Everything Wrong With Canadian Real Estate

[00:00:00] Welcome to the Canadian Real Estate Investor, where host Daniel Foch and Nick Hill navigate the market and provide the tools and insights to build your real estate portfolio.

[00:00:10] Welcome back to the Canadian Real Estate Investor podcast. Today we are joined by maybe the most famous person we've ever had on the show.

[00:00:21] Maybe biggest following on TikTok and Instagram.

[00:00:25] Do you have more TikTok followers than Chippewousen?

[00:00:27] Maybe not right. You might actually, yeah.

[00:00:30] We are joined by, what is it?

[00:00:33] Is it Generation X idiot does that as name as?

[00:00:36] No, no, the other one.

[00:00:37] Millennial Moron.

[00:00:38] There you go.

[00:00:39] So yeah, I mean this was good.

[00:00:41] We were recording remotely.

[00:00:44] We've been upgrading our infrastructure lately.

[00:00:47] Text stack.

[00:00:49] But we're going to text guys.

[00:00:51] Anyway, we're not apparently good at tech.

[00:00:54] No, well.

[00:00:55] Because one of us in particular, but although today we're recording this retroactive introduction for

[00:01:02] this episode and today you did not crash Riverside.

[00:01:05] This is the first time.

[00:01:06] But in the interview that we're recording, you'll notice that Nick disappears halfway through the interview.

[00:01:13] Just Irish exit right out there, no goodbye.

[00:01:15] No nothing kind of hairy who denies.

[00:01:17] It's funny because like I was there and I was sitting in the studio through just seeing

[00:01:21] like the anger on your face.

[00:01:23] Well, I was like, I was like, I was texting you.

[00:01:26] Like, hey, you're not in the studio.

[00:01:28] You want cameras?

[00:01:29] You're camera.

[00:01:30] And you're just like, you're just watching me.

[00:01:32] And I'm just over here.

[00:01:33] Steam coming out of my ears.

[00:01:35] Like a cartoon as I'm watching Dan and Mr. Moron have a great come to me.

[00:01:40] Nick's a big millennial Moron fan.

[00:01:42] So yeah, yeah.

[00:01:44] Yeah.

[00:01:45] So anyway that was a bit of a bug or Nick and we'll have to ask what to do another episode where you get to ask your questions.

[00:01:50] But listen, hey, from a literally having a front row seat to at least one half of the podcast because it started off with the three of us and then really ended up just being you.

[00:02:01] And again, we don't know his name, Mr. Moron or Mr. Millennial Moron.

[00:02:06] You two had a great conversation and you guys are very similar in the way you look at things from a very important part of the story.

[00:02:11] And I think that's a great thing from a very analytical, extremely well researched somewhat cynical point of view.

[00:02:17] So it was a great conversation and just like all of you listening now when I tune into this episode,

[00:02:24] it will actually be the first time I hear it as well because I was not a part of it.

[00:02:29] But enough of that enough of me, let's get into the episode where Dan and Millennial Moron have a chat on what is wrong with Canadian real estate.

[00:02:40] Okay, so it is not just Dan and I today.

[00:02:48] We are joined by a smart young man, but you'd never guess that by the name he goes by.

[00:02:56] Do you prefer Mr. Moron or what would should I be calling you for the remainder of this episode?

[00:03:02] Mr. Moron is my father's name. You can call me Millennial Moron.

[00:03:07] I love it. So if anyone isn't familiar with Millennial Moron, great follow on TikTok, Instagram, ex, ghost talk and everywhere, famous for your European castle bit which is hilarious.

[00:03:24] And I think in like the 25 or something like that segments, where you essentially discuss European castles versus, you know, shitty duplexes or single family homes in Vancouver or Toronto or whatever that may be.

[00:03:39] I think what I'm personally wondering what a lot of people are wondering that are listening to this is what is or was your interest or involvement in real estate before you became this kind of funny hilarious with really good takes commentator on the subject.

[00:04:03] Yeah, so this is a surprise to a lot of people that I have no professional experience in real estate or in finance of any kind.

[00:04:09] It's more just a matter of something I was interested in when I first started my, you know, real big kid career.

[00:04:15] I started looking into whether I should buy a place with a ship rent a place.

[00:04:19] Obviously everybody was saying bye bye, it's always much better than renting, but I ran the numbers for myself and I couldn't make sense of it in terms of what the rents were at the time versus what the prices were at the time.

[00:04:30] And you know, over time as I continued watching it, the situation just became kind of worse and worse.

[00:04:37] Like it seemed to make a less and less sense to me.

