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

CBC News

19 Apr 202411:20

Summary

TLDRThe 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.

Outlines

00:00

🤔 The Housing Dilemma in Canada

Andrew opens by discussing the paradox of Canadians wanting lower housing prices but being conflicted due to homeownership. He highlights that while many Canadians, including himself, want affordability for future generations, the reality is that most Canadians own homes (66.5%) and are building equity. This makes it difficult for both individuals and politicians to fully commit to reducing home prices, as it would hurt homeowners' investments.

05:01

💼 Supply vs. Demand: The Political Dilemma

Andrew reflects on a poignant question posed to Canada's housing minister about whether home prices should fall. The minister sidesteps the question by advocating for policies to increase affordable housing supply. Andrew notes that while experts agree on increasing supply, no politician can openly support a drop in home values without risking political backlash. The conversation touches on how home prices impact the well-being of many Canadians and the challenges of balancing these interests.

10:02

🏡 The Investor-Driven Housing Market

Andrew explores the role of investors in Canada’s housing market, highlighting how an increasing portion of homes are being purchased as investments rather than for living. He emphasizes that nearly 30% of recent home purchases were made by investors juggling multiple properties. This shift is driving up prices, making it harder for first-time buyers to enter the market, while reinforcing the idea that homes are primarily financial assets rather than living spaces.

🏠 Homeownership as a Cultural and Economic Asset

In this section, Andrew compares homeownership in Canada to other countries like Germany and Japan, where renting is more common and home prices often don't appreciate. He discusses the cultural reasons behind these differences, such as Germany's post-WWII housing crisis and Japan's frequent natural disasters. He also raises the question of whether Canadians could view homes more like cars—functional, depreciating assets—instead of long-term investments.

🔧 The Challenges of Changing the Housing System

Andrew concludes by discussing the systemic nature of the Canadian housing market, where homes are seen as investments and developers prioritize selling to investors rather than end-users. He points out that the government benefits from rising home prices through increased tax revenues, making it difficult to tackle the issue head-on. Experts warn that if housing continues to be inaccessible to younger generations, it could hurt Canadian cities and force people to leave urban centers.

Mindmap

Keywords

💡Homeownership

Homeownership refers to the state of owning a residential property, which is a central theme in the video. The video explores the tension between homeowners who benefit from rising property values and non-homeowners struggling with housing affordability. It mentions that 66.5% of Canadians are homeowners, highlighting the conflict between wanting lower home prices and protecting one's investment.

💡Housing Affordability

Housing affordability is the ability of individuals or households to afford housing without spending a disproportionate amount of their income. The video focuses on how many Canadians feel 'trapped' due to the rising costs of housing, both for buying and renting, and discusses how this issue affects the majority of the population, particularly non-homeowners.

💡Supply and Demand

Supply and demand are key economic concepts that impact housing prices. The video highlights the shortage of housing supply as a primary factