Canada and Toronto’s housing markets

2021-03-20

in Canada, Economics, Politics, Psychology

Perhaps the hardest thing about doing a PhD in Toronto is finding decent housing and paying for it with the kind of income the university’s funding package and TA work provides. Since the 2008 financial crisis, governments around the world have undertaken exceptional monetary and fiscal stimulus to try to sustain employment and economic growth. Those ultra-low interest rates, however, have affected asset prices in at least two ways. First, since they cannot even earn the rate of inflation from savings accounts, people have been prompted to invest in all manner of speculative assets, from frothy tech stocks to bitcoin to the housing bubbles inflating around the world. At the same time, low interest rates have facilitated massive borrowing for house purchases, also helping to drive up the level of house prices.

Those dynamics have several unwanted current and future impacts. For one thing, I worry that the sense of affluence it fosters among house owners is contributing to an erosion of empathy. It is also worsening the intergenerational inequalities between people who bought houses decades ago and have experienced a huge jump in wealth as a result and the younger people who in past generations would have been entering the housing market now. When interest rates do finally need to rise (once inflation rises above target levels) many home owners risk being in the unfortunate position that the 2008 crisis caused for so many: being ‘underwater’ with a mortgage now larger than the market price of their home.

I think it would be prudent for governments to pay more attention to asset price levels alongside the inflation and employment rates when setting policy. Their efforts to juice their way out of the last crisis seem to be setting up the next one. It would also be desirable for countries to start requiring comprehensive disclosure of wealth as a prelude to wealth taxation.

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. March 20, 2021 at 4:03 pm

The COVID-19 pandemic has had a major impact on Toronto’s rental market since it first arrived last March — resulting in rent prices not seen in several years — and the latest data shows this month is no exception.

A new report from Padmapper indicates that the median one-bedroom rent in Toronto now sits at just $1,750, continuing the downhill trend that has shaken up the city’s rental market following years of uncontrollable exponential growth.

The last time Toronto saw rental prices this low was in February of 2017, according to the report, when it was at $1,700.

https://www.blogto.com/real-estate-toronto/2021/03/rent-prices-one-bedroom-unit-toronto-four-year-low/

. March 20, 2021 at 4:03 pm

Toronto rents were supposed to drop as people fled the city during COVID-19. The data tells a much different story | The Star

https://www.thestar.com/news/gta/2021/03/20/toronto-rents-were-supposed-to-drop-as-people-fled-the-city-during-covid-19-the-data-tells-a-much-different-story.html

. March 20, 2021 at 8:46 pm

Canada’s Housing Bubble Is Getting Way Worse, And Young People Are Screwed

Experts warn that overall wealth inequality is only going to worsen without real interventions to cool housing prices.

. March 21, 2021 at 9:42 pm
. March 22, 2021 at 12:10 pm

Certain landlord applications to increase rent rose following Ontario’s rent freeze legislation

https://www.cbc.ca/news/canada/toronto/above-guideline-rent-increase-applications-rent-freeze-1.5956415

. March 23, 2021 at 2:11 pm

New Zealand moves to rein in runaway housing market with billion dollar plan

Jacinda Ardern announces more support for first homebuyers and measures to dampen property speculation but admits its no ‘silver bullet’

Measures have also been introduced to dampen speculation, after property investment reached record-highs due to low interest rates and New Zealand’s speedy economic recovery from the pandemic last year. In 2020 15,000 people who already owned five or more properties, bought houses.

The finance minister, Grant Robertson, announced an extension to the “bright-line test” – the holding time of investment properties to get tax offsets – from five to 10 years to curb the flipping of residential homes by speculators. New-build homes would be exempt to encourage more construction.

The government has also removed the ability for property investors to offset their interest expenses against their rental income when calculating tax. More loopholes that favoured investors would be closed, with the Reserve Bank due to report back on possible measures in May.

