Will we ever break the cycle of rising home prices? | About That

Summary

The video explores the complex relationship Canadians have with rising home prices. While surveys suggest a desire for lower prices, many Canadians, particularly homeowners, are reluctant due to the financial impact on their property investments. The script highlights the tension between affordability for future generations and the economic dependency on rising home values. It discusses various housing markets, like Germany and Japan, where renting is more normalized, and questions whether homes should be treated as assets or simply places to live. The challenge lies in balancing economic growth with housing affordability.

Takeaways

• 🏡 Many Canadians express a desire for lower house prices, but homeowners are conflicted because lower prices would reduce their home equity.
• 📊 A significant portion of Canadians—66.5%—own homes, and many of them rely on increasing home values to build wealth and secure retirement.
• 💸 Politicians find it difficult to suggest lowering home prices due to the financial impact on homeowners, making it a politically sensitive issue.
• 🏠 One proposed solution is increasing the housing supply, but the focus often remains on protecting the value of existing homes.
• 📈 Investors are playing a growing role in the housing market, with 30% of home purchases in early 2023 being made by people buying additional properties.
• 🚗 The script questions why homes aren't seen like cars, which depreciate over time, and suggests imagining a world where homes are valued based on practical factors like location and condition rather than as investments.
• 🇩🇪 Countries like Germany have cultural differences where renting is more common, with renters outnumbering homeowners, due to government policies supporting affordable housing.
• 🏚️ In Japan, homes often lose value over time and are rebuilt due to natural disasters and cultural acceptance of cyclical renewal, contrasting with the Western investment-focused housing mindset.
• 💼 Canada’s housing market heavily influences the economy, contributing significantly to GDP through related industries such as real estate and construction.
• 🔄 The script highlights that the current system encourages building homes for investors rather than for people who want to live in them, suggesting a shift is needed to prioritize end users.

Q & A

Why do Canadians express conflicting feelings about housing prices falling?

Many Canadians say they want housing prices to fall, but in reality, many homeowners, who make up 66.5% of households, don’t want to lose the equity in their homes. This creates a conflict of interest between affordability and personal financial investment.

What is the main reason politicians avoid advocating for lower home prices?

Politicians avoid advocating for lower home prices because doing so would negatively impact the financial well-being of a majority of homeowners, which could result in significant political backlash.

What solution do experts and policymakers agree on to address housing affordability?

Experts agree that increasing housing supply is a key solution to addressing housing affordability. Building more homes, especially affordable ones, can help bring down prices.

How does homeownership in Canada compare to other countries like Germany or Japan?

In Canada, homeownership is seen as a way to build wealth, whereas in Germany, renting is more common due to cultural and historical factors, with renters outnumbering homeowners. In Japan, homes often lose value over time, contrasting with Canada’s expectation of homes appreciating in value.

What role do investors play in the Canadian housing market?

Investors are becoming a larger part of the housing market, with 30% of home purchases in early 2023 being made by investors who already owned other properties. This has increased competition for first-time homebuyers.

How is housing treated differently from cars in terms of investment value?

Homes are typically seen as investments that appreciate over time, while cars are expected to lose value once they are purchased. Canadians generally view housing as a way to build wealth, unlike cars, which are viewed as depreciating assets.

What are some cultural reasons why renting is more common in Germany?

After World War II, much of West Germany’s housing stock was destroyed, leading to a focus on rental properties, rent controls, and affordable housing policies. This created a culture where renting became the norm for many.

How do natural disasters influence Japan’s housing market?

Japan frequently experiences natural disasters like earthquakes and tsunamis, which contribute to a culture of rebuilding homes frequently. Many homes are not built to last for generations, and they often lose value over time.

What is the concern about the speculative nature of housing in Canada?

The speculative nature of housing, where homes are bought with the expectation that they will appreciate in value, creates an environment where homes are treated as financial assets rather than places to live. This drives up prices and makes it harder for people to afford homes.

What is the long-term consequence if future generations cannot afford to live in major Canadian cities?

If future generations are priced out of major cities, they may leave for more affordable areas, which could hurt the economy and cultural vibrancy of cities like Toronto. This would result in a loss of talent and reduce the overall quality of life in those cities.