@@VitalySidorok funny you ask… ironically, investors actually did socialize profits in a way. By being cash-flow negative, condo speculators made units available for rent cheaper than the cost of owning them, and in exchange they got capital appreciation
@@daniel_foch Condo speculators rented their condos at max price market could offer. Condo Prices should have come down to make condo ownership profitable. Any investment has risk. Let the market work. How about bailout for tax payers by reducing the marginal tax rates.
@@daniel_foch they didn't subsidize shit, their intention was to get quick increases in the price and cash out all while voting down condo fee increases to screw over future owners. I'm begging finance bros to learn with socializing or socialism actually means before throwing the term around
@@jp-sl7cd again, if you watch the video, my suggestion is that builders inventory units would be bailed out, not speculators. If builder units are bailed out, it would have further consequences for speculators as they’d be competing with builders units in the rental market. The socialization above I mentioned is just an answer to the question
@@daniel_fochat what point does FMV become BMV (bubble market value)? I could just as easily argue that we've never seen a 'fair market' because of government regulation (zoning) and taxation (massive development fees subsidizing property taxes and stifling development to benefit owners at the expense of new buyers). Maybe in a 'fair market' the average person would be able to afford a home😂 but we probably will never know because there is no fair market!
Nooooo. The last thing we need is to bail out these builders and agents. Greed cannot be rewarded. If they are rescued then we need to see an "arab spring" in Canada.
@@daniel_foch Its only a matter of time. Ontario is frankly a fiscal mess and due for a major correction. Not trying to be a dick here but we have priced whole generations out of the market and are running never ending deficits. We need to invest in our real economy, namely commodity exports. That is what pays for everything.
@@baziloneil1271 I agree entirely, but I don't think we will see an inch of economic diversification until after 2025 election. Until then, this problem still needs solving IMO.
No bailouts should be provided. Allow them to default. Distressed assets should be sold at substantial discounts through power of sale, ensuring realistic and fair value for purchasers.
"Investors" are fully prepared to lose money when they invest; that's the game. So, I see no reason to waste MY money bailing anyone out who was not going to share his profits with me?
Great catch, you have a keener understanding of this than most others it seems. Yeah the Big 6 already have been doing blanket appraisals at 80% LTPP to get projects closed, which ends up being 100% LTV if the units presold at 20% over today's market. And I agree but that is a private sector bailout and a messy one. It won't surprise me if we see a government layer too in an attempt to cleanup and de-risk.
So I don't really know what I'm talking about but couldn't we let the builders go under? Then people would be free to form new corporations and hire the laid of workers and get to work. There's lots of demand for housing. Surely there's a profit margin once land values find their price.
Yes, you could do that. It would put a lot of losses on banks and it would likely cause a big gap in the construction pipeline. Both of these would have far-reaching consequences into the employment market in the form of layoffs, but by the sounds of what I'm seeing in this thread, that's what everyone wants to see.
@@daniel_foch if new corporations were formed, the employees would be hired fairly quickly. Tbh, I don't care what happens to the banks. They can deal with the consequences of their own choices
Ridiculous. We must pay the price for Moral Hazard otherwise the lesson is not learned. Canada did not learn from the US subprime implosion, so now it is our turn. Any bailout will fall on my shoulders as a taxpayer, and will ultimately just serve to protect all the complicit players: banks, r/e brokerages, builders etc. While I sympathize with people who will lose employment as the r/e market crumbles, and even with those speculators who made bad decisions, those decisions must have consequences. Otherwise we will just do it all again in 20 years. That said, we obviously are currently doing it all over again. 😂
Thanks for watching and thanks for the great comment. I agree with you. The problem is the absence of a bailout falls on the shoulders of the taxpayer too. The highest-leverage borrowers are insured by taxpayers. They are often first-timers, who represent almost 50% of buyers. Current annualized condo value trajectory wipes out all insured buyer equity within a year or two.
No bailouts. The developers need to sue buyers that cant close. Why does someone in moncton have to bailout greedy "investors" ? Its a Toronto problem ... Its called price discovery..
@@robotron26 you're right, the problem I've identified with that is there's a 3-5 year gap in the construction sector if we allow that economic darwinism to take place
Hi, I'm not sure if a bailout is the right framework to get this crisis back in line. But I will argue that your comment about the CHMC getting back in the affordable housing market has some merit. Since 1985 the federal government exited the building of affordable homes and this may be a good idea for the purpose of turning these empty units into rental space
The issue is that you wont be asked. They will wrap it under some buzzword like "equity", "diversity" or some other BS and use the taxpayer money to bailout the builders and speculators
Thanks for talking about this Dan. This situation is going to get WAY worse with with condo that closes from here on. We need to let the speculators fail to correct condo asset values.
@@Kevriyal5654 I totally agree, but I think something should be done with the inventory that comes back, from failed closings and previously unsold inventory. Rather than it sitting vacant
@@robotron26 if you watch the video, that’s not at all what I’m suggesting. I am suggesting that unsold inventory and units returned from failed closings be given a credit product to allow them to be rented rather than sitting vacant in inventory
@@LawrenceWinterburn I agree, but I just don’t think you or the average member of the economy know what all that entails. Unions are already moving trades from GTA to other cities and provinces because there is no work here. Ontario will have to burn down entirely if you want us to rise from the ashes
@daniel_foch -- I've been a carpenter for nearly 40 years. In the 80's and nineties there was a shortage, so they brought in trades from Eastern Europe. Most worked in the cash economy-- driving wages down. Here we are bringing in the next crop of low wage servants...working under the table, competing with us...collecting benefits. When taxpayers hit the 70% tax mark and 50% of the economy is govt-- it becomes unsustainable. It will burn itself down soon enough.