“Housing bubbles are unstable by their very nature, and we cannot afford to put the current economic recovery at risk by allowing house prices to spiral out of control,” said Robertson.

. March 26, 2021 at 9:18 pm

First, let’s start with down payments in Gangster’s paradise — Greater Vancouver. At February’s prices, the GVA would require 307 months of savings (31 years) to save the minimum. If you plan to flee to Fraser Valley, you’re looking at 128 months of savings (11 years). For those not from Vancouver, Fraser Valley is the adjacent real estate board to the GVA. It’s basically a suburb of a suburb.

Greater Toronto real estate seems affordable in contrast, but really isn’t. The typical down payment requires 135 months of saving (11 years) for the minimum. Fleeing to Hamilton cuts it down to 105 months of savings (9 years) for the minimum. You’re going to have to stop crying, because we’ve got a lot of numbers to go through.

https://betterdwelling.com/canadian-property-bubble-nears-systemic-failure-and-not-even-a-big-crash-can-fix-it/amp/

. March 26, 2021 at 9:21 pm

In Vancouver, you currently need to earn at least $147,600 to make the payments on a typical home in February 2020. Over in Fraser Valley, you can get away with $143,700 per year. That’s 44% and 40% higher than the current median household income, respectively.

Greater Toronto real estate also requires much bigger salaries to carry the mortgages. The payments on a typical GTA home needs a minimum salary of $148,570. In Hamilton, it’s estimated at $128,100 at minimum. The minimum income is 45% and 25% higher than the current estimated household income, respectively.

. March 27, 2021 at 12:25 pm

The Supreme Court gives Conservatives a chance to move past the carbon tax | CBC News

https://www.cbc.ca/news/politics/carbon-tax-pricing-climate-supreme-court-otoole-kenney-1.5964328

. March 30, 2021 at 7:44 am

Toronto rent prices just dropped again for the 15th month in a row

Year over year, rent prices are down a whopping 16.3 per cent, hitting a new average of $1,986 — and that’s not just for one-bedroom rental units, that’s for all property types of all sizes in all parts of the Greater Toronto Area.

For downtown Toronto specifically, condos and apartments did experience a nearly 20 per cent decline in average rental rates compared to the year previous.

“The spring rental market is now upon us, and that will be a test for the resiliency of the market, as this period typically experiences the strongest demand of the year,” said Bullpen’s president, Ben Myers, of the market at present.

“Are tenants willing to return downtown in anticipation of a re-opening of offices, or wait until it becomes a reality?”

. April 12, 2021 at 8:11 pm

Our house-price forecast expects the global rally to lose steam

A slowdown looms for booming housing markets, but a global bust is unlikely

. April 16, 2021 at 2:29 pm
. April 21, 2021 at 3:21 pm

Bank of Canada will hold current level of policy rate until inflation objective is sustainably achieved, adjusts quantitative easing program – Bank of Canada

https://www.bankofcanada.ca/2021/04/fad-press-release-2021-04-21/

. April 26, 2021 at 5:55 pm

Johnson’s Tories are reaping the rewards of an economy built on rising house prices | Housing | The Guardian

http://www.theguardian.com/commentisfree/2021/apr/26/boris-johnson-tories-economy-rising-house-prices-wages

. April 28, 2021 at 9:48 pm

Bank of Canada offers fresh hints that interest rates will rise next year as economy surges | CBC News

https://www.cbc.ca/news/business/macklem-future-column-don-pittis-1.5995997

. April 28, 2021 at 10:04 pm

Proposing an Alternative To Renting or Owning a House: Publicly-Owned Housing – Slashdot

https://yro.slashdot.org/story/21/04/18/2112249/proposing-an-alternative-to-renting-or-owning-a-house-publicly-owned-housing

