonds), we'd shift mentality over the longer-term. We're so backlogged with demand that this may take decades to accomplish.

6. A reactive gearing of immigration levels to what the economy requires and will likely require in the future. Which will probably require some soul-searching about things like 'industrial policy'. If we aim to be a do-nothing resource colony so be it, but we should be cognizant of the risks of a large portion of the labour force may experience if the bottom falls out of resource prices. Conversely, if we're going to revitalize manufacturing/high-value here, we'd better have a pro-development policy in all its facets. Our immigration targets should reflect our goals.

It's all very unlikely and seems to require bigger thinking than is currently apparent in Ottawa.

[WarrenC12]

Originally Posted by theman23

The biggest take away is it casts doubt on the narrative that we have a labour shortage in this country - the jobs that are available are the low wage/low skilled positions. When it comes to jobs that require some degree of education or training, there's actually a shortage of jobs.

It doesn't make a whole lot of sense to be ramping up the import of points-based economic migrants and international students (most of whom are using it to access PR status) when the jobs that we actually need to fill don't utilize any of their skills or experience.

Don't companies post these jobs and then not hire anyone and claim we need TFWs?

There should never be a shortage of "low skilled workers" since those are job everyone can do, right? People just choose to remain unemployed vs. take a crap job and wage.

There can be a shortage of skilled labour, or overall labour.

[LightingGuy]

Originally Posted by thewave46

5. A pro-development housing regime to relieve the existing pressures of housing prices without causing a catastrophic housing price deflation in the short-to medium term. By making the asset class deflate relative to other options (stocks/bonds), we'd shift mentality over the longer-term. We're so backlogged with demand that this may take decades to accomplish.

This is unlikely in my opinion. I don't see any way out of this without triggering a short term crash. Most likely is a short term crash, followed by a bull run that peaks lower than the previous high, and then a longterm steady decline.

You have to remember that the market value is simply the balance of buyers vs sellers at that particular time. Even though we don't have nearly enough homes for all our people, the only thing that matters for today's sale prices is: how many homes are listed for sale, vs. how many people are currently in the market.

In a situation where a mass sell-off is triggered, you're going to see thousands of investors try to pull their profits at once. When this happens the number of listings will far surpass the number of people looking to buy at that time, and we will see a short term crash in prices.

It will reach a bottom at some point once most of the investors have pulled out and the inventory sold off, and then will return to a high driven by fundamentals.

Then you will see a longterm downward trend in real terms as construction goes up while population growth stagnates.

For reference here is Tokyo's home price index since 1984.



https://japanpropertycentral.com/202...d-land-prices/

[casper]

Originally Posted by LightingGuy

This is unlikely in my opinion. I don't see any way out of this without triggering a short term crash. Most likely is a short term crash, followed by a bull run that peaks lower than the previous high, and then a longterm steady decline.

You have to remember that the market value is simply the balance of buyers vs sellers at that particular time. Even though we don't have nearly enough homes for all our people, the only thing that matters for today's sale prices is: how many homes are listed for sale, vs. how many people are currently in the market.

In a situation where a mass sell-off is triggered, you're going to see thousands of investors try to pull their profits at once. When this happens the number of listings will far surpass the number of people looking to buy at that time, and we will see a short term crash in prices.

It will reach a bottom at some point once most of the investors have pulled out and the inventory sold off, and then will return to a high driven by fundamentals.

Then you will see a longterm downward trend in real terms as construction goes up while population growth stagnates.

What your proposing is we need a bunch of people to write off investments they have made, with some perhaps going bankrupt. The end result is forcing them to evict their tenants so others can potentially get a good deal. In the process scare away property developers that are building new units.

Any solution that does not build more homes is not solving the problem. It is just moving money around.

It makes little difference if a home is owned by a investor or the person living there as long as its not sitting vacant. In both cases it is providing housing.

[LightingGuy]

Originally Posted by casper

What your proposing is we need a bunch of people to write off investments they have made, with some perhaps going bankrupt. The end result is forcing them to evict their tenants so others can potentially get a good deal. In the process scare away property developers that are building new units.

Any solution that does not build more homes is not solving the problem. It is just moving money around.

It makes little difference if a home is owned by a investor or the person living there as long as its not sitting vacant. In both cases it is providing housing.

I'm not proposing anything. I'm saying what I think the likely outcome is going to be.

We 100% need more homes. As we trend towards a more pro-construction society, property prices will eventually go down in real terms. That is a given.

As soon as investors get a whiff that we're at the peak of they are all going to list their homes for sale in a very short period of time. If they aren't living in it, there is nothing preventing them from listing it at a moment's notice. It doesn't matter whether there's a tenant living in it, or if it's vacant. A listing is a listing. And if there 4x or more listings than sales, you have a buyers market. If you have 10x as many listings as sales you will have a housing crash (which will likely be short-lived, and followed by a bullrun).

