[opendoor]

Originally Posted by peter12

I got to say, this is the most wildly out of touch response I have seen on the housing subject. The income to payment ratio is one thing, but the income to down payment ratio is completely out of control. There is now an entire generation of Canadians used to housing insecurity.

The down payment requirements aren't all that different when comparing to the early '80s of early '90s peaks. Yes, lower interest rates will mean a higher down payment at a given mortgage payment, but you can also get away with a 5% down payment now, whereas the minimum was 10+% in the past.

And as you can see here, it has been more or less this crazy before, and it wasn't construction that fixed it, as housing starts dropped through the floor during all of the down periods:

Spoiler!

We have a shortfall of 3.5M units. We have an economy built on a shaky foundation of property changing hands. We could not afford a recession. For one thing, it would destroy the economy.

Based on what? Housing was very affordable in the late '90s and early '00s with similar ratios to now in terms of units per capita and total units per household.

And even now, Canada has more units per household than a place like Germany does for instance, even though the latter has significantly more units per capita. That's because we have more units not being used year-round (either left vacant, used as AirBnBs, or used as vacation properties) than a lot of other countries. So there isn't a lot of evidence that it's lack of built units that's driving the current ridiculousness. And obviously, bringing existing underutilized units into the market is significantly cheaper than building from scratch.

But also, what kind of recession? The Canadian property market has weathered Covid and high interest rates. The market is already bouncing back in Vancouver and Toronto, but starts continue to decrease.

The entire model is broken and will require the same type of fix that Japan faced in the late 90s. We have to change the way our cities are governed and built.

COVID wasn't really a recession, as savings rates skyrocketed while interest rates dropped to the floor, allowing people to put even more money into housing.

And the housing market isn't recovering all that much. We've just seen the largest 1-year decline in Real Residential Property prices in the last 50 years (possibly ever). And because interest rates take 1-1.5 years to really work their way through the economy, house price peaks often coincide with interest rate peaks, so I wouldn't jump the gun in saying the housing markets are coming out unscathed. Prices likely won't crash, but if it happens like previous analogous situations, we'll see a long period of price stagnation where lower interest rates, inflation, and wage increases improve affordability. Particularly as boomers die off.