Baby, we got a bubble!?

[Admiral Beez]

High borrowing costs, record condo completions lead to oversupply in Greater Toronto Area

A report by TD economist Rishi Sondhi said sales activity hasn’t been absorbing supply fast enough, with July condo resales in the GTA down 25% from pre-pandemic levels

www.theglobeandmail.com

Paywall free: https://archive.is/0q1iz

Um. The only way any market can have both an over-supply and over-demand of any product is when prices are not adjusting to meet the equilibrium of supply and demand.

Toronto does not have an over supply of condos, instead we have manufacturers, resellers and financiers of condos that are pricing their product over what the market can/will pay. Government, land owners and developers need to find a way to make it feasible for true 2bdrm units (no dens or interior glass doors) at $500k. That’s what the market wants to buy.

 

[Undead]

Yeah I believe the condo market has just returned to balance--5 months of supply at current sales volume, if I remember correctly.

Also:

Rent relief follows federal cap on foreign students

Ottawa’s reform of international student visa program helped keep a lid on asking rents over the summer after years of spikes

www.theglobeandmail.com

"That month the federal government capped the number of international student visas it issues, with the move expected to reduce Canada’s foreign student intake by 35 per cent this year compared with last year. However by some estimates, international study permits could be on track to drop by almost half this year.

While it’s impossible to say exactly how much of the asking rent slowdown is owing to those policy changes, it is likely significant, said Mike Moffatt, a senior director of policy at the Smart Prosperity Institute."

Always nice to see the "lack of supply" meme take another hit.

 

[afransen]

That sound you hear is the Liberals furiously trying to reinflate the bubble.

Extending amortizations to 30 years for first time buyers on existing homes (previously it was just new build) and raising the insurable mortgage amount to $1.5M from $1M. Both are designed the prop up prices and protect the wealth of the homeowning boomer class, the most loyal remaining part of the LPC coalition. It will do very little for affordability, just saddle young people with more debt, and increase risk in the financial system, as low downpayment 30 year amortization mortgages are at high risk of being underwater after the first 5 year term.

Ottawa to expand 30-year amortizations, raise insured mortgage cap - National | Globalnews.ca

Finance Minister Chrystia Freeland announced proposals Monday to expand the availability of 30-year amortizations and to raise the price cap for insured mortgages.

globalnews.ca

 

[Deadpool X]

Is there any thread on the current mortgage interest rates?

 

[Admiral Beez]

Extending amortizations to 30 years for first time buyers on existing homes

30 years is insane. No one can predict where they will be or what their financial or relationship status will be after three decades. For example, 40% of Canadian marriages end in divorce.

 

[PinkLucy]

The same can be said for traditional 25 year amortizations. Renewals will still happen, likely at 5 year intervals.

 

[afransen]

30 years is insane. No one can predict where they will be or what their financial or relationship status will be after three decades. For example, 40% of Canadian marriages end in divorce.

The biggest risk is the first renewal as very little principal is repaid in the first 5 years. So a 5% down payment gives precious little cushion for home prices to turn downwards before the borrower is underwater at renewal time. I don't think 25 or 30 years makes a material difference for predicting life circumstances at the end of the amortization period.

 

[Admiral Beez]

Renewals will still happen, likely at 5 year intervals.

Or foreclosures...
Power-of-sale listings more than double as mortgage lenders repossess homes from over-leveraged buyers

 

[Strange Advance]

Toronto area housing market ignites with sales jumping 44% in October — but prices hold steady, for now​

Link to Article

Sales across all property types jumped with detached home sales up 46%, semi-detached by 44%, townhouse by 56% and condos by 33.4%.

 

[slickpete83]

https://twitter.com/x/status/1860333616850424086

 

[evandyk]

To be fair, the government *should* be making it super expensive to build single detached houses in Toronto unless they are laneway/garden suites.

 

[afransen]

Shifting the tax burden from new development to general property tax base (ideally biased as more of a land value tax) would have the benefit of lowering resale home values and new home prices. It's obviously the right thing to do socially, but it is not politically palatable. Maybe it is a matter of having the province ban DCs altogether, or at least capping them at a certain value (much lower than present), indexed to inflation.

 

[slickpete83]

here is an interesting take having Land Value Tax (LVT) instead of our traditional property tax system

In this episode, we’re diving into a timeless economic solution that’s gaining new attention in today’s housing debates: the Land Value Tax (LVT).


Unlike traditional property taxes, which tax both land and the structures on it, a Land Value Tax focuses solely on the land. This means property owners aren’t penalized for making improvements, like building more housing—a crucial distinction in the context of today’s housing crisis.


We’ll explore the origins of this idea, tracing back to economists like Adam Smith and David Ricardo in the 1700s, and its popularization by Henry George in his influential 1879 book Progress and Poverty. Advocates of LVT, often called Georgists, have emerged from across the political spectrum, including notable figures like Milton Friedman and Joseph Stiglitz.


Joining us is Floyd Marinesco from Common Wealth Canada, a think tank advocating for a Land Value Tax to address housing challenges in Canada. Floyd shares insights into how this idea could reshape housing markets and what lessons might apply to other regions facing similar issues.