[00:04:39] And in the past few years I think it's passed the point where I consider it just, you know, an awkward personal decision to have to make.

[00:04:47] And it's gotten into something I consider a problem in the broader economy.

[00:04:51] And then what kind of spurred me to start making these videos?

[00:04:54] What got me thinking about it again was when interest rates started going up rapidly in 2022.

[00:04:59] And that was always what I thought would cause some kind of transition in the market.

[00:05:04] I think it's really hard to predict what exactly that's going to look like, but I think, you know, it was a very interesting time in real estate right now.

[00:05:12] And that's what got me thinking about it and that's what got me to start making videos.

[00:05:16] But I didn't really have much interest in doing the analytical videos at first.

[00:05:20] I thought I would just, you know, make some funny videos that would be watched by me and my friends and nobody else.

[00:05:26] And they kind of blew up and people started asking what's going on.

[00:05:30] And so I started giving my personal takes on it after having followed it for maybe, you know, 12 to 14 years or whatever it is at this point.

[00:05:38] Fascinating. So while that now I'm a little bit jealous.

[00:05:41] I just assume that you were on TikTok for like years and years and years.

[00:05:44] And that's why you had a way bigger following than me.

[00:05:46] But apparently it's just because you're way more interesting in your content's better.

[00:05:49] And who would have ever imagined that that's the case?

[00:05:52] I guess the question and the truth is like you are very good at explaining what's wrong here.

[00:05:57] And you're very good at providing news.

[00:06:00] And so where I tend to ramble, which I'm already doing, I would love to just get your take from like 30,000 feet.

[00:06:06] If you could describe to someone and maybe it's a summary of the last several years of content that you've been putting together.

[00:06:13] What's wrong with Canadian real estate?

[00:06:15] What is like if you were to describe the problem and I know we don't have three weeks to do it.

[00:06:20] So if we can try and do it in like you know 10 minutes, that would be great.

[00:06:25] All right. So do you want to do specific details here?

[00:06:28] Do you want my grand theory of everything kind of take?

[00:06:31] Let's start with the grand theory of everything.

[00:06:33] And then we'll zoom in if we see any details that we need to nitpick on.

[00:06:38] Sure. So the grand theory of everything.

[00:06:40] And this is not just real estate but I think a lot of issues that have a reason in Canadian politics and business and just our general culture is that.

[00:06:49] Canada generally has a long-term problem with short-term thinking.

[00:06:53] People are always looking for a solution today and we end up really always preferring to go with an option of short-term gain for long-term pain.

[00:07:03] And I think many, many problems that we see today are just the result of an accumulation of that over decades, right?

[00:07:12] And in real estate in particular, I think you know there's you know 12 or 15 different things that people will have as their pet theory of what's wrong.

[00:07:21] You know from immigration to cheap debt to political interference to you know amateur landlords in the market to boomer retirement planning all these things.

[00:07:30] And you know people will often say you know which one of those is really the problem and the answer to that is yes.

[00:07:37] They're all happening. They're all happening at the same time.

[00:07:40] To me that core problem that you know all of these other things are connected to, but the core issue is sort of a cycle that we're in where we have cheap debt being injected into the market through you know the C.M.H.C. and other lending programs.

[00:07:57] And then we have that driving prices up which leads people to a fear of missing out, which makes them always think that buying houses the best decision no matter what at any price.

[00:08:07] And then because of that expectation it would be very very painful for a lot of people if houses were to go into a protracted contraction in prices.

[00:08:16] So you end up with government interference which results in more cheap debt being injected into the market.

[00:08:21] And you can see that with all sorts of programs like the RSP home buyers plan where people can borrow money from their retirement in order to fund a down payment.

[00:08:30] They increased the cap on that.

[00:08:32] We've had the Canada mortgage bond program, which you know was introduced basically as a way to inject liquidity into the mortgage market.

[00:08:40] And now the government has decided to start purchasing something like half of the annual issuance of that.

[00:08:46] So not only are we you know ensuring the mortgages and injecting liquidity into the mortgage market and then, you know buying up the mortgage back securities that these mortgages have been packaged into.

[00:08:57] Now we're buying our own vanilla bonds that the government is issuing kind of back to themselves to keep things going.

[00:09:05] So there is very much an issue of government interference in the market.

[00:09:09] And to me those three things that's the main cycle that keeps driving prices up and up, but just recently the cheap debt side of it has kind of fallen in right?

[00:09:19] Which was never not going to happen.

[00:09:21] Yeah it's interesting.

[00:09:23] So you know there's one thing that I find fascinating where you're saying people can borrow against their retirement.

[00:09:29] You forgot to mention the unregistered program where you convince your parents to get a he-lock to give you a down payment and you actually get to borrow against your inheritance rather than your retirement.

[00:09:38] Or you get to borrow against their retirement so skip a generation and then the other piece that's fascinating.

[00:09:43] And I'm not sure how much how much research you've done into this, but I've done a lot on it and Nick and I actually do a lot of work with this credit product.

[00:09:50] But outside of just like single family home ownership and end user and owner occupied or stuff, see a mate she's also doing a lot for the creation of purpose built rental with very similar programs through MLS select and I mean regardless of whether or not it's good for the long term of Canada because I think it very much is that type of product where it is a it's a short term solution to that creates a long term consequence whatever the opposite of deferred gratification would be.

[00:10:18] But it is literally the only thing propping up the multifamily market right now. It's only the only thing getting houses built is the fact that you can do it with.

[00:10:26] Functionally the cheapest debt in the market at the highest leverage point and the longest amortization as long as you're building purpose built rental housing in Canada. So it's a fascinating addition to the discussion there as well.

[00:10:38] Yeah, and I would agree with that. And you know for my perspective if we're going to go with a band aid solution we should be trying to put more money into purpose built rental housing and you know multi family housing and kind of that baseline.

[00:10:51] You know housing form in the market that allows people to come in and rent it immediately and stay there and if we can push up the vacancy rate a little bit.

[00:10:59] That would solve quite a few of these problems but as you're saying it's all contingent on cheap debt and in the longer term we should be trying to facilitate our market conditions that are favorable.

[00:11:11] In terms of an actual business case to build purpose built rental housing separate from just being able to get free money to do it.

[00:11:18] So what from your perspective stands in the way most when it comes to purpose built rental I'm actually speaking at the Rescon AGM tomorrow the residential.

[00:11:29] Construction Council of Canada and so I'm curious to just really get your take like I have my theories but I'm curious what's your take of the biggest obstruction for purpose built rental right now.

[00:11:41] I mean there are several things at different levels of government right there's the taxes and fees that come along with new developments. There's extrudingly long approvals processes.

[00:11:53] Exlusionary zoning is a big one exclusionary zoning and you know, nimbeeism in general restrictive covenants are an interesting one that's not a lot of people talk about which is basically where there's.

[00:12:06] What's the best way to put it there's like reciprocal agreements between different property owners that only a certain type of thing can be built on that property.

[00:12:15] That's the way that kind of property owners use to secure their neighborhood as a certain type of housing separate from like city zoning and city regulations.

[00:12:25] Yeah, so it would be like a title there it's interesting we've actually never discussed it on the show but it's it's pretty uncommon but it is.

[00:12:32] It is common in places where it would matter like you're describing it wouldn't matter to a lot of audience because we're not dealing with pension funds who are trying to build stuff around.

[00:12:40] You know, shopping malls or whatever but yeah, there's a lot of restrictive covenants when it comes to transit like so MTO has restrictive covenants around like ever a certain setback on every major.

[00:12:50] Road all highways have it all railways have it so there's so that would be a probably a good example is it's not actually zoning but it's registered on title.

[00:13:00] It looks like an easement kind of I'm going to get I'm going to get blasted by a lawyer for trying to to describe it in that way but where it's it's actually on the title of the property that you can't do something because of the neighbor.

[00:13:12] Yeah, that's a good thought yeah as you say it is more of a minor issue or it's kind of like a peripheral issue but all these things add up to a situation where we are effectively putting in a lot of roadblocks to doing something that we should be facilitating right.

[00:13:28] Yeah, we should be working to get more housing bill to get the vacancy rate pushed up to a level where basically occupants and owners are in a more balanced market.

[00:13:38] Couldn't agree more.

[00:13:39] Yeah, I mean like people will you know I think a lot of my viewers would be upset to hear me say that rent control is not necessarily a great solution because you know it distorts the market and again it's a bandaid to deal with a situation where.

[00:13:54] You know tenants and landlords are not on equal footing right.

[00:13:57] Yeah, it's a symptom right like the I think right control is treating a symptom and and and every time we're treating a symptom we're refusing to look at the disease right and and and at least that's what it seems to be with the with the government with a lot of these bandates.

[00:14:12] Yeah and really all it does especially the way that it's done in Ontario where it's tied to the tendency and not to the property.

[00:14:18] It just transfers the burden of rent from long-term tenants to new tenants or people who have to move right.

[00:14:26] Yeah, but at the same time that also discourages the creation of purpose built housing right it's one of the major reasons why Ontario has had almost none of that and instead people are just putting up condo towers selling all the units and walking away from the project and creates a hundred different landlords.

[00:14:41] It's a good it's an interesting thought but the chat the things with Ontario 2018 and newer is not subject to rent control and so you would think that like that arbitrage that those new units have that they're able to sell to the market and unregulated.

[00:14:54] I think that challenge with the big challenge with purpose built rentovers is high-rise condo is like in order to build a high-rise condo you need a lot of cash and a big deposit and you need a pre-cell attorney units to do that so you can borrow.

[00:15:08] And in order to do that functionally these these people who are buying these pre-construction condos are investors in the project right they're providing collateral for the capital stack that later gets used for.

[00:15:19] The construction financing so the ultimate equity requirement is what's standing in the way and in that example where a developer would have to put like 30% equity and if they wanted to build the same project as a purpose built rental and they have to put like 5 to 10% in to build it as condos because.

[00:15:37] The investor deposits end up making up the difference or the the buyer deposits and there was something else I wanted to jump on there but I totally forgot so I'll let Nick jump into this next question.

[00:15:47] Yeah, no, I mean really good stuff so far you know I like the I like the all discussion about the band aid solutions so let's keep that analogy going it seems that that's been the case with with every problem just band aid solution bad news solution so from a triage perspective.

[00:16:04] I think that's the problem that you go back and address the problems that you've identified and the problems that we've been talking about on this show for last year and a half two years.

[00:16:16] Where do we start to fix it like where does it make sense to go first and put that effort energy money you know is it pulling back on cheap debt is incentivizing developers is it's shutting the doors and immigration.

[00:16:31] The little bit of each what's your take on how to fix the problems that you've identified.

[00:16:36] I think yeah from a triage solution point of view I mean yeah it is a little bit of each.

[00:16:41] I'll say I think you you guys discussed this in your last episode, but we've seen a huge explosion in population recently right and a lot of that is in non permanent residents and you know temporary workers and that's again another issue of us using a band aid solution to address a problem right.

[00:16:58] You can't borrow your way out of debt and you can't do it by borrowing money and you can't do it by borrowing people either so in terms of what we need to do what we need to target I guess is a higher vacancy rate to again make housing more accessible to everyone.

[00:17:13] And that needs to happen at different levels of government and on different sides of the equation right we could ease up on demand a little bit by you know granting I guess fewer non permanent residents permits I don't really see like rising PR numbers as a problem.

[00:17:31] Because we've always been building enough housing to accommodate that but as far as you know just letting any business that wants get as many permits as they want like that's something we could ease up on and in fact is something that.

[00:17:43] Our current government promised to do before they were elected and then kind of went the opposite way with it.

[00:17:49] Well, let's not go to government problems or government promises I should say. Same thing.

[00:17:55] Yeah, well it's an issue of all of the parties that form our government right now so I'm not trying to get political with it really.

[00:18:02] But as far as the supply side goes I think one thing we're seeing a really good trend in right now is reduction in exclusionary zoning so.

[00:18:10] A lot of cities are starting to allow denser housing by default even as the lowest density zone you can build multi unit housing and another thing I think we need to do is I guess get municipal and provincial governments to stop.

[00:18:26] So much money from housing transactions it was something that we had the capacity to do when the market was really hot and prices kept going up and up.

[00:18:34] But now that things are slow and down and we're seeing a pullback in prices having things like.

[00:18:40] Taxes development fees all of these things that have been piling on where it's been an easy source of revenue now it's becoming a real inhibition to getting housing built.

[00:18:49] So yeah basically easier regulations through zoning and through approvals and then reducing the financial burden of what I would consider to be.

[00:19:01] No unproductive entities in the house building process like government fees.

[00:19:07] Yeah I mean I think the the can see and rescon report showed that they had it jumped from like 26% of total cost structure which is still a massive amount to like 31% of total cost structure so like the government is the largest beneficiary of new construction.

[00:19:24] The interesting part and I'm curious to get your take on this so like it sounds like we're kind of in agreement that the path that we're on is we're going towards probably a renters economy if nothing changes any time soon home ownership will likely stay into climb we're going to continue to see a lot of at scale purpose built rental still probably not enough purpose built rental.

[00:19:42] One of the consequences of that could be you know the way that we see.

[00:19:45] The idea of Canadians getting poorer which we hear in quotes all the time.

[00:19:49] It that materializes in a lot of people from our generation never stepping up into their next home or never up sizing and our quality of life.

[00:19:57] The quality of life decline that we see materializes in units getting smaller which is common across around the world we have the third largest square footage per capita I believe.

[00:20:07] So I guess the question that I have here is do you think that these more incremental changes like up zoning to four units.

[00:20:17] Do you know do flexing triplexing four units six units cutting up existing houses just given like I think you're probably especially in touch with the market right now do you think that those are going to have a meaningful solution or are we really just relying on a high rise to solve this problem or not high rise but large scale development.

[00:20:37] Well, I think it's both right everyone you know when they're criticizing these policies for example you know I very closely followed the affordable housing plan debate in Calgary.

[00:20:50] Because I've done a series of videos on it and I want to see the public consultations and what you end up seeing is a lot of people criticizing policy by saying you know this alone is not going to give us what we need or like this is not the right type of housing or whatever but if you look at the advocacy side right on.

[00:21:06] People who are in support of affordable housing you have to understand housing as a continuum right there's people who are unhoused or in insufficient housing right now and a lot of people say okay to solve that problem we need to just build.

[00:21:22] Like social housing or subsidized housing affordable housing units like that but a lot of that is also the consequence of not enough housing existing across the whole market right.

[00:21:32] For example I had some friends who were previously living downtown in the city and then their unit got sold.

[00:21:40] They couldn't afford to rent a new place in the same area and so they ended up moving like well well outside the city core and this is like a dual professional income couple.

[00:21:50] So if they were to have housing that met their needs where they wanted to live then they wouldn't be taking up this other spot that they're in now and then that's probably available for someone else.

[00:22:01] So when you have insufficient housing in you know the middle a lot of times we refer to the missing middle housing which is kind of medium density row housing that kind of thing when you expand that people will move in there and they ease up on.

[00:22:15] The you know the next run down the ladder if you want to call it that right because people are going to move up to something that they can't afford they're going to move down to the next thing they can afford and that takes up spaces from.

[00:22:27] People who can afford that by can't afford the next one up right so when you have not enough in the middle segment of the market people get pushed down and down and down and eventually people get pushed off the bottom of the housing ladder and into the street.

[00:22:41] And they're going to have to be more into a shelter system something like that which is why you're starting to see people who are you know they may be working full time but their on how's there they're living in a shelter.

[00:22:51] Yeah, right so we can say yeah there's these incremental solutions yes we need those we also need.

[00:22:57] High rise towers we need less restrictive zoning everywhere to get new housing built I mean I don't see it as a question of which solution.

[00:23:05] Is going to be the one that saves us I see it more as like you know everyone should take one improv class and learn yes and right.

[00:23:13] Yeah, we need this and this and we need this it's it's many many problems at all levels of government there's been many policy failures that have persisted for a long time and.

[00:23:22] We need many solutions to all kind of be implemented at once everyone needs to be pulling in the same direction and not kind of worrying about finger pointing and saying who's to blame for this it's something that we all need to pitch in itself.

[00:23:36] Yeah, for sure.

[00:23:38] Really interesting insights what do you when you see people like I think that especially probably I maybe I'm wrong here but I think TikTok is probably more like Jen very much at Gen Z platform like that would be the biggest.

[00:23:51] Audiance on there is that right.

[00:23:53] I think a lot of people who follow me following to my age bracket actually millennials I haven't looked at my analytics for a bit but I think.

[00:24:00] Millennials may have actually overtaken Gen Z on TikTok generally.

[00:24:04] About time.

[00:24:06] About time.

[00:24:07] Good.

[00:24:08] Oh, I got it back from them.

[00:24:10] So so that means we're safe to wear skinny jeans and stuff like that again.

[00:24:15] So what are I was curious because I thought it'd be interesting to get the take on what Gen Z is feeling like I think millennials kind of you know any of the damage is going to happen to us and our fate as homeowners or whatever it is probably already taking place.

[00:24:33] For Gen Z, you know the next generation that's supposed to be coming up and thinking about their financial future and buying houses and stuff like that.

[00:24:40] Does it seem like a lot of them have sort of just given up like is that is that kind of the thought that isn't out there or like.

[00:24:49] I think so yeah, I think you know among millennials there's a lot of this like frustration of we've seen something kind of like slip away from us.

[00:24:57] Yeah, because there was a chance for us right?

[00:25:00] Yeah, or well you know if you're if you're older and you had a good job or you were living in like a specific kind of market like.

[00:25:07] Yeah, there might have been an opportunity to buy it or it was like you were kind of like you would have been close if things stay the same and then they just.

[00:25:14] Keep getting further and further out of reach like faster than people could save up for it Gen Z in a lot of cases I think it's just been kind of.

