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Housing crisis "a real drag" on Canadian economy - Trudeau

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Ephraim Vecina | 13 Jun 2016, 08:15 AM Agree 0
The overheated real estate sector is limiting not only the country’s economic strength but also the options available to consumers, according to the Canadian prime minister
  • Rebecca | 14 Jun 2016, 04:41 PM Agree 0
    To be born and raised in a city that's real estate has become so unattainable by the average worker that only the rich or foreign buyers can swoop in and purchase more than one investment while the rest of us are struggling to make the down payment just to get into the market. It's incredible depressing to have gone to school earned an education and then to be squeezed out of the city you dreamed of buying in you cannot afford. There are also other issues that go along with squeezing the working generation out of a city, this leads to no one being able to acre for the ageing population, no money going into the education system or the communities, leading eventually to closures of businesses.
    Also I am so confused that Canadian government has not protected our land from being overly developed due to lack of any rules around foreign buyers buying up as much as they want or not having to have to live in the properties or operating them as rentals is obscured. Then allow us Canadians to go anywhere else in the world and go purchase houses where it is affordable to live.
  • Scott | 17 Jun 2016, 08:08 AM Agree 0
    Just to touch on the development and rules around buyers briefly.

    The whole planning process is very confusing and frustrating for the people who live with the effects of the planning (or lack of planning).

    A big part of the problem is that there are three levels of government - federal, provincial and municipal, none of which can agree in the best of times, all of whom have different taxation powers and responsibilities.

    Just as an example, cities have responsibility for city infrastructure but they also have the least ability to raise money. Usually they have to beg the province and federal levels to cost share the price of projects.

    The provincial and federal governments might have more money but they also have more debts and expenses (health care is the biggest) and when a city that has expanded and expanded wants financial assistance to build additional sewer lines or roads to service the new development in addition to servicing the existing city, well, they're probably saying, "No! You didn't plan for this growth you approved, you figure it out!"

    There really needs to be better planning going into some developments and I think the cities should develop contingency funds for each development to cover 10 years worth of expenses - new schools, roads, sewers, maintenance, etc, etc. Of developer will agree to this - "Give me tax breaks! (Or I'll take my money and build somewhere else!)". And asking exisiting tax payers to allow their tax money to be set aside in a contingency fund to cover potential costs of a new development? "NO!! The city can't even cut the grass, shovel the snow...whatever now with the money I pay in tax and they want me to pay more for a new development?! NO!! Ask the new homeowners in that development to pay for their own services!". And if the tax burden is too high, no one will buy in the new development.

    So......things stay the same and the situation gets worse......

    Is there an answer? Probably not one that will satisfy everyone.
  • Scott | 17 Jun 2016, 12:58 PM Agree 0
    To continue, you're probably asking, well, if they knew this problem was there, why'd the planning department of the city approve the development to begin with?

    Two possible answers. First one is they didn't think it through fully. Second one is they wanted more development (more jobs) and a larger tax base to tax. Of course, they forgot that expenses also go up as new developments go up.

    A better question is why do they continue to do this when they KNOW the results? Easy - all politicians at every level are in it for the short term. Not one of them is planning 20, 30, 40, 50 years ahead and that's what we need.

    A perfect example in Winnipeg would be the fact that we have vacant schools due to a lack of students and we have a serious lack of personal care homes for seniors. When I think of those two situations, I ask myself, couldn't anyone build a school that could be converted to a personal care home in 20 or 30 years? If I can think of it, why can't the people who build and plan out the growth of a city consider it?
  • Scott | 17 Jun 2016, 01:55 PM Agree 0
    And my last post (finally!), cities are also dealing with the donut effect. Basically people flee the inner city for the shurubs and outskirts of the city because they want to live near green space, they want newer houses with all the bells & whistles (solar panels anyone) and a lower crime rate. Imagine everyone who can afford to vacates the inner city neighbourhoods. The inner city will be in the position of not having enough taxpayers to provide basic services to the inner city and it will continue to decay, eventually requiring more and more money to fix. And needing to be subsided by other taxpayers money, leaving less to spend on new developments - "Hey, it was built two years ago, the roads should be ok for 20 years." The key word in that quote is the word, "SHOULD" doesn't necessarily mean it is true.

    Hence the "donut" effect. The inner city is an empty hole and the surrounding city neighbourhoods are the part of the donut you eat. (The "donut effect" is not my original idea but I don't know who came up with the idea in the first place - makes sense in Winnipeg)

    Historically this "weakness" was hidden as new people immigrated to the city and bought homes in the inner city where prices were cheaper. This doesn't seem to be happening any longer. Immigrants are arriving with more money and buying mansions and luxury homes now. Hence the inner city falls apart. There are opportunities for investors to purchase cheaper properties and renovate them but when it's time to sell or rent them out, are there tenants or buyers who are interested?
  • GP | 17 Jun 2016, 11:53 PM Agree 0
    I'm not going to pretend that I know everything or anything about development, but I am glad, Scott, that one of the most crucial factors in toronto's market is being talked about more and more by people like yourself - development and infrastructure. Toronto is a growing city with global appeal and the growth has been accelerating over the last 20 years.
    All in all, this growth is leading to a shortfall in supply of something that EVERYONE needs and is a customer of in one way or another - housing.
    I believe the relatively strict mortgage rules in Canada and the lack of infrastructure in Toronto are resulting in a hot and expensive real estate market, but not a bubble. Hot and expensive does not always mean bubble, and people never seem to think about this when they are writing Armageddon articles with no hard data aside from rates of price increase.
    Does this mean prices will go up forever with no blips? Of course not. There can always be market events (like 2008 driven by USA and impact on entire world) that temporarily shift the demand/supply relationship.
    There is a problem... Supply... In part driven by infrastructure shortfalls. But this problem is actually preventing a bubble. A bubble could only be present in Toronto today if there was massive overdevelopment occurring right now to meet artificial booms in demand, because then if there was a massive shock, we would be sitting on massive oversupply that shouldn't have been built in the first place. Overdevelopment plus the greatest real estate fraud in USA history driven right from the top floor of Wall Street is what caused that bubble. Nothing is comparable to that.
    Buy a house if you need one, but one you can see yourself living in for a decade and that you can afford, and you'll be fine. Dont speculate. Buy housing on need.
    And if anyone starts bringing up oversupply of condos, well, the healthy supply of condos is now an opportunity for potential homeowners to get into a property when otherwise they couldn't... Thank god they have been building those or the market would be even more out of whack on supply-demand.

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