@Steve and @Rich great discussion around Canadian housing. One point I think you guys missed that is going to impact housing downturn in Canada apart from interest rates and how long they stay up here, is rise in the unemployment rates in coming quarters (although it will be directly linked to interest rates). People are already struggling with mortgages despite full employment. Imagine what happens when significant number of people start losing jobs when the recession actually hits. Can't refinance due to falling house prices, can't get financing to close on pre-cons etc etc... Can get really ugly fast.
My friend said he got a city block BBQ fund from city Coquitlam, so he goes door to door to invite his neighbours, but he soon found out the whole community was vacant homes of people who had bought two or three houses cash from overseas money!
Yup, there are a bunch of those. And what's worse, they were bought a long time ago probably (in relative terms, like 5-7 years ago) so they can sustain these interest rates. Those who are truly screwed are domestic investors or families who live in these units/houses that have high-interest rates.
I was at the bank and watched an old immigrant couple complaining about their mortgage payments. They wanted the rate to be lowered and couldnt understand why they keep going up. I wonder how many people this much in the dark about how mortgage works.
Would love to her you guys share thoughts/statistics on Sustainability, Net-Zero by 2050 goals, etc. Modern economists of today need to be aware of these paradigm shifts. Sometimes we overemphasize the importance of GDP growth when in reality, continous growth is unsustainable.
I hope 40 year mortgages doesn't become a common thing in the next few years. The average age to buy a first property is 36. So the average guy would be paying that until they're 76 ?? Sounds like a good deal. Very sustainable. Plus at a 3% interest rate, paying a 300 000 house over 25 years will cost 425 000$ and paying it over 40 years will cost 513 000$. And we all know if ppl can extend their mortgage to 40 years they'll be willing to pay more for the house as well, boosting prices again for no reason other than taking on more debt. Not great for the future.
19:20 "It's going to discourage wealthy people from owning secondary homes". I would say this is going to force the middle class from owning, truly wealthy people will still have it. Someone who owns a business and travels a lot finds having a secondary home a better deal long-term than paying for hotels all the time. What this policy does is encourage growth in a disparity between the rich and the poor. These policy changes effects disproportionally more those at the bottom
Exactly. I owned three properties from 2010. Sold one to offset the losses ahead. But I would have held all three if I could. Because long term realestate is the true inflation shelter.
1233 Tecumseh, Vancouver which was on sale for almost 40 Million a year ago is now a court order sale at 50% discount. That house may sell for 10 million if they find a greater fool and if that happens. Otherwise this might be the first foreclosure in Vancouver.
Should of done it years ago rather than propping it up. It’s going to be a big fall now and we’ve priced out most productive businesses in exchange for real estate.
What about all of the trades people involved in real estate sector that don’t get paid until the property is sold, wondering what the snowball effect of that will be?
@@darkhorsedesign That’s what I thought, however I am finding from a lot of anecdotal stories that the last 5-6 years trades were willing to take the risk because of the ‘hot’ real estate market.
I really enjoy the discussions and how global decisions impact Canada et al. The China thoughts were particularly interesting this week. Re: the rental restrictions being removed in B.C. Steve - I view it as a very good thing. A couple of years ago I needed to buy a place with the freedom to rent it. Ultimately I had to pay more for a place I could rent if my family dynamics or work situation were to change temporarily. It seemed to skew the market unnecessarily. BTW, I gave you 5 stars on Apple.
The pivotal key metric for the housing market will be employment. How could there be a housing crash when people still have jobs. Who would sell their house even with negative equity as long as they have income to pay the mortgage. To see a significant housing correction we would need to see wide unemployment. With the current labour shortages it seems hard to fathom.
Canada has about 1 million jobs available but most are low paying retail and food industry jobs while others are in nursing and hospitality around 40-50 k for hard labor. Big companies have been paying much better salary for office/work from home jobs, but will these high paying jobs last? Big high tech corporations have been letting go of thousands of workers that pay 6 figure salaries. If this continues with banks and other companies letting go of high paying jobs in the next 6 months, a lot of people with mortgages will lose a high paying income. It’s quite possible Canadians will grab a second or third part time job like they did in the late 70’s and early 80’s to get by similar to the last time inflation got out of control. We’ll see what happens. Though if someone loses their high paying job and can’t find a replacement next year or in 2024, will they work 3 part time jobs to get by? Hopefully your tight and a recession won’t occur but only time will tell. If someone loses their good job in the next year or two and can’t find a replacement will they sell their home with a large mortgage payment at that time?