Let it fail ! they are too expensive and needs a reset. We all know real estate is way too expensive ... it needs to drop because salary did not follow. Its so badly run, and I don't feel sorry for the real estate agents .. they made a killing in the fomo. The condo was built for investors... welcome to reality.. not all investments are winners
What you are saying is really informative, but at some point, as Canadians, we need to stop the Communist solutions to every problem we face. This is what got us here in the first place. Let the market figure this problem out. If construction workers are out of work, it's fine, they've been making 5-10 times the median salary for the past decade. They have a lot of money set aside for rainy days!
i have been trying to buy an established business for about 2 years now. i basically only get 3-4 types of businesses sent to me, and 95% are restaurants or food related. there really doesn't seem to be alot going on in canada.
Require for speculators and other parasites that depend on high prices? sure Require for the betterment of society and a return to normal affordability? absolutely NOT. We need some short term pain for the long term betterment of society. The absolute ROT in Canada of housing being purely for profit is a danger and moral failure. Speculators absolutely must be allowed to feel pain.
Unfortunately the way we're structured, a housing market collapse is already a taxpayers' problem. The highest-leverage borrowers are insured by taxpayers. They are often first-timers, who represent almost 50% of buyers. Current annualized condo value trajectory wipes out most insured buyer equity within a year or two.
@@daniel_foch If the government buys back the unsellable units, it should be for pennies on the dollar. Turning those failed buildings into something like a co-op would reduce the concern for future moral hazard. The speculators absolutely must know this cannot continue in the future.
@@nairbos They wouldn't buy them, they'd likely provide loans on them. This would introduce competition as someone else in this thread mentioned, putting more negative pressure on rentals and further damaging speculators. It ends up being an ultimatum I guess - would you rather save builders and the construction industry, or speculators? I don't see another choice. I would rather save builders and keep trades employed and housing getting built. We have record approved units and record contemplated units in the pipeline. We need to keep the machine moving or things get A LOT worse over the next few years.
How does this option protect future construction? Didn’t you start the video by saying builders can’t produce new units for less? If you crush the market for rent, how does that incentive future buyers? Aren’t you just wiping out CAP rates? I must be missing something. Really enjoy your videos 👍
@@kylere6288 great question and something I wish I explained better in this video. Builders can’t build more if all their equity is trapped in existing projects’ inventory - they need to be liquid to move on to their next project. For example, Some builders have projects pre-sold they can’t move onto until they’ve finished their first one, since they can’t have too much construction debt out at one time. The next problem becomes the lack of sales for future projects, but we’re seeing builders begin to pivot to purpose-built rental (PBR) in the absence of sales. Unfortunately PBR has an even higher equity requirement, exacerbating their need for the equity from existing projects. I hope this explains it, and I really appreciate you watching my video and asking great questions
Also construction workers who don't have jobs due to lack of builds can move to other parts of the economy - oil & gas, resources, infrastructure. Instead of bailing out builders/speculators the govt can use that same tax money and build better infrastructure, encourage more pipelines, etc and hire / re-skill those same construction workers into more productive sectors of the economy.
@@daniel_foch If we stop mass migration and let the stay permits expire - of many of the newcomer/students that came - it would ease a lot of pressure on housing units. We'll still need housing units even without mass immigration, but it gives us breathing room to build those homes. Either party doesn't want to though, because they are wedded to the idea of mass immigration, don't want to disappoint their boomer voting base who will lose their house value.
Very interesting take on the situation, basically saying take a morally challenging road now, to avoid falling off a cliff and starting over later. But, doing that doesn't stop the core reason why we are at this point in the road today, which is a Canada that doesn't product anything other than real estate, doesn't exploit it's natural resources for the benefit of Canada first, and essentially profits itself off the rampant speculation that has occurred. It's like being addicted to drugs, such as heroin. What's better, quitting cold turkey or taking methadone. Obviously many would die quitting cold turkey, but the same can be said for methadone. In life, choice have consequences, including death of the economy, but, death also brings new life, which should be a consideration. No bailouts would be my choice, let the cards fall where they will, rebuild better after that, regardless of how long it takes.
@@LockdownSecurity that’s my choice as well, it’s just a much more painful path. I’m positioned fine for it so I don’t care, but the rest of the economy isn’t
The most logical "Bailout" mechanism would simply be allowing builders to rent out their completed condos that didn't sell for whatever reason. It would be crazy to have thousands of completed units that can't be used. Builders build Condos because it's easier to obtain construction financing by having hundreds of individual buyers committed to buying a unit when a building is complete versus borrowing for a rental building. I'm sure most builders would rather own an entire rental building that has forever cash flow than build a condo. From a builders perspective, when building condos, you only earn money once on the markup of a unit, versus earning money every month forever. It's easier to obtain construction financing from a bank with 70 to 80% pre-sales for a condo building versus being able to borrow enough funds to build a similar sized all rental building. So if the government allows builders to simply own and rent out unsold units, this would be a mechanism that contributes to resolving the housing crisis, and keeps the banks out of hot water, is a windfall for builders, because they got their rental units without having to originally having the huge equity requirements that would have been required of a rental building builder in the first place, and the buyer aka investor/speculator that couldn't close would simply loose all or part of their deposits. Banks win because builders can pay the mortgage, builders really win, as they can use the deposit money to subsidize purchase the price of the unit, agents and brokers lose some or all of their commissions, but they can make some money back arranging for rentals, condo buyers that couldn't close become the biggest losers as they lose their deposit money, renters win as all these unsold condos simply become part of the rental inventory.
Bail out ? You got to be kidding ! How about asking those real estate agents and real estate investors that made all the $$$$ in the last couple of years to foot the bail out. How naive Dan is even suggest to ask the government for a bail out. The free market will work itself out. Yes, people are going to be in trouble financially. That's the only way for them to learn.
