This is me attending the Rock Star Real Estate, Your Life Your Terms event, while riding my Peloton bike.
Time is in short supply these days… need to be efficient! lol
Okay, I didn’t actually attend the event, but I was fortunate enough to receive the recording, to watch on my own time.
And let me tell you, it was well worth the time investment. This event was jam-packed with useful information and great speakers.
These guys do a fantastic job. The focus was the economy and Canadian real estate, but I got so much more out of it.
I typically don’t last more than 20 minutes on the bike… but I was so into one of the speakers, that I rode for 45 minutes straight without even realizing.
That’s a big deal for me! I usually can’t go 30 seconds without looking at the clock.
Concerning real estate and the economy, my big takeaway from this event was that we are finally at a point where everybody agrees on something… housing in this country is a mess!
And the problem is likely going to get worse before it has any chance of getting better.
The core of the problem comes down to the law of supply and demand.
Put simply, there are now way more people that need housing, than there is housing.
And this issue is exasperated in Ontario, as our population growth far exceeds that of any other province.
Last year alone, our population grew by 522,000 people. To put it into perspective, that’s the population of Kitchener-Waterloo.
The year before that, we added 355,000 people. That’s similar to the population of Windsor-Essex.
The year before that, 242,000 — the population of St. Catherines/Niagara Falls.
That’s wild!
Ever wonder why traffic has gotten so crazy, roads are a mess, and hospital wait times keep increasing?
Might have something to do with these numbers… lol
And housing production hasn’t even come close to keeping up with the population growth…
Check this out…
Annual population growth has consistently outpaced new residential units constructed, but as of 2019 this this got completely out of control.
This isn’t new news… people have been screaming about this for years.
And for many years this was the response from the politicians and bureaucrats was this…
A whole lot of finger-pointing and people playing the blame game.
But lately, they are at least agreeing that a problem exists. That’s step one!
And it even appears that they are starting to take some action by introducing policies that are supposed to help the problem… That’s Step two!
Step three, and likely the most crucial step, is execution.
And that’s where I believe we will be stuck in the mud for a while.
Because the math still isn’t working for most developers.
And if the math doesn’t work, they don’t develop new housing.
And why doesn’t the math work??
That’s a conversation for another day, but government taxes, interest rates and easy money policies have a whole lot to do with driving up the cost of land and development.
But that’s why I say the problem will get worse before it gets better…
Because even if the population growth starts to slow, it’s still going to grow.
And that’s on top of the recent population boom that has not yet been absorbed.
But I do believe that eventually, the execution phase will occur.
And we will start to add to the housing inventory
But the only way to add to that inventory in a meaningful way, is to maximize density.
The emphasis will be on building up (i.e. condos and apartments) and adding units to existing residential dwellings.
Take a guess at what you won’t be seeing built…
That’s right… the good old single family detached home that we have become so accustomed to.
And this trend has already started.
Check out this chart…
The black line represents housing completions of low-rise units, while the light blue line represents high-rise units.
Detached single family homes compared to high-rises, is already on the decline.
This will be even more lopsided in the coming years.
And this means something different for everybody.
For our brokerage, this means becoming experts in financing multi-family dwellings.
As a real estate investor, you may want to review your business model to account for the fact there will likely be a lot more rentals available in the future.
As a homeowner, you may want to plan for the fact that there’s a very good possibility that your existing neighborhood and/or the neighborhoods around you, may look a lot different in the future.
These are just a few of many things to consider as the housing landscape begins to change.
Governments may move slowly, but private business moves fast.
So once the math starts to work again for developers and investors, rest assured that the shift from low-density to high-density will happen very quickly.
That’s all for now.
Until Next Time,
Vince
P.S. I intend to attend the next Rock Star Your Life Your Terms event, in person. I believe it takes place in Oakville. I think there’s a lot to be gained by being in a room with like-minded individuals.
P.P.S. The Peloton was a spontaneous purchase during the pandemic. My wife did a hard sell on me. I really don’t like it all that much and only use it to help justify my purchase lol.