Also, you mentioned that developers won't be incentivized to build if property prices keep going down - this I highly disagree with. All a developer cares about is recouping their costs by the time they sell. Most homes are sold before they're even built. If developers who have been sitting on land for a decade see that their land is starting to lose value, then they are going to be incentivized to either sell that land immediately (for which they are unlikely to find a buyer since the buyer pool are developers themselves), or develop it ASAP so they can sell it ASAP before the land loses even more value (much more likely).

[LightingGuy]

Originally Posted by LightingGuy

For reference here is Tokyo's home price index since 1984.



https://japanpropertycentral.com/202...d-land-prices/

By the way, here is a chart of Japan's population over the last few decades. As you can see, when their property bubble burst, their population was still growing. Japan's population didn't peak until 2009 ... 22 years after their property bubble had burst, and at which point Tokyo's property values had already plummeted by over 70%. Don't be naïve in thinking the same thing won't happen here. We don't know when it will happen, just that it will happen in the near future. Everything the Liberal government is doing right now to attract immigrants is a desperate attempt to prevent this bubble from popping, in my opinion. Ultimately it will fail, and it's the baby boomers who are going to end up losing their shirts. Here's another fun fact about Japan: 50% of those aged 65-69, and 33% of those aged 70-74 are still working (source).


https://www.statista.com/statistics/...an-historical/

[acottawa]

Originally Posted by LightingGuy

By the way, here is a chart of Japan's population over the last few decades. As you can see, when their property bubble burst, their population was still growing. Japan's population didn't peak until 2009 ... 22 years after their property bubble had burst, and at which point Tokyo's property values had already plummeted by over 70%. Don't be naïve in thinking the same thing won't happen here. We don't know when it will happen, just that it will happen in the near future. Everything the Liberal government is doing right now to attract immigrants is a desperate attempt to prevent this bubble from popping, in my opinion. Ultimately it will fail.

The Japanese Asset Bubble had a lot to do with the Plaza Accord
https://en.wikipedia.org/wiki/Japane...price%20bubble.

which is not necessarily a good analogy for what is happening in Canada.

[thewave46]

Originally Posted by LightingGuy

By the way, here is a chart of Japan's population over the last few decades. As you can see, when their property bubble burst, their population was still growing. Japan's population didn't peak until 2009 ... 22 years after their property bubble had burst, and at which point Tokyo's property values had already plummeted by over 70%. Don't be naïve in thinking the same thing won't happen here. We don't know when it will happen, just that it will happen in the near future.

I am curious about the rate of household formation in Japan for the 1990s and 2000s. That is a bigger underlying drive for housing demand, all other things being equal. Immigration is nearly a non-factor in Japan; the demographics of the country and supply of homes provided are key. The bubble popping was a run up in speculative demand that spectacularly cratered, similar to the US in the late 2000s. Demand was easily met by supply and once a recession hit, the speculative bubble popped.

The thing about Canada is that both rents and housing prices are high and vacancy very low. This seems more indicative of high demand to low supply mismatch. If housing prices fall here, in theory that pent up demand should flow out of rentals and into houses. As long as household formation rate remains higher than the ability to supply accommodation, the bottom shouldn't fall out. Obviously a severe recession changes this calculus.

[ssiguy]

We are never going to get out of this mess while our politicians refuse to dramatically reduce our immigration rates and for the 100k that we allow in every year, they must be in very high demand areas. Currently Canada is relying on house building/flipping to grow our economy and when prices start to decline {like last year}, what does Canada do? We increase our immigration levels to keep the Ponzi Scheme going while our productivity levels continue to decline. If we eventual reach a housing crash, Ottawa will turn around and just keep increasing immigration to stop it from happening.

Canada is getting progressively poorer and this will continue. Our standard of living has plunged in the last 40 years. When I was a kid a bank was a place to get money, not food and the only time you saw tents in your city was when the carnival came to town. Mass immigration, except for the very highly skilled in high demand areas, has led to the situation where instead of businesses investing in new technology or the skills of their workers, just import cheap labour. If cheap labour resulted in a wealthy population then Nigeria would be the new Switzerland. Immigration MUST plunge so Canada can again become a country with a high productivity level to say nothing of actually being able to house our people.

The thing that I find really scary about this whole situation is that younger Canadians seem to think this is normal. Dodging tents on the sidewalks or not being able to go to a city park , being asked for spare change every 100 meters, paying 60% of your income on a glorified walk-in-closet, and having your friends or family going to the Food Bank to put dinner on the table is just part of normal life. Poverty and homelessness has become just another part of our urban landscape and younger people seem to think that it has always been like this and will always will be and that is truly horrifying.

[LightingGuy]

Originally Posted by thewave46

I am curious about the rate of household formation in Japan for the 1990s and 2000s. That is a bigger underlying drive for housing demand, all other things being equal. Immigration is nearly a non-factor in Japan; the demographics of the country and supply of homes provided are key. The bubble popping was a run up in speculative demand that spectacularly cratered, similar to the US in the late 2000s. Demand was easily met by supply and once a recession hit, the speculative bubble popped.

The thing about Canada is that both rents and housing prices are high and vacancy very low. This seems more indicative of high demand to low supply mismatch. If housing prices fall here, in theory that pent up demand should flow out of rentals and into houses. As long as household formation rate remains higher than the ability to supply accommodation, the bottom shouldn't fall out. Obviously a severe recession changes this calculus.

Yes it would be interesting to see that data.

Regarding vacancy stats:

7% of homes in Toronto were vacant in 2021, vs 5% in 2011. I can only assume that most of these are mostly short term rentals. This is roughly 90,000 units city-wide. (source 1, source 2)

Furthermore, 42% of all condos in Ontario are used as an investment (meaning the owner doesn't live in it). This is roughly 378,000 condo units across the province. (source 1, source 2)

It is incredibly easy for any investor to sell their property at any time, since it doesn't involve them moving or having to find a new place to buy. You can literally call your agent on Monday and have it on MLS by Wednesday without having to lift a finger. If a bunch of them get spooked at the same time we would see a flood of inventory hit the market all at once which would most certainly lead to a crash.

[kwoldtimer]

Originally Posted by ssiguy

We are never going to get out of this mess while our politicians refuse to dramatically reduce our immigration rates and for the 100k that we allow in every year, they must be in very high demand areas. Currently Canada is relying on house building/flipping to grow our economy and when prices start to decline {like last year}, what does Canada do? We increase our immigration levels to keep the Ponzi Scheme going while our productivity levels continue to decline. If we eventual reach a housing crash, Ottawa will turn around and just keep increasing immigration to stop it from happening.



....

Afaik, neither party has suggested a lowering of immigration to that sort of level, although they could do so. I think I saw something in the news this week about the Government speeding up the family reunification process.

[acottawa]

Originally Posted by kwoldtimer

Afaik, neither party has suggested a lowering of immigration to that sort of level, although they could do so. I think I saw something in the news this week about the Government speeding up the family reunification process.

The 300k in the 2010s under both Harper and Trudeau seemed reasonable.

[goodgrowth]

If you were actually concerned with productivity you'd wouldn't be decreasing immigration....you'd be placing a significant retiree tax on a 100km radius around every CMA where all the jobs are concentrated.

How productive is a retiree sitting on $1M worth of prime urban land relative to an immigrant working?

[whatnext]

Originally Posted by kwoldtimer

Afaik, neither party has suggested a lowering of immigration to that sort of level, although they could do so. I think I saw something in the news this week about the Government speeding up the family reunification process.

Of course they won't, the all want to whore around for the immigrant vote.

[craner]

Is this the new “normal” for office buildings ?
(I sure hope not as a skyscraper enthusiast):

http://https://www.reminetwork.com/articles/office-building-values-still-trending-downward/

[ssiguy]

Apparently a debt ceiling compromise has been met in Washington and it MAY provide some help to Canada's finances.

The Republicans are looking for big cost reductions on current program spending in exchange for an agreement. The details have not yet been released but there is a good chance that one of the reductions could be directed at the IRA ACT which is responsible for the unGodly amount of government subsidies being thrown at auto giants and which Canada has had to match.

The ongoing subsidies for VW and others don't kick in until production starts and in the agreement it is stated that if the US subsidies fall, Ottawa's contribution falls by an equal amount. The IRA is a massive amount of money and would be easy picking for Republicans to demand a claw back with no negative political ramifications. It is also reported that the debt ceiling amount will only continue to 2025 and again, the scenario starts and again the IRA would be an easy target for cost reductions and is also before VW starts production in 2027.

This juvenille charade in Washington may actually end up helping Canada. Here's hoping.

[goodgrowth]

GDP is up...another rate hike?

[kwoldtimer]

Originally Posted by goodgrowth

GDP is up...another rate hike?

I'm a bit surprised. I thought growth would be flat this quarter, at best.

[goodgrowth]

Originally Posted by kwoldtimer

I'm a bit surprised. I thought growth would be flat this quarter, at best.

I'm not that surprised because we've had significant population growth.

I think BoC raises another .25

[hipster duck]

Originally Posted by ssiguy

The Republicans are looking for big cost reductions on current program spending in exchange for an agreement. The details have not yet been released but there is a good chance that one of the reductions could be directed at the IRA ACT which is responsible for the unGodly amount of government subsidies being thrown at auto giants and which Canada has had to match.

This juvenille charade in Washington may actually end up helping Canada. Here's hoping.

Early reports I've heard suggest that the Republicans aren't touching this. Usually in these debt ceiling negotiations, the GOP slashes social programs and things that help working class people, not corporate subsidies.

That said, I think that in the case of Stellantis, the Ontario government should have promised a token amount - like $500 million (still not chump change) and then called Stellantis' bluff. It's a much smaller plant than VW, and Stellantis has probably sunk enough planning effort into the project that they have to write off a certain amount if they decide to move the whole project to some southern state. Also, the VW subsidy as I understand it is more about foregone future tax revenues than cutting a cheque today.