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Hamilton LRT (Metrolinx/City of Hamilton, Revived)

asher__jo

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Low interest rates.

If in previous years, you could borrow 1Billion at 8% interest; that means 80 Million per year in interest costs alone to service that debt.

If today, you can borrow that same sum at 3% its 50M per year cheaper.

That's the essence of 'cheap money'.

In a direct sense, this can lower the cost of a debt-financed project.

But it also causes many more people to enter the real estate market (and stock market) than otherwise would, using 'the banks' money, rather than their own.

In so doing, the cost of real estate is driven up.

In so far as it fuels high levels of construction; that puts ever greater demand on a relatively fixed labour pool in the skilled trades; which tends to drive up wages at rates faster than inflation.

***

Cheap money is not, by any means a fulsome explanation of why construction costs have risen inordinately in Canada, and in cities like Toronto and Vancouver in particular.

High levels of immigration, creating a real need for additional housing and infrastructure factor in to this as well; amongst other things.

But 'cheap money' is a part of the story for sure.
I honestly don't see a link to low interest rates being the reason construction costs have increased. Rather that their is a labour shortage in North America with proposed projects in infrastructure and buildings outstripping supply of said labour.
 

Undead

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High levels of immigration, creating a real need for additional housing and infrastructure factor in to this as well; amongst other things.

Yep, I'm aware of this, but did not want to bring up the big bad "I" word because folks on this forum would get too triggered.

Construction has also gotten more expensive because of more stringent safety and environmental regulations, materials becoming more expensive, NIMBYism, and the urban environment becoming much more built up and cluttered (esp. below ground).
 

Northern Light

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I honestly don't see a link to low interest rates being the reason construction costs have increased. Rather that their is a labour shortage in North America with proposed projects in infrastructure and buildings outstripping supply of said labour.

The partial link is that the number of projects (or the demand side of this equation) is somewhat greater due to lower interest rates.

A lot of projects that are viable at 3% are not viable at 8%.

Think of that condo project selling a 1M unit. If the prospective buyer puts 20% down and carries the rest at 3% (30-year term) the monthly mortgage is $3372
and change.

At 8% that same unit at the same price is $5,870 for a monthly mortgage.

You can be certain there would be fewer buyers at that price point, and fewer projects.

The same is true for public sector works.

****

To be sure there are many other factors going into this; but that is surely one of them.
 
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Northern Light

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Yep, I'm aware of this, but did not want to bring up the big bad "I" word because folks on this forum would get too triggered.

Construction has also gotten more expensive because of more stringent safety and environmental regulations, materials becoming more expensive, NIMBYism, and the urban environment becoming much more built up and cluttered (esp. below ground).

I don't think people here fear the word immigration.

They would react poorly if the idea of immigration were demonized; or accorded blame for social ills.

I'm firmly of the belief that immigration need not be, and generally is not a negative for Canadian society.

But it does impact on real estate development in cities where immigrant settle.....(duh!) LOL.

One just has to place such comments in their proper context; and provide evidence in support of them as required.
 

asher__jo

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The partial link is that the number of projects (or the demand side of this equation) is somewhat greater due to lower interest rates.

A lot of projects that viable at 3% are not viable at 8%.

Think of that condo project selling a 1M unit. If the prospective buyer puts 20% down and carries the rest at 3% (30-year term) the monthly mortgage is $3372
and change.

At 8% that same unit at the same price is $5,870 for a monthly mortgage.

You can be certain there would be fewer buyers at that price point, and fewer projects.

The same is true for public sector works.

****

To be sure there are many other factors going into this; but that is surely one of them.
That may be true, but the linkage to increased construction costs can't be correlated to interest rates. I would look towards the fact needed projects were deferred by decades and now we're scrambling to build all these projects with a labour shortage. Many European cities avoid this by continually investing in infrastructure to retain the labour and knowledge.
 

Northern Light

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That may be true, but the linkage to increased construction costs can't be correlated to interest rates. I would look towards the fact needed projects were deferred by decades and now we're scrambling to build all these projects with a labour shortage. Many European cities avoid this by continually investing in infrastructure to retain the labour and knowledge.

Many might be an over statement.

It is certainly true of some, notably Madrid in respect of subway construction.

The key here is that its complex and multi-faceted, not a single answer.
 

SaugeenJunction

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I know it doesn’t mean much, but Infra Minister Catherine McKenna liked my tweet. She’s originally from Hamilton and has been supportive of the project, so hopefully that helps.


When (fingers crossed) the project is retendered, I am curious to see what vehicles the winning bidder will select? Having the vehicles as part of the procurement was a unique aspect of the Hamilton LRT project. I hope it’s a model we don’t currently have in Ontario!
 

syn

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Glad to hear the LRT has at least verbal support from Ford. Hamilton has quite overbuilt highway infrastructure between the Red Hill, QEW, 403, Linc, and Tesla, not to mention the numerous multi-lane one-way arterials. These serve higher income residents with vehicles quite well, especially on the mountain. It's the inner-city poor who would really benefit from higher-order transit who could really use an LRT. It would give the downtown a well-needed lift.

It's good to hear no doubt, but politicians say they like a lot of things and then take no action.

Hopefully this isn't just another one of his empty promises.
 

jordanmkasla2009

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These costs are still insane. Operations should not be THAT expensive.
Over 30 years $12B For Line 5 Eglinton is entirely sane costing. Total Hamilton costs sound pretty sane to me too. $1B for construction, $2.7B for vehicles, property, equipment and other capital expenses, and ~$2.2B over 30 years for operations, maintenance and debt financing. $73,333,333.33/yr or thereabouts for operations, maintenance and debt financing of a high frequency LRT line is not all that expensive.
 

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