I think you're getting it all wrong. The government needs to reduce the costs that builders have to pay. That in itself will increase the spread for builders. No bailouts needed.
It should be way cheaper to build a condo building than residential. Check out 2005 prices. How were they building back then for a quarter the price and twice the size per unit. Wages for contractors have not even doubled since then???? Developers and investors want to retire on one project that is the answer.
As of Jul 24, the average annual salary in Ontario is $54,834. As a rule of thumb for mortgage qualification, your GDS ratio should be in a range of between 32 - 39%. So $21933 annual should go to mortgage payment or 1,827 monthly. The average house price in Toronto is $1,110,600 in June 2024, Toronto's average house price down by -4.6% compared to the year prior. So how in the world of Pluto the Toronto house market average in a million dollars? In a real non speculative market you have a buyer & a seller, seller correcting their price based on the purchasing power of the buyer so how in the vast wide of the universe the Toronto Real Estate market got their calculation get so absolutely insanely speculatively greedy depriving regular families of their homes!!!!
@@daniel_foch It’s a rational argument and I could see it happening, but it’s still a somewhat desperate attempt to escape the pain that follows after a multidecade euphoric bull market in housing. Bring on the bear I say, as somebody on the sidelines with a big chunk of cash. 🐻
It's already happening downtown with those able to close competing amongst each other. $800k purchaes asking $2300 for 1 bedroom rent. Meanwhile dilapitated distant one beds not much cheaper which is the crisis.
@@SzymonStas I agree, but I think people underestimate what a multi year bear will do to Canada. Another year of precon sales like this and we have a 3-year gap in the residential construction pipeline in 2026, which will be painful for the employment market. That is my big fear.
A lot of builders aren't even Canadian owned, why bail out international mega corps, let the projects take on hot water. The only "bailout" that should be allowed is for the builders to rent out the units until they can sell them.
Fuck bailouts... like someone else said, if the buyers can't close, sue them, you are in a contract. Read a news article in the middle of the pandemic that sellers (whether it was a normal person, or builder) have historically been reluctant to sue, when the buyer is in breach, because people didn't want to be seen as dicks and seem impolite. But that some people had noticed that was starting to shift. I say good. Too many people get into the pre-sale "investor" market, without doing their homework. All they know is buy condo, rent, make money. Tax payers shouldn't have to bear the burden of that stupidity. Builders need to start suing people who are in breach, and yeah that's going to suck for those people, but they are adults, they had a lawyer to explain their contract and obligations, and now the market needs to see actions will have consequences.
I'm talking about builders empty units though, not the buyers. I agree the buyers who cant' close shouldn't be bailed out. But they're being bailed out by Big 5 Banks right now who are giving them loans based on purchase price, not current market value.
@@daniel_foch Well who did the builders sell those units to in the first place to get their construction loans? Who at the banks made these terrible loans? The banks and the builders need to eat their losses. Let them learn they shouldn't have been building/financing overpriced craptacular unlivable shoeboxes. These people need to reap what they sowed, when drew up plans for 2bed2bath 500 sq/ft units, and got morons to finance it.
@@edwardlenovo3240 I agree with that actually. I want economic darwinism to take place and I believe in accountability for those who deserve it. My challenge is that does not include the hundreds of thousands of construction workers who will lose their jobs as a result of the stupidity you're describing.
@@daniel_foch Those who are here legally always have the option to move to areas where there is employment. Toronto and Vancouver might be the worst hit areas, but i have no doubt there will be many areas where employment can be had (right now there plenty of places that are desperate for more skilled trades). A decade ago I spent 2 1/2 years working as a contractor overseas to be able to afford to buy my condo in Toronto (which I unfortunately was forced to sell 3 years ago). So don't have much sympathy for people who have the ability to move to find employment, but won't.
@@edwardlenovo3240 I hope you're right that they will have other options within Canada. I've already heard of unions sending labour out of the GTA to other markets for work, within ontario or other provinces
No offense, but if these properties were never bought up by investors looking to make long-term profits from these properties, average people would've been able to afford to buy them, because it's the investors who drove up the market to the insane prices we had. It's their own doing. I for one, as someone who works full-time and has never not been employed, should be able to afford to own a home, but I can't because the prices were blocking us out for so long. Now that their not making their profits, and the market is correcting itself, they want us to feel sorry for them? Investements have risks. But everyone deserves a safe and secure home. I have 0 sympathy for investors. The government should be subsidizing housing, employing construction companies to make rentable, public housing, or pre-fab homes (like they did in the 1950s and 60s), and condos/houses should be for people who actually want to live in them. Get investors out of real estste and the market will finally reflect the actual value of these properties.
Canadian pension fund has the money, they should buy it as a huge discount from those speculators and investors who over bid first time home buyers, and make these available for Long term rental.
A bail out? LOL. OMG why??? Let the market finally correct. It's been 24 yrs of "Bailouts" pumping prices. A 600% increase vs a 25% increase in wages doesn't ring any alarm bells??? It's just stupid.
You're talking nonsense, the government is the one who wanted that situation to occur in the first place so why would it step in now ??? Trudeau, Freeland and company want prices to collapse. Canadians also wanted to make housing affordable here, they have it. No more complaints now. Just learn that greed has its limits.
Also, I think a major factor contributing this, is the socialist politicians in Toronto who have demanded "higher density" units start about 5ish, 7ish years ago? The bulk of the units that are sitting around not selling, not closing, are these junk over priced shoeboxes. People can now see in person what utter shyte they are where in a "2 bedroom" unit, maybe you can fit a card table and a pair of folding chair in the living space. All those investors buying these shoeboxes on plans, with zero spatial awareness can only blame themselves.
Would there be a way to know how much major institutional investors have invested in Real Estate? While I don't believe that speculators should get bailed out either if one of these speculators include the Ontario Teachers Pension Plan then a recession in the real estate market would have a disastrous effect on the personal wealth of a lot of Canadians.
@@swindi1 it’s a very small amount in Canada. Pension funds invest mostly in office commercial in Canada which frankly could be an even worse fate to be honest. I suspect this is a big reason why return to office has been such a big theme in Canada lately.
Anyone who lost money investing in bitcoin and stocks should also get a bailout too I guess. When you invest sometimes they are good investments and sometimes they are not. Let the correction shake out.
Burlington Condo 1 Bed 1 Bath Sold With Just $315,000. Real Deal. Not My Listing. Worthy The Information For Our Condo Investors. Record Low? 2017 Prices? #Burlington #Condo #Realtor #CristianEnache
I don't see any issue w restructuring the builders loans to allow them to rent hung product. Appraise the product at the appropriate level, allow them to rent the units until such time the builder decides they want to sell them. Builder has a 20% cushion to start with (forfeited deposit)... Plus rental income. If they can't survive with the benefit of that, Ce la vie.
I do however, see an issue with new funding (ie bailout) going in to absorb losses created by builders, speculators and bank, whether it's through CMHC or some other mechanism.
Why doesn't the govt buy the units at a deep discount and turn them into a publicly owned trust for affordable units? Builders should under no circumstances get a bailout. They've made more than enough to eat a loss for a change. One less yacht or private jet won't hurt them much. If they get bailed out, they shouldn't be allowed to sue failed closers. It can't be heads you win, tails you win.
Lmao. "They can't sell them". Bahahahah...oh yes you can. And. You will be selling them. That's how this works. Omg so funny. "They can't sell them". 😂😂😂😂
Data would say that you’re wrong. It is exactly how it works. Canada’s market has clearly proven itself irrational. Owners prefer to lose money slowly rather than quickly. So the majority won’t sell. They will rent at a loss like they have for the past 10 years. Builders will likely do the same. And that constant economic draw will be far worse for the economy than a swift price discovery.
Another stupid click bait video. There is zero chance of anyone getting a bailout in Canada. This is not the US. You can't buy a home, condo or anything else without 20% down and a stress test. The US was giving mortgages with zero down to strippers. Give your head a shake.
@@daniel_foch Ignorance is spouting nonsense with no foundation. You are beyond delusional! Let me educate you...If the condo market tanks...which it will...and people can't pay their lenders, they will simply foreclose. This isn't the US where banks were giving bad loans with zero down. ANYONE who buys ANY real estate in Canada has to put a SIGNIFICANT DOWNPAYMENT usually at least 20% to secure the loan as well as a stress test that the US didn't have. Most people will do whatever they need to avoid foreclosing and losing their downpayment and possible owing the bank even more funds. If they can't the the property gets sold and the banks get paid first so the person who will get the most affected is the owner. Even with the drop in value of the property, the banks will still likely be able to get all or most of their loan back from the foreclosure of the property. Once again, Canadian banking laws are MUCH stricter in lending practices than the US and your ridiculous prediction that the government will bailout the banks is grounding in fantasy.
Goldman Sachs and Ballast are set to surrender 82 apartment buildings (~1,200 units) in San Francisco to lender Royal Bank of Canada. They recently defaulted on loans totaling $687.5M lol Lots of roaches in the motel that need cleaning out. Bank balance sheets will be interesting to analyze over the coming year or two esp as running to Ottw. for repos !
yup - once we figure out wtf is happening with this repo market activity and who is illiquid I think Canada could be ugly. Our Credit Suisse moment? I imagine RBC and TD are hungry to buy a small guy lol
@@jay1645 it seems the GOC is doing a good job on the liquidity side with the mortgage bond market as well, buying 50% of all Canada mortgage bonds in the interest of "spread capture" the alarms went off for me as soon as a sovereign was buying mortgage bonds lol
Bailouts? Did they share their profits with us in the last decades? Why should we share the losses now? 😤
@@VitalySidorok funny you ask… ironically, investors actually did socialize profits in a way. By being cash-flow negative, condo speculators made units available for rent cheaper than the cost of owning them, and in exchange they got capital appreciation
@@daniel_foch Condo speculators rented their condos at max price market could offer. Condo Prices should have come down to make condo ownership profitable. Any investment has risk. Let the market work. How about bailout for tax payers by reducing the marginal tax rates.
@@daniel_foch they didn't subsidize shit, their intention was to get quick increases in the price and cash out all while voting down condo fee increases to screw over future owners. I'm begging finance bros to learn with socializing or socialism actually means before throwing the term around
that was answered in the video already.
@@jp-sl7cd again, if you watch the video, my suggestion is that builders inventory units would be bailed out, not speculators. If builder units are bailed out, it would have further consequences for speculators as they’d be competing with builders units in the rental market.
The socialization above I mentioned is just an answer to the question
Real estates drops 10% after a 500% rise.
Investors: IT'S A CRISIS! WE NEED A BAILOUT!
Some of these condos that close are sitting at like 40% below FMV if values continue trending down.
But otherwise yeah I see the humour in it
@@daniel_fochat what point does FMV become BMV (bubble market value)?
I could just as easily argue that we've never seen a 'fair market' because of government regulation (zoning) and taxation (massive development fees subsidizing property taxes and stifling development to benefit owners at the expense of new buyers).
Maybe in a 'fair market' the average person would be able to afford a home😂 but we probably will never know because there is no fair market!
Nooooo. The last thing we need is to bail out these builders and agents. Greed cannot be rewarded. If they are rescued then we need to see an "arab spring" in Canada.
Do you know what they call the Arab spring now... ISIS
Sucks for Toronto I guess but nobody's bailing me out. Let the market do its thing.
@@baziloneil1271 agreed, but I don’t know if it happens
@@daniel_foch Its only a matter of time. Ontario is frankly a fiscal mess and due for a major correction. Not trying to be a dick here but we have priced whole generations out of the market and are running never ending deficits. We need to invest in our real economy, namely commodity exports. That is what pays for everything.
@@baziloneil1271 I agree entirely, but I don't think we will see an inch of economic diversification until after 2025 election. Until then, this problem still needs solving IMO.
@@daniel_foch wrong, let the chips fall
@@daniel_fochthere is nothing to solve
There is too much volume already and the condos are not worth it
They need to reach their real price
No bailouts should be provided. Allow them to default. Distressed assets should be sold at substantial discounts through power of sale, ensuring realistic and fair value for purchasers.
Just listened to your podcast with Nick - August 9. Curious if you or with Nick plan to do a condo report episode on Vancouver’s condo market?
Thanks for the comment. We will try to do a segment on it!! It's interesting what's happening there. Any insights you want us to cover?
"Investors" are fully prepared to lose money when they invest; that's the game. So, I see no reason to waste MY money bailing anyone out who was not going to share his profits with me?
Didn't they give blanked appraisals? Already factoring a 100% LTV?? + OSFI already delayed Basil 3- the bailout is happening in-front of us...
Great catch, you have a keener understanding of this than most others it seems.
Yeah the Big 6 already have been doing blanket appraisals at 80% LTPP to get projects closed, which ends up being 100% LTV if the units presold at 20% over today's market.
And I agree but that is a private sector bailout and a messy one. It won't surprise me if we see a government layer too in an attempt to cleanup and de-risk.
@@daniel_fochthats on the banks
They dont automatically get bailouts either from the feds
So I don't really know what I'm talking about but couldn't we let the builders go under? Then people would be free to form new corporations and hire the laid of workers and get to work. There's lots of demand for housing. Surely there's a profit margin once land values find their price.
This is exactly what will and should happen
Screw bailing out builders who built these trash condos
Yes, you could do that. It would put a lot of losses on banks and it would likely cause a big gap in the construction pipeline. Both of these would have far-reaching consequences into the employment market in the form of layoffs, but by the sounds of what I'm seeing in this thread, that's what everyone wants to see.
@@daniel_foch if new corporations were formed, the employees would be hired fairly quickly. Tbh, I don't care what happens to the banks. They can deal with the consequences of their own choices
Ridiculous. We must pay the price for Moral Hazard otherwise the lesson is not learned. Canada did not learn from the US subprime implosion, so now it is our turn. Any bailout will fall on my shoulders as a taxpayer, and will ultimately just serve to protect all the complicit players: banks, r/e brokerages, builders etc. While I sympathize with people who will lose employment as the r/e market crumbles, and even with those speculators who made bad decisions, those decisions must have consequences. Otherwise we will just do it all again in 20 years. That said, we obviously are currently doing it all over again. 😂
Thanks for watching and thanks for the great comment.
I agree with you. The problem is the absence of a bailout falls on the shoulders of the taxpayer too.
The highest-leverage borrowers are insured by taxpayers. They are often first-timers, who represent almost 50% of buyers.
Current annualized condo value trajectory wipes out all insured buyer equity within a year or two.
No bailouts. The developers need to sue buyers that cant close. Why does someone in moncton have to bailout greedy "investors" ? Its a Toronto problem ...
Its called price discovery..
@@charlesmacleod5037 bailing out builders isn’t bailing out investors. Watch the video
@@daniel_foch
> bailing out builders...
_NO_ bailouts
@@daniel_fochthe builders can go under and new ones will go up
No bailouts
@@robotron26 you're right, the problem I've identified with that is there's a 3-5 year gap in the construction sector if we allow that economic darwinism to take place
Hi, I'm not sure if a bailout is the right framework to get this crisis back in line. But I will argue that your comment about the CHMC getting back in the affordable housing market has some merit. Since 1985 the federal government exited the building of affordable homes and this may be a good idea for the purpose of turning these empty units into rental space
No. I am not paying, stop this BS. I don't owe anyone anything
The issue is that you wont be asked. They will wrap it under some buzzword like "equity", "diversity" or some other BS and use the taxpayer money to bailout the builders and speculators
Thanks for talking about this Dan. This situation is going to get WAY worse with with condo that closes from here on. We need to let the speculators fail to correct condo asset values.
@@Kevriyal5654 I totally agree, but I think something should be done with the inventory that comes back, from failed closings and previously unsold inventory. Rather than it sitting vacant
no, what the hell
You cant ask people without homes to bail out investors
Thats so disgusting
@@robotron26 if you watch the video, that’s not at all what I’m suggesting. I am suggesting that unsold inventory and units returned from failed closings be given a credit product to allow them to be rented rather than sitting vacant in inventory
@@daniel_foch Bandages only mask the real issues... The system is broken. It needs rebuilding.
@@LawrenceWinterburn I agree, but I just don’t think you or the average member of the economy know what all that entails. Unions are already moving trades from GTA to other cities and provinces because there is no work here. Ontario will have to burn down entirely if you want us to rise from the ashes
@daniel_foch -- I've been a carpenter for nearly 40 years. In the 80's and nineties there was a shortage, so they brought in trades from Eastern Europe. Most worked in the cash economy-- driving wages down.
Here we are bringing in the next crop of low wage servants...working under the table, competing with us...collecting benefits.
When taxpayers hit the 70% tax mark and 50% of the economy is govt-- it becomes unsustainable.
It will burn itself down soon enough.
Let it fail ! they are too expensive and needs a reset. We all know real estate is way too expensive ... it needs to drop because salary did not follow. Its so badly run, and I don't feel sorry for the real estate agents .. they made a killing in the fomo. The condo was built for investors... welcome to reality.. not all investments are winners
What you are saying is really informative, but at some point, as Canadians, we need to stop the Communist solutions to every problem we face. This is what got us here in the first place.
