Housing Struggles & Rising Costs

📉 Productivity Crisis Hits Canada Hard

• Canadian labor productivity fell 0.4% in Q3 2024, marking the third consecutive quarterly decline.

• Only 1 in 5 quarters since 2020 have shown positive productivity growth.

• Labor productivity is roughly the same as in 2019, showing no progress over nearly half a decade.

• High labor costs and low productivity deter global capital and reduce Canada’s economic competitiveness.

Why This Matters: Continued investment in housing instead of productive assets may weaken the broader economy, reducing the value of real estate investments over time. Investors may face reduced interest from foreign capital if Canada’s economy is perceived as unproductive.

😖 Most Canadians Can’t Afford Over $1,749 for Housing

• According to a new survey by Leger, 67% of Canadian households cannot comfortably afford housing costs above $1,749 per month

• 42% of households earning over $100,000 annually report struggling with housing costs above $1,749 per month.

• Rising credit card debt, now at $122 billion, and delinquencies on mortgages (0.19%) and auto loans (2.42%) indicate widespread financial strain.

• CMHC data shows that average mortgage payments exceed comfort levels by 62.8% in British Columbia and 54.3% in Ontario.

Why This Matters: Housing affordability challenges could increase demand for rental properties as homeownership becomes unattainable for many Canadians. Rising mortgage delinquencies and credit strain also suggest potential opportunities for investors in distressed properties or foreclosures.

Survey results: What is the maximum you can comfortably afford for mortgage or rent payments every month

🏘 Purpose-Built Rentals Reaches Decade Highs

• Purpose-built rental starts in Canada nearly quadrupled over the past decade, accelerating since 2018 due to government incentives.

• CMHC insured 64,979 multi-unit residential units in Q3 2024, a 26% increase from 51,443 units in Q3 2023.

• Toronto and Vancouver have seen the fastest growth in rental unit completions, surpassing population growth in recent quarters.

• CMHC's MLI Select product offers up to 95% loan-to-value financing, 50-year amortizations, below-prime interest rates, and reduced insurance premiums.

Why This Matters: New construction supported by CMHC products may present investment opportunities in multi-unit residential developments. Emphasis on affordability, sustainability, and accessibility could shape market demand and pricing strategies.

🤔 Calgary Plans New Short-Term Rental Restrictions

• Calgary City Council is considering changes to short-term rental regulations to address potential housing issues.

• Proposed changes include a moratorium on new non-primary residence licenses when the vacancy rate is below 2.5%.

• As of September 2023, Calgary had 4,950 active short-term rental listings, less than 1% of all residential properties.

Why This Matters: Proposals aim to prevent outside investors from turning Calgary real estate into short-term rental stock during periods of low vacancy. If the changes are adopted, Calgary's vacancy rate will be below the 2.5% threshold, triggering the moratorium.

🏢 Toronto Condo Tower Scrapped Amid Weak Sales

• A 37-storey condo tower project, The Riv, in Toronto's Regent Park, was recently canceled due to insufficient pre-sales despite price reductions of around 5%.

• The project would have added 388 units, including affordable rentals and ground-floor retail, by 2028.

• Studio units were priced at $503,490, and three-bedroom units exceeded $1.1 million, which deterred buyers.

Why This Matters: Toronto's new condo sales are down 75% below the 10-year average, contributing to numerous project cancellations and delays. Developers are struggling to meet the pre-sale thresholds required for construction financing. A significant oversupply of resale homes on the market further highlights affordability issues rather than just supply shortages.

 🤔 WTF of The Week

One of our community members, Norm Li took Mike Moffatt's PhD chart and applied the same multiplier to everyday items based on their 2000 prices, revealing how drastically development charges (DCs) have increased.

Here’s the comparison he made:

If the price of consumer items rose at the same rate as development charges….

A litre of gas would cost $33

A small Tim Horton’s coffee would be $57

A Big Mac would be $145

A 4 litre bag of milk would be $328

And this is just municipal DCs… add on all the other govt levies and your brain stops working

The actual cost of that $80,690 after 30 years at 4% is actually $138,628 … and they wonder why people aren’t spending money”

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