. May 4, 2021 at 12:44 pm

Yet no one can blame millennials for not seeing a future here. They’ve been patient, but quite frankly, they’re not so young anymore and need to get on with their lives. The supposedly once-in-a-life-time Great Recession struck just as they entered their adult years, but Canada never fully recovered. Boomer wealth rebounded, but stable employment and good wages didn’t return for many young professionals. The country’s prescribed remedy for this? In 2014, Bank of Canada Governor Stephen Poloz told unemployed youth living in their parents’ basements to look for unpaid work. He actually suggested, more than once, that millennials view illegal unpaid internships as “opportunities.”

https://nationalpost.com/opinion/sabrina-maddeaux-millennials-are-fleeing-canadas-big-cities-as-big-government-coddles-boomers

. May 4, 2021 at 12:46 pm

“Throughout this entire period, Canadian home prices soared to such levels that even the IMF became concerned. At first, Canada denied there was a problem and lectured millennials to save more and stop buying avocado toast. Then, they conceded there might be a problem, but said anyone concerned with foreign influence in the market was xenophobic. Finally, this month, MP Adam Vaughan, parliamentary secretary for housing, admitted Canada built a housing market that’s better for foreign investors than local buyers. However, after a year that saw house prices skyrocket by 30 to 40 per cent, he wouldn’t tolerate a drop of even 10 per cent.

This commitment to preserve overinflated boomer assets to the detriment of everyone else was followed by a federal budget that all but ignored the housing crisis. You know what the federal budget did include though? Huge increases for spending on boomers, already the wealthiest generation in history. By 2025, the price tag to support seniors’ retirements will be almost triple that of the proposed new child care plan. This new money isn’t even aimed at low-income boomers; it’s a blanket generational handout.”

. May 4, 2021 at 9:07 pm

The eternal zero

The pandemic will leave a legacy of even lower interest rates—and even higher asset prices

. May 4, 2021 at 9:37 pm

Low interest rates leave savers with few good options
The covid-19 pandemic has only sharpened the dilemma

Savers around the world face the same problem. Bank accounts, money-market mutual funds and other short-term instruments used to offer a decent return. Not any more (see chart). Rates are lower in nominal terms than they were 30 years ago because of a long-term decline in inflation, but they are also lower in real terms. The pandemic has made the dilemma acute. This year American, British and German nominal ten-year bond yields have all touched their lowest levels in history.

. May 9, 2021 at 1:50 pm

Globe editorial: How to douse Canada’s housing mania when you can’t raise interest rates – The Globe and Mail

https://www.theglobeandmail.com/opinion/editorials/article-how-to-douse-canadas-housing-mania-when-you-cant-raise-interest-rates/

. May 11, 2021 at 5:52 pm

‘There are times I sit here and cry,’ renter says of housing situation

‘Everyone deserves a safe and affordable place to live, yet our policies allow the housing market to behave like this,’ says Simcoe County Alliance to End Homelessness official

. May 20, 2021 at 3:05 pm

Red-hot and rural: Small towns grapple with fallout from big-city-like real estate boom | Calgary Herald

https://financialpost.com/real-estate/red-hot-and-rural-canadian-towns-grapple-with-big-city-like-real-estate-boom

. May 20, 2021 at 3:50 pm

Bank of Canada flags debt risks as some Canadians overpay to get into hot housing market

In its latest financial market review, the central bank says real estate markets in Toronto, Hamilton and Montreal are highly overheated, while Ottawa is nearing that level

. May 26, 2021 at 12:27 pm

Renters under pressure in Canada’s active home resale market as owners look to cash in

Housing advocates say more investor owners looking to cash in on the boom are asking tenants to leave

. May 28, 2021 at 1:48 pm

Renters are getting burned in Quebec’s red-hot housing market
Housing crisis spreads well beyond Montreal, but the CAQ still won’t act

Landlords are increasing rent well beyond legal limits and they’re turning aside tenants on the basis of race, marital status and physical impairments. They’re getting away with this because there’s no real incentive for them to stop.

Soaring real estate prices and low vacancy rates have shifted the balance of power almost entirely into their hands.

