President at Mirabella Development Corporation, a Diamante Legacy Company
Good morning to those interested in what is the current housing environment. (Blessed Our Lady of Fatima Day too). A. New Housing starts and new housing sales are way down. This is in the context of every level of government confirming we need https://lnkd.in/g2DPjTwx 5.8 million new homes by 2030 (6 years from now). This would be already a target that is 3x what we produced at peak efficiency. B. The economic value of the contribution of new home construction is enormous. 255,000 jobs in GTA alone 18B in wages. Inevitable with the slowdown of new home sales and starts shown in A. Is economic problems ahead. C. Instead you will see a glut of inventory in the short term temporarily that will confuse you. Maybe 40,000 units in the next few years that were sold years ago when interest was low before unprecedented rate hikes. You will recall we were told 'Interest rates will be low for a long time': Macklem July 2022. This will represent people losing their savings and investments and more and units that are constructed likely being sold at depressed below cost pricing. Good opportunity certainly for buyers but those lower prices will further depress new home sales and starts because the replacement cost is much higher. 40,000 units will be absorbed against a need of millions of new units. D. What will governments do with the drop in windfall taxes from residential new construction? They are not prepared. 30 percent of a new home in Canada is taxes. It’s no surprise new home building has been a cash cow to all levels while auto (a depreciating asset) gets deep subsidies. E. And approval times in our most dense area where building is efficiently near public transit is the slowest. When the cranes you see in the skyline come down at the end of the last cycle, they are not going up again. Pre-sales are required to start projects and pre-sales are way way down. At no point have I heard any discussion of any level of government acknowledging these facts. In previous cycles when pre-sales slowed/stopped, the government was intelligent enough to follow “Keynesian” thinking meant government would tap into the capacity from a slowdown and build infrastructure aka subways and social housing efficiently for the tax payer. Peterson years built hundred thousand non profit social housing units and absorbed B and C locations and allowed the recovery to quick start without losing institutional memory and construction and industrial capacity. https://lnkd.in/gmMjTpcp Patch sound bite solutions promising investment in more efficient “technology” and “building systems” is just that - inconsequential. We build faster and safer than most places in the western world. No in depth government consultations. No task force. No large scale social housing plans. Hold your hard hats. #housing #economicdevelopment #economy #affordablehousing
There is no more universally true principle than cyclicality. As such, the pain must (necessarily) come, to the same degree that there was euphoria before. Hold on to your hats indeed.
What is going to happen when EI for all the layoff construction workers runs out....
Richard Lyall
2mo
Hold on to you hard hats indeed. As stated, this requires immediate action to cut the red tape (planning and approvals) and reduce the impact fees (taxes and levies) on new housing. They are other measure that have been introduced and many remain unaddressed. This is a mess years in the making. Fiddling around the edges won’t fix it.
You don’t hear anything from them because they’ve painted themselves into a corner, and now they’re panicking.
Another example of people in positions of power that don’t have the ability to properly forecast or understand the future. “Interest rates will be low for a long time” Macklem July 2022”
Zsolt Fischer
2mo
The deep subsidies on cars are funded by the fact that the Feds are doing nothing about the theft epidemic and collect taxes on the repurchase. We are talking 10's of thousands of units annually with no end in site. I am not suggesting they are causing the thefts, simply saying since they are not doing much about it, windfall taxes result.
Kim Furlong
2mo
Rodrigue Gilbert have you met Julie Di Lorenzo? We crossed paths at a dinner a couple weeks back. I think the two of you should connect.
Julie - Congrats and thanks for all you do for your community and for your faith! Wishing the best for you and your dad Nic!
Entrepreneur * Financial Architect * Strategist * Brand Builder & Team Builder
2moFrom a high level economic perspective, the cost of a home to average income ratio is the highest in the G7 countries in Canada. Why, lackluster GDP growth does not support this. About a year ago the Deputy Minister of the Bank of Canada said the Ave house to Ave income ratio is ~30% too high. The conversation continued that we can't raise average incomes 30%; the problem is in the rapid rise of house prices much faster tha incomes. Other G7 economies are performing the strongest ever, but Canada has declined over the last 10 years. Why? Too high land cost, regulatory costs, development charges and construction costs collectively are the problem. How do they build and sell the same size home for a half of the price in Texas? Could we learn something to reduce out cost structure say just 20%? This would have a huge positive impact.