Let the market figure this problem out. If construction workers are out of work, it's fine, they've been making 5-10 times the median salary for the past decade. They have a lot of money set aside for rainy days!
i have been trying to buy an established business for about 2 years now. i basically only get 3-4 types of businesses sent to me, and 95% are restaurants or food related. there really doesn't seem to be alot going on in canada.
@@roseoverdose6451 really not much going on. What kind of business are you hoping to buy?
Likely a flower shop, judging by her handle.
> not a lot going on
there is communism and crime
They can definitely see all the units but at a price that make sense for the buyer
Require for speculators and other parasites that depend on high prices? sure
Require for the betterment of society and a return to normal affordability? absolutely NOT. We need some short term pain for the long term betterment of society. The absolute ROT in Canada of housing being purely for profit is a danger and moral failure. Speculators absolutely must be allowed to feel pain.
Unfortunately the way we're structured, a housing market collapse is already a taxpayers' problem.
The highest-leverage borrowers are insured by taxpayers. They are often first-timers, who represent almost 50% of buyers.
Current annualized condo value trajectory wipes out most insured buyer equity within a year or two.
@@daniel_foch If the government buys back the unsellable units, it should be for pennies on the dollar. Turning those failed buildings into something like a co-op would reduce the concern for future moral hazard. The speculators absolutely must know this cannot continue in the future.
@@nairbos They wouldn't buy them, they'd likely provide loans on them. This would introduce competition as someone else in this thread mentioned, putting more negative pressure on rentals and further damaging speculators. It ends up being an ultimatum I guess - would you rather save builders and the construction industry, or speculators? I don't see another choice. I would rather save builders and keep trades employed and housing getting built. We have record approved units and record contemplated units in the pipeline. We need to keep the machine moving or things get A LOT worse over the next few years.
How does this option protect future construction? Didn’t you start the video by saying builders can’t produce new units for less?
If you crush the market for rent, how does that incentive future buyers? Aren’t you just wiping out CAP rates? I must be missing something.
Really enjoy your videos 👍
@@kylere6288 great question and something I wish I explained better in this video. Builders can’t build more if all their equity is trapped in existing projects’ inventory - they need to be liquid to move on to their next project. For example, Some builders have projects pre-sold they can’t move onto until they’ve finished their first one, since they can’t have too much construction debt out at one time. The next problem becomes the lack of sales for future projects, but we’re seeing builders begin to pivot to purpose-built rental (PBR) in the absence of sales. Unfortunately PBR has an even higher equity requirement, exacerbating their need for the equity from existing projects.
I hope this explains it, and I really appreciate you watching my video and asking great questions
Also construction workers who don't have jobs due to lack of builds can move to other parts of the economy - oil & gas, resources, infrastructure. Instead of bailing out builders/speculators the govt can use that same tax money and build better infrastructure, encourage more pipelines, etc and hire / re-skill those same construction workers into more productive sectors of the economy.
@@prao4603 I would agree with this if we had more productive sectors of the economy and if we didn’t need millions more housing units
@@daniel_foch If we stop mass migration and let the stay permits expire - of many of the newcomer/students that came - it would ease a lot of pressure on housing units. We'll still need housing units even without mass immigration, but it gives us breathing room to build those homes. Either party doesn't want to though, because they are wedded to the idea of mass immigration, don't want to disappoint their boomer voting base who will lose their house value.
@@prao4603 yes I think a reduction in population growth would solve the problem faster than anything else - yet no politicians will commit to it
Very interesting take on the situation, basically saying take a morally challenging road now, to avoid falling off a cliff and starting over later.
But, doing that doesn't stop the core reason why we are at this point in the road today, which is a Canada that doesn't product anything other than real estate, doesn't exploit it's natural resources for the benefit of Canada first, and essentially profits itself off the rampant speculation that has occurred.
It's like being addicted to drugs, such as heroin. What's better, quitting cold turkey or taking methadone. Obviously many would die quitting cold turkey, but the same can be said for methadone. In life, choice have consequences, including death of the economy, but, death also brings new life, which should be a consideration.
No bailouts would be my choice, let the cards fall where they will, rebuild better after that, regardless of how long it takes.
@@LockdownSecurity that’s my choice as well, it’s just a much more painful path. I’m positioned fine for it so I don’t care, but the rest of the economy isn’t
Who is buying ??? Nobody. No interest.
@@Carolinapetroska yeah I said that
The most logical "Bailout" mechanism would simply be allowing builders to rent out their completed condos that didn't sell for whatever reason. It would be crazy to have thousands of completed units that can't be used. Builders build Condos because it's easier to obtain construction financing by having hundreds of individual buyers committed to buying a unit when a building is complete versus borrowing for a rental building. I'm sure most builders would rather own an entire rental building that has forever cash flow than build a condo. From a builders perspective, when building condos, you only earn money once on the markup of a unit, versus earning money every month forever. It's easier to obtain construction financing from a bank with 70 to 80% pre-sales for a condo building versus being able to borrow enough funds to build a similar sized all rental building. So if the government allows builders to simply own and rent out unsold units, this would be a mechanism that contributes to resolving the housing crisis, and keeps the banks out of hot water, is a windfall for builders, because they got their rental units without having to originally having the huge equity requirements that would have been required of a rental building builder in the first place, and the buyer aka investor/speculator that couldn't close would simply loose all or part of their deposits. Banks win because builders can pay the mortgage, builders really win, as they can use the deposit money to subsidize purchase the price of the unit, agents and brokers lose some or all of their commissions, but they can make some money back arranging for rentals, condo buyers that couldn't close become the biggest losers as they lose their deposit money, renters win as all these unsold condos simply become part of the rental inventory.