This isn’t just happening in Montreal. Cities like Rimouski, Joliette, Sherbrooke and Gaspésie have seen an unprecedented demand for emergency shelter as the summer nears.

And while renters’ rights groups have implored the government to increase funding for emergency housing, the province has been unresponsive.

In fact, Premier François Legault refuses to call it a crisis and his government has blocked legislation that would provide oversight of rent increases.

. May 28, 2021 at 1:50 pm

Oddly enough, the vacancy rate in Montreal’s rental market is up to 2.7 per cent this year — still low but not enough to set off alarms.

Even so, the city’s poorest tenants are in crisis mode.

“The problem is that the new units aren’t affordable. Landlords would rather have their properties sit empty than charge less,” Laflamme said. “It is especially bad for families.”

She points to her organization’s research, which found that vacant two-bedroom apartments are 43 per cent more expensive than a two-bedroom apartment that’s currently being rented.

“The average rent on a two-bedroom right now is $907 a month and so that’s not that bad,” Laflamme said. “But if you had to move, for whatever reason, the average cost on the open market is $1,300. There’s clearly abusive practices going on and Quebec isn’t doing much, if anything, to enforce its own rent controls.”

To Laflamme’s point, the vacancy rate may be 2.7 per cent across the island but for units under $925 a month, that number sinks below 1 per cent.

“It’s essentially a two-tiered market,” she said. “In one of them, where people have resources, there’s vacancy. In the other, where people don’t, it’s a scramble to find anything.”

. June 1, 2021 at 4:00 pm

‘My landlord wants six months’ rent upfront’ – BBC News

https://www.bbc.com/news/business-57289888

. June 8, 2021 at 9:28 pm

I’m a millennial with a good income. In Toronto’s housing market all I can afford is a parking space or storage locker

https://www.thestar.com/news/gta/2021/06/08/im-a-millennial-with-a-good-income-in-torontos-housing-market-all-i-can-afford-is-a-parking-space-or-storage-locker.html

. June 10, 2021 at 4:56 pm

Rent control provision quietly softened by N.S. Liberals two days after announcement | The Star

HALIFAX – Two days after Nova Scotia’s Liberals announced temporary rent caps in response to evictions and fast-rising rents amid the pandemic, they quietly decreased how broadly the controls applied.

On Nov. 25, Chuck Porter, who was at the time minister of municipal affairs and housing, signed a minister’s directive that limited rent increases to two per cent annually until the conclusion of the state of emergency, or February 2022 — whichever came first.

It included a provision that rent controls would apply both to existing tenants and new tenants coming into the same accommodation.

The provision for new tenants, which advocates say is key to discouraging landlords from finding ways to evict tenants, was dropped in an amendment to the Emergency Management Act by Porter on Nov. 27, with no news release issued about the change.

A spokeswoman for Service Nova Scotia, which oversees the Residential Tenancies Act, said in an email Wednesday the directive “was amended as it went further than the policy intent of protection for existing tenants.”

“By allowing landlords to raise the rent between tenants, the government incentivized landlords to evict long-term tenants or those with below-market rents, which is contributing to the wave of evictions that ACORN is seeing now.”

. June 12, 2021 at 10:17 pm

Renting Is Cheaper Than Buying, Almost Everywhere – The New York Times

https://www.nytimes.com/2021/06/10/realestate/renting-cheaper-than-buying.html

. June 16, 2021 at 7:12 pm

‘Very frightening’ plan by developer to buy $1B in homes will price renters out: anti-poverty group | CBC News

https://www.cbc.ca/news/canada/london/toronto-developer-buying-homes-anti-poverty-group-1.6066903

. June 20, 2021 at 3:02 pm

Inflation: The housing market is on fire. The Fed keeps adding gasoline – CNN

https://www.cnn.com/2021/06/19/business/inflation-housing-market-federal-reserve/index.html

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