I listened when they said no rate increases until 2023 and that rates would remain low for a long time. We have a floating variable rate and yes, we’re getting crushed.
If your strata now has to allow rentals ...just remember. those units are full of owners who are not planning to move, anyways ...for a while ...the government taking away your rights ... they look down on you
The concerns about real estate in Canada’s market pales in comparison to real estate concerns in China’s market. China is turning into a dystopian nightmare and to think that nightmare will not affect the rest of the world is short sighted. We’re heading into a few really tough years going forward because what has been the market over the past 50 years has changed in so many ways going forward. Those who plan properly will be ok but those who like ignorant bliss will fail. Too many people took on debt failing to see the changes going on as they thought what was, will always be. The future will be very different from the recent past. History shows excessive exuberance can’t be sustained forever and the consequences of excess result in pain. The pain is coming for many.
I would say to help enforce the "empty home tax," the owner would have to sign an affidavit each year that the home is not vacant. Communities become unliveable for everybody if there is not affordable housing for working people. I think public policy has to address it, and I think reducing the demand for housing is in order. I realize this idea is not a crowd pleaser and goes against the grain of personal freedom, however I don't think other solutions (e.g. zoning etc) will be enough.
BC property owners have to affirmatively declare online every year that their property isn't empty if they want to avoid the empty homes tax. I believe it's legally equivalent to an affidavit - a false declaration can be used against you in the future. As I recall, prior to the implementation of the tax Vancouver had about 12000 empty residences which went down to about 6000 after the implementation. So it helped but it's really a drop in the bucket.
It’s been enforced in B.C. courts many times. It’s easy to enforce - that’s why it had to be an affirmative declaration. And Vancouver doesn’t have that many empty homes compared to other cities. The number of empty homes isn’t even as large as the number of new homes we build every year. It’s just not the factor people think it is. We just have too many new people arriving and too many roadblocks standing in the way of development.
I would agree with comments about the Empty Homes/Vacancy Tax not really making a difference but I think it is still good policy. People who are priced out of the housing market get incredibly infuriated when they see others owning multiple homes that they leave vacant for much of the year. Since the vacancy tax has cut the number of vacant homes by roughly 70% in Vancouver, people now perceive there to be a little more fairness in the housing market. So in that respect, the Vacancy Tax does serve an important psychological function in tight housing markets.
There are way bigger things at play than saving homeowners and there's a reason why most central banks are taking that route, calling it total incompetence is calling a cop car names for making me stop on the roadside while they sped by for an apparent urgency.
How nice system for last 15-20 years. China supplying very cheap products(taking lots of dollars in to their country) and then they buying properties such as housing markets, bonds(giving back dollars to developed countries, US, Canada, Australia etc) This kind of liquidity circulation made big bubbles and now… We all in endgame
You've got to understand that there are no people more heavily propagandized than the American (and by proxy, Canadians as well). Most of them believe anything they're told.
Nope max spending. Wake up buddy. Canada just hired 9000 irs agents. 33000 new politicians. Wahahahah when are citezens going to learn. It’s been over since 2018. They just gave a bunch of free money to a few that sold and are now living at home with 500k in the bank. Otherwise, you will just end up a slave to taxes or a burden to your landlords.
@@justinjones5281 politicians will use 'high' interest rates and the coming job losses as a political platform especially if inflation doesn't drop. Election cycles played into 1968-1984 interest rate policies so will likely repeat over the next decades.
Keith is a fund manager, he has to keep an eye on the market at all time to go in and out if needed, too bad if they are recording the show at that time. That's just my take.
Keith, what you were saying about China and their no covid policy-I just had that conversation with my wife earlier today. I live in Taiwan and we were talking about the situation with China, and I was telling her how strange it is that they would be willing to sacrifice economic growth and maybe setting off the population ( their biggest fear)in order to stamp out covid, a long term impossibility. Steve just now, as I'm writing, said there is something else going on over there and I agree. We're missing something.
The thing we’re missing is social unrest that had already begun due to the real estate Ponzi scheme that is china’s property market. When Evergrande’s (and other property development companies) debt started to overwhelm the scheme people were already starting to take to the streets in social unrest. Covid fears are being used as a mask for keeping social unrest locked down to prevent coordination. The CCP know there are huge numbers of people willing to cause social unrest as many people have lost wealth and the CCP bought themselves time to adjust the population to a new reality of lower wealth storage in property. If they hadn’t done these Covid lockdowns then we may have seen protests on a wide scale to where leadership would be challenged and we all know Xi wouldn’t allow that especially during his re-election. China’s moving ever quickly towards the dystopian future envisioned by George Orwell in his book 1984. The scary thing is that Xi will go after Taiwan soon to spread this ideology and I fear for what happens after that. The world that was, is no longer.
Someone help me out here. Ill be a 1st time home buyer. Live in Red Deer AB. Looking at a few fix me uppers on Monday all with basic infrascture to rent the basement. The price ranges are 250-275k respectively. Any tips on what my offer shoudld be on these? One thats 250k might need upwards of abt 50k in renos. Anyway, any advice is appeciated.
Another great episode! Are any of you Gentlemen looking at the HELOC situation at all? I'm curious what the average household HELOC picture looks like and the impacts of those rates rising. Just wondering how much risk that might be adding in the background.
Hey guys, I’m a big fan of the show and I never miss a week… Has it ever crossed your mind, and/or, have you guys considered discussing some of the hearings from the emergency act ? Especially this past week when high-level officials including the PM have testified.
Like arbitrarily freezing peoples bank accounts with no notice. That would be a good one. Or that the Americans referred to this shithole as a banana republic.
@@notalmostfamous9773 There was nothing arbitrary about the reasons for freezing the banks accounts. Giving someone notice that you were going to freeze their accounts would entirely defeat the purpose of freezing them. A private American citizen referred to Canada as a “banana republic” when he saw us letting the contents of a trailer park disrupt our international trade.
@@jimmybaggs5342 I get your opinion. Its kinda like an asshole, everyone's got one. But that opinion obbiously isnt rooted in anything remotely resembling anything factual. Nobody cares what you think of the people there. And it was not some jow blow referring to Canada as the banana republic. So try again.
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Rich, you are not even near an Austrian economics enthusiast. Keith shame you left early, you keep the show afloat. It's a shame everyone wants to fire Tiff, if he gets us to 9% I think he should get a raise
Tiff also said in early 2021 don't buy more then you can afford he did have a warning to new buyers I blame it on the individual at the end of the day make wise choices it was obviouswhat we where heading to and we did have Information to back it ....LIKE THE OLD SAYING GOES WOULD YOU JUMP IF SOMEONE TOLD YOU TO.
I don’t blame buyers. We dodged a 2008 correction and since then the government has 100% backed housing. Land restrictions, backing loans to banks, dropping interest rates, slowing infrastructure building, increasing immigration levels, “helping “ first time buyers, offering to buy a stake in homes for buyers… To assume the government would stop this after pumping it this far… beyond anything reasonable.. for over a decade… even after it should of corrected multiple times but was actively bailed out… even during Covid they gave away money… so people could pay their landlords and mortgages.., printed 40% of our currency out of thin air in 2 years. They slaughtered savers and forced people to move into the market . It was a loose loose loose for everyone. Housing was increasing over 100,000k a year for years… few people can save that, while they printed 40% of currency. That means ur taking a 40% hit eventually on savings while housing is jumping..
The world cup isnt the biggest or the second most watched sporting event... its 3rd at best.. cricket is number 2 and the tour de France is number 1 ....
A fixed payment on a variable rate should not be allowed. If you need a 30 year mortgage, you can’t afford the house. It is time we started acting like grown ups.
With regards to what is going on in China go to Lei's Real Talk and China Update channels for deeper insights. From what I have read and viewed, China has reverted to a more socialist economy and will have huge economic and geopolitical implications globally.