[00:25:22] They've been born into a situation where they assume they're never going to own a place and they're also in an extremely difficult rental market right now.

[00:25:30] Yeah, that's I think another really really very difficult part of their experience and you know I don't want to be the older generation saying oh we had a tough to like no it's way harder to be Gen Z.

[00:25:39] And to be starting at your career and having to rent a place for like 50% of your income or 60% of your income.

[00:25:46] Yeah, there's really no way to get ahead there right like when I was starting out I said okay I don't want to bury myself in debt to buy a house.

[00:25:53] Like I could have done it if I laid down all the money I had in the world and then like put a bunch of income towards it.

[00:25:59] I didn't want to do that but I was still able to like go out and find a cheap place to rent and it wasn't hard to find an apartment where I wanted to live.

[00:26:07] And then I started you know setting money aside in savings and investments and eventually that led to me buying a place in a different market right but that's neither here nor there right what they're experiencing is like even if you're graduating with like a good degree.

[00:26:22] And you get a good job right at a school it's really hard to get ahead they're just kind of treading water and working and paying bills as we as you said in the beginning of your last episode.

[00:26:32] Yeah, what different market did you buy in if that is that on the table?

[00:26:37] No need your business it's where I live now it's not it's not the GTA which is where I used to live and it's not it is where you live now I got I thought you were like a long distance investor or that.

[00:26:49] Or that or I thought yeah, I thought it may be you bought a castle in France.

[00:26:54] Now yet no once I get to once I got my YouTube revenue coming in then I'll feed you right into it right to a castle.

[00:27:01] Yeah, well let's shout a little bit about that like how how's how's that going how's the segue and along form longer form going I know TikTok's doing long form now tell me a little bit about the content journey and like what you're seeing right now if you have any advice for people who are in in this space like.

[00:27:17] Housing real estate investment whatever what kind of like tips can you give maybe top top three things that you would recommend for people who want to.

[00:27:27] Who want to be like you and have 150,000 followers on TikTok that want to hear about the housing market.

[00:27:33] For short form content it's definitely different from long form content although I consider TikTok to be entirely a short form content platform because it only goes up to 10 minutes which I still consider short like there's some.

[00:27:46] Topics that I could drone on about for like 45 minutes right which is part of what I'm hoping to do with the YouTube in the future when I have time to actually record those videos.

[00:27:56] Yeah, it's really hard to find the time required to research and script and prep and film something like that but for TikTok first of all I would say like.

[00:28:06] People can spot when your content is inauthentic like if you're trying to.

[00:28:11] You know push a product or sell a course or something they would rather just hear somebody use.

[00:28:16] Passionate about it something talking about it.

[00:28:18] Another really important thing is that those platforms like from the user side are very much a bit like scrolling and flipping through videos and then stopping on something that interests you.

[00:28:28] So something that's really key if you're going to be doing more detailed content is to summarize what the video is going to be about in like the first two seconds.

[00:28:38] Yeah, so like you'll notice on my videos that I will like the first sentence that I say is what the video is going to be about and I put the text on screen as well.

[00:28:48] So there's like this is what the video is about if you want to watch it, stand watch and if you don't you can scroll by but if you have someone who's just talking for like 30 seconds like kind of leading into their own train of thought about it people are just going to are just going to flip by.

[00:29:03] Right, what's your best piece of content best performing piece of content.

[00:29:07] That's performing piece of content it would be one of the castle videos I'm not sure which like those are mostly most of the ones that have gotten over a million views are from that.

[00:29:16] Yeah, and then as far as like analytical goes I had one that was my very first video about the housing bubble which just it shows that like classic chart of like here's home prices versus disposable income in the states and then in Canada.

[00:29:30] You normally see them side by side I present to them one after the other because I like to do a reveals that's something.

[00:29:37] I guess I wasn't doing it intentionally but I think that's something that keeps people watching is having a series of reveals in the videos for sure.

[00:29:43] So that one did really well because it's you know, it's shocking if you're seeing that data for the first time which a lot of people are.

[00:29:50] Yeah, you know for me it's not anymore because I've just been watching it get for some worse and worse and more ridiculous for 15 years.

[00:29:56] Yeah, whereas the other one that I had was called the beginning of the end question mark about the housing bubble and how interest rates may affect it.

[00:30:07] I do think that's really what's going to take a lot of juice out of it and that was you know something like almost a time in the video.

[00:30:14] Just explaining the relationship between the price of debt or the price of money and the price of real assets like housing.

[00:30:23] Love it on that know what do you think like were you surprised by how far.

[00:30:29] This is dropped, did they not drop like did they meet your expectations exceed your expectations and what do you think is.

[00:30:35] You know I try not to ask people the forecast or hold them to forecast but like you know if you were to guess what do you think is kind of the next 12 to 24 months.

[00:30:45] I don't think prices have settled that in equilibrium yet as I mentioned on Twitter you know a lot of real estate agencies are releasing their bullish predictions for more price gains in 2024.

[00:30:56] They have no bias though so it's all good sure. Yeah, so hey I need a little skeptical of that because you know in my I did a fairly in depth analysis on this in my video about cheap debt and you know I looked at what's the price of a home versus.

[00:31:15] How much borrowing power do households have adjusted for inflation at a given payment right and we've seen that ratio of home prices skyrocket completely when interest rates went up.

[00:31:27] And I think they'll probably settle somewhere above where they were before like it's going to be less affordable because I think there's still a lot of you know pent up demand and people are very bullish on housing in Canada in general.

[00:31:40] But a lot of people just don't have the money to buy which is why we've been seeing you know we've seen a big decline in prices.

[00:31:47] But we're still seeing very slow sales right people aren't jumping into the market to get those properties simply because they can't afford it and at the same time we've got a lot of existing fixed term interests debt like five year fixed mortgages that have not renewed yet.

[00:32:04] It's becoming a diminishing part of the market because so many people at the very rock bottom of interest rates decided to go variable which obviously turned out not to be a great decision for them. But yeah that was.

[00:32:16] Yeah right now there is something like a between the new debt rate being offered by banks like the interest rate on a five year mortgage today versus the existing debt on five year mortgages.

[00:32:28] It's a spread of something like 270 basis points. So people who are renewing this year even if rates dropped by a hundred and 150 basis points over the course of this year people who are renewing are still going to be paying more than they were before.

[00:32:42] And I think once you see those lines touch when people are in general in the market paying the prevailing rate for new debt and when home price when homes sales start to come back up again.

[00:32:56] That'll give us a better idea of what equilibrium pricing looks like but I also think you know regardless of housing prices this may surprise people, but I don't care that much about housing prices.

[00:33:08] The problem for me is that all of these housing prices were supported by debt right which means households have an enormous debt load and the cost of that.

[00:33:18] Yes in the world right and can I'm not sure if it's still the biggest in the world but it's it's really up there it's something like a hundred and eighty five or hundred and eighty six cents of debt per dollar of disposable income on average which is really really bad as kind of like at a macro level.

[00:33:34] I think that's something like two point nine trillion dollars of household debt was the latest I saw as of October 2023.

[00:33:40] I think we can make it to three trillion if we really try.

[00:33:44] But you know they're certainly trying so yeah and when you look at that like you know if you're saying like three trillion dollars of debt then every move of one basis point right and the bank normally adjusts by twenty five but like every one basis point is something like thirty billion dollars to the economy.

[00:34:02] Yeah it's like a multi multi-multi-billion dollar question of one basis point and I think in this long term build up of debt we never thought about that right.

[00:34:14] There is a lot of speculation of like oh what happens if rates go up by one percent like that's going to cause a huge amount of stress for households and then they went up by four hundred and seventy five basis points yeah.

[00:34:25] There's a lot of pain that has yet to be felt because there is still that preexisting cheap debt and we're also seeing people putting more.

[00:34:35] More of their debt onto short form types of lending like lines of credit he locks credit cards.

[00:34:43] So they're not actually necessarily managing their debt they're just kind of rearranging it into a worse format you see the same trend with mortgage lenders right like traditionally.

[00:34:53] You would see people if they were really strained to buy a property they would go to for example a b-lender private lender with the hope of moving up to.

[00:35:00] And a lender where there's more regulated market right and now you're very much seeing it go the other way new debt is diminishing at the big six banks and is going more to private lenders more to investment corporations things like that.

[00:35:16] Yeah for sure so so then.

[00:35:19] Are you of the perspective that we still need to see a deal leveraging take place sort of before we can see the Canadian economy grow like regardless of what the interest rate is we still need to pay off that debt really before we can see meaningful growth here I think.

[00:35:35] And in terms of the economy, yeah absolutely I think we are very very badly in need of a deal averaging cycle and have been for quite a while now and like I said everybody well not everybody but.

[00:35:45] I think everyone who is paying attention knew that it was happened eventually we just didn't know when and now it is happening and we don't quite know what's going to look like or if.

[00:35:54] You know something else is going to happen that disrupts it or if the government is going to try and step in I think they will I don't know if they will have the power to stop it necessarily.

[00:36:04] Why is that happening?

[00:36:07] This is this is fine I'm enjoying this okay one thing that I again this I think it's going to depend on the regulatory side of government to whether or not they allow this but like we could see.

[00:36:21] The extension of ensured mortgages at longer amortizations and lower down payments like in 2006 right.

[00:36:31] In the first conservative budget they did introduce 40 year zero down mortgages and sure through the C.M.H.C. right not a lot of people remember that they did eventually claw back to their credit but that I in my opinion is part of why we saw.

[00:36:45] Home prices in 2008 and Canada they took that like tiny little blip of a dip and then continue rising and I consider that just you know an extension of more credit and over the past 15 years between.

[00:36:58] Any party that's been in government when you see them talking about making housing more affordable.

[00:37:02] What they actually end up doing is just extending more credit to people and kind of putting the risk back onto the taxpayer through a program like the C.M.H.C.

[00:37:12] fascinating.

[00:37:14] My thought would be I think I actually think that the up zoning is an attempt for them to create a bit of a price floor right like because by increasing the output of property they're kind of flooring the value the investment value of it but it wouldn't surprise me if we ended up also going the root of like a universal basic income.

[00:37:33] Especially with an election coming up it might be and the incumbent party polling quite low like I'm just thinking of you know what kind of hell Mary they might throw at this election.

[00:37:43] To try and get a put a win on the board and that one just seems like a low hanging fruit from my perspective.

[00:37:50] It's possible I mean they've been doing okay so far with endless studies and no actual action on it.

[00:37:55] I do think that's kind of a you know this and we're getting off the topic of real estate to me it's an interesting one to study I think as possibly a replacement for a lot of our means tested programs because we're spending a lot of money on overhead and we're putting you know on recipients there's like a significant burden of paperwork and managing.

[00:38:15] All of the things they need to do to get those benefits when really you could just give them money and let them spend it like I really interesting.

[00:38:23] video that I like to give to them more like economically liberal minded people like people who are free market economists is there's a video of a milling freedman on firing line like years and years ago and he's basically making a case for universal basic income he frames those and they can have income tax.

[00:38:40] It's essentially the same thing because you would have you know somebody going to the lower end and some being clawed back as they start working their way up the income ladder.

[00:38:49] Which is how it would have to be arranged one way or the other you know you can't just send a check to everyone and have no tax.

[00:38:55] Consequences on the other end of that but there is like an interesting case from either side for a universal basic income and life.

[00:39:05] But I don't think that's coming before the next election.

[00:39:10] I think it's interesting.

[00:39:15] I think that's everything I got for you today Nick dropped off the recording here because that's just how we do it on the show we have technical difficulties.

[00:39:24] It's the only thing that's guaranteed on the show is that we're going to have a technical difficulty at least once in an episode he's sitting here.

[00:39:30] Do you have any other questions?

[00:39:33] Yeah, it was a great conversation. I wish you were part of it but anything you want to add before we wrap up anything you want to share with the audience and if not then where can they find you if they would like to argue with you in the tick.com and or whatever it might be.

[00:39:49] Yeah, well if on any platform that you've seen me on be a you know tick talk in Instagram, YouTube or Twitter those are all the main ones that I'm active on there is also a link in my bio where you'll find links to all the other platforms.

[00:40:01] You know links to spreadsheets that I've made if you want to audit them and tell me I'm full of crap you can find other ways to contact me and in general my DMs are open on most platforms so I'm not that hard to get in touch with but I am pretty busy these days.

[00:40:15] So I might not respond right away fair enough busy with what just personal life stuff or being a housing policy analyst slash all the other different things that you do on on social media there.

[00:40:26] Yeah, between this job and my real job takes up a lot of time and then also my personal life so it's a fresh little free free time to waste on stuff like that but yeah totally get it man.

[00:40:36] Okay, well thanks a lot for your time I really appreciate it and I think this is going to be a great episode for everyone in our audience make sure you check out millennial moron on tick talk will put all the stuff in the show notes so you guys can just click right through and give them a heads up let them know you found them on the show.

[00:40:50] Thanks man.

[00:40:51] Thank you very much.

[00:40:52] The Canadian real estate investor podcast is for entertainment purposes only and it is not financial advice Nick Hill is a mortgage agent with premier mortgage center and a partner in the G and each mortgage group.

[00:41:05] Licent number one zero three one seven agent license M two one as zero zero four zero three seven.

[00:41:14] Dino photos are real estate broker license to with rare real estate a member of the Canadian real estate association the Toronto real estate board and the Ontario real estate association.