Exactly, thank you. That’s what I’m suggesting
Thanks for watching the video and the thoughtful comment.
What a stupid idea on so many levels. Shouldn’t even be wasting breath talking on it
@@tyvrabel1696 too late
💯
Bail out ? You got to be kidding ! How about asking those real estate agents and real estate investors that made all the $$$$ in the last couple of years to foot the bail out. How naive Dan is even suggest to ask the government for a bail out. The free market will work itself out. Yes, people are going to be in trouble financially. That's the only way for them to learn.
I think you're getting it all wrong. The government needs to reduce the costs that builders have to pay. That in itself will increase the spread for builders. No bailouts needed.
Completely disagree. We cant keep propping up real estate even if it will result in pain for us as a country. Thanks for the vid 👍
It should be way cheaper to build a condo building than residential. Check out 2005 prices. How were they building back then for a quarter the price and twice the size per unit. Wages for contractors have not even doubled since then???? Developers and investors want to retire on one project that is the answer.
As of Jul 24, the average annual salary in Ontario is $54,834. As a rule of thumb for mortgage qualification, your GDS ratio should be in a range of between 32 - 39%. So $21933 annual should go to mortgage payment or 1,827 monthly. The average house price in Toronto is $1,110,600 in June 2024, Toronto's average house price down by -4.6% compared to the year prior. So how in the world of Pluto the Toronto house market average in a million dollars? In a real non speculative market you have a buyer & a seller, seller correcting their price based on the purchasing power of the buyer so how in the vast wide of the universe the Toronto Real Estate market got their calculation get so absolutely insanely speculatively greedy depriving regular families of their homes!!!!
Tens of thousands of new rental units hitting the market would crush rent prices, making it even harder to cashflow on existing investments.
Perfect, easier to pitch it to everyone else who wants to watch the market burn down!
@@daniel_foch It’s a rational argument and I could see it happening, but it’s still a somewhat desperate attempt to escape the pain that follows after a multidecade euphoric bull market in housing. Bring on the bear I say, as somebody on the sidelines with a big chunk of cash. 🐻
It's already happening downtown with those able to close competing amongst each other. $800k purchaes asking $2300 for 1 bedroom rent. Meanwhile dilapitated distant one beds not much cheaper which is the crisis.
@@JudePi-jx7yo absolutely wild, and this is just the beginning… that’s the crazy part
@@SzymonStas I agree, but I think people underestimate what a multi year bear will do to Canada. Another year of precon sales like this and we have a 3-year gap in the residential construction pipeline in 2026, which will be painful for the employment market. That is my big fear.
A lot of builders aren't even Canadian owned, why bail out international mega corps, let the projects take on hot water. The only "bailout" that should be allowed is for the builders to rent out the units until they can sell them.
I don't think there should be a bailout. They knew the risks they were running if anything used that carbon tax Plus fund to bail them out
Fuck bailouts... like someone else said, if the buyers can't close, sue them, you are in a contract. Read a news article in the middle of the pandemic that sellers (whether it was a normal person, or builder) have historically been reluctant to sue, when the buyer is in breach, because people didn't want to be seen as dicks and seem impolite. But that some people had noticed that was starting to shift. I say good. Too many people get into the pre-sale "investor" market, without doing their homework. All they know is buy condo, rent, make money. Tax payers shouldn't have to bear the burden of that stupidity. Builders need to start suing people who are in breach, and yeah that's going to suck for those people, but they are adults, they had a lawyer to explain their contract and obligations, and now the market needs to see actions will have consequences.
I'm talking about builders empty units though, not the buyers. I agree the buyers who cant' close shouldn't be bailed out. But they're being bailed out by Big 5 Banks right now who are giving them loans based on purchase price, not current market value.
@@daniel_foch Well who did the builders sell those units to in the first place to get their construction loans? Who at the banks made these terrible loans? The banks and the builders need to eat their losses. Let them learn they shouldn't have been building/financing overpriced craptacular unlivable shoeboxes. These people need to reap what they sowed, when drew up plans for 2bed2bath 500 sq/ft units, and got morons to finance it.
@@edwardlenovo3240 I agree with that actually. I want economic darwinism to take place and I believe in accountability for those who deserve it. My challenge is that does not include the hundreds of thousands of construction workers who will lose their jobs as a result of the stupidity you're describing.
@@daniel_foch Those who are here legally always have the option to move to areas where there is employment. Toronto and Vancouver might be the worst hit areas, but i have no doubt there will be many areas where employment can be had (right now there plenty of places that are desperate for more skilled trades). A decade ago I spent 2 1/2 years working as a contractor overseas to be able to afford to buy my condo in Toronto (which I unfortunately was forced to sell 3 years ago). So don't have much sympathy for people who have the ability to move to find employment, but won't.
@@edwardlenovo3240 I hope you're right that they will have other options within Canada. I've already heard of unions sending labour out of the GTA to other markets for work, within ontario or other provinces
No offense, but if these properties were never bought up by investors looking to make long-term profits from these properties, average people would've been able to afford to buy them, because it's the investors who drove up the market to the insane prices we had. It's their own doing. I for one, as someone who works full-time and has never not been employed, should be able to afford to own a home, but I can't because the prices were blocking us out for so long. Now that their not making their profits, and the market is correcting itself, they want us to feel sorry for them? Investements have risks. But everyone deserves a safe and secure home.
I have 0 sympathy for investors. The government should be subsidizing housing, employing construction companies to make rentable, public housing, or pre-fab homes (like they did in the 1950s and 60s), and condos/houses should be for people who actually want to live in them. Get investors out of real estste and the market will finally reflect the actual value of these properties.
Canadian pension fund has the money, they should buy it as a huge discount from those speculators and investors who over bid first time home buyers, and make these available for
Long term rental.
Nope keep your hands off
A bail out? LOL. OMG why??? Let the market finally correct. It's been 24 yrs of "Bailouts" pumping prices. A 600% increase vs a 25% increase in wages doesn't ring any alarm bells??? It's just stupid.
yes bail me out plz
Nope
You're talking nonsense, the government is the one who wanted that situation to occur in the first place so why would it step in now ??? Trudeau, Freeland and company want prices to collapse. Canadians also wanted to make housing affordable here, they have it. No more complaints now. Just learn that greed has its limits.
A market that doesn’t allow price discovery isn’t a market.
Bailout? For speculators? Yeah sure, keep dreaming until you get crushed
Also, I think a major factor contributing this, is the socialist politicians in Toronto who have demanded "higher density" units start about 5ish, 7ish years ago? The bulk of the units that are sitting around not selling, not closing, are these junk over priced shoeboxes. People can now see in person what utter shyte they are where in a "2 bedroom" unit, maybe you can fit a card table and a pair of folding chair in the living space. All those investors buying these shoeboxes on plans, with zero spatial awareness can only blame themselves.
Toronto condos have been cashflow negative for a very long time... nothing new imo...
> reputation management perspective
please print it out, roll it up and shove it where the sun don't shine
Would there be a way to know how much major institutional investors have invested in Real Estate? While I don't believe that speculators should get bailed out either if one of these speculators include the Ontario Teachers Pension Plan then a recession in the real estate market would have a disastrous effect on the personal wealth of a lot of Canadians.
@@swindi1 it’s a very small amount in Canada. Pension funds invest mostly in office commercial in Canada which frankly could be an even worse fate to be honest. I suspect this is a big reason why return to office has been such a big theme in Canada lately.
Thanks for watching and thanks for the great question.
Anyone who lost money investing in bitcoin and stocks should also get a bailout too I guess. When you invest sometimes they are good investments and sometimes they are not. Let the correction shake out.
Investor who lose there bet, need no bailout. F.k.o.f.f
Burlington Condo 1 Bed 1 Bath Sold With Just $315,000. Real Deal. Not My Listing. Worthy The Information For Our Condo Investors. Record Low? 2017 Prices?
#Burlington #Condo #Realtor #CristianEnache
I don't see any issue w restructuring the builders loans to allow them to rent hung product. Appraise the product at the appropriate level, allow them to rent the units until such time the builder decides they want to sell them. Builder has a 20% cushion to start with (forfeited deposit)... Plus rental income. If they can't survive with the benefit of that, Ce la vie.
I do however, see an issue with new funding (ie bailout) going in to absorb losses created by builders, speculators and bank, whether it's through CMHC or some other mechanism.
@@alljoules I agree, very well said
big tent cities will emerge by 2027
Is this what China is doing?
Why doesn't the govt buy the units at a deep discount and turn them into a publicly owned trust for affordable units?
Builders should under no circumstances get a bailout. They've made more than enough to eat a loss for a change. One less yacht or private jet won't hurt them much.
If they get bailed out, they shouldn't be allowed to sue failed closers. It can't be heads you win, tails you win.
Lmao. "They can't sell them".
Bahahahah...oh yes you can. And. You will be selling them.
That's how this works.
Omg so funny. "They can't sell them".
😂😂😂😂
Data would say that you’re wrong. It is exactly how it works.
Canada’s market has clearly proven itself irrational.
Owners prefer to lose money slowly rather than quickly. So the majority won’t sell. They will rent at a loss like they have for the past 10 years.
Builders will likely do the same.
And that constant economic draw will be far worse for the economy than a swift price discovery.
Another stupid click bait video. There is zero chance of anyone getting a bailout in Canada. This is not the US. You can't buy a home, condo or anything else without 20% down and a stress test. The US was giving mortgages with zero down to strippers. Give your head a shake.
Ignorance is bliss
@@daniel_foch Ignorance is spouting nonsense with no foundation. You are beyond delusional! Let me educate you...If the condo market tanks...which it will...and people can't pay their lenders, they will simply foreclose. This isn't the US where banks were giving bad loans with zero down. ANYONE who buys ANY real estate in Canada has to put a SIGNIFICANT DOWNPAYMENT usually at least 20% to secure the loan as well as a stress test that the US didn't have. Most people will do whatever they need to avoid foreclosing and losing their downpayment and possible owing the bank even more funds. If they can't the the property gets sold and the banks get paid first so the person who will get the most affected is the owner. Even with the drop in value of the property, the banks will still likely be able to get all or most of their loan back from the foreclosure of the property. Once again, Canadian banking laws are MUCH stricter in lending practices than the US and your ridiculous prediction that the government will bailout the banks is grounding in fantasy.
Goldman Sachs and Ballast are set to surrender 82 apartment buildings (~1,200 units) in San Francisco to lender Royal Bank of Canada. They recently defaulted on loans totaling $687.5M lol Lots of roaches in the motel that need cleaning out. Bank balance sheets will be interesting to analyze over the coming year or two esp as running to Ottw. for repos !
yup - once we figure out wtf is happening with this repo market activity and who is illiquid I think Canada could be ugly. Our Credit Suisse moment? I imagine RBC and TD are hungry to buy a small guy lol
@@daniel_foch Will take time to play out if at all as BOC/FED will be all in to bail them out also as usual lol
@@jay1645 it seems the GOC is doing a good job on the liquidity side with the mortgage bond market as well, buying 50% of all Canada mortgage bonds in the interest of "spread capture"
the alarms went off for me as soon as a sovereign was buying mortgage bonds lol
@@daniel_foch In '08 heard US mtg. bonds were sold back thanks to Carney .. today BOC will have to step in for the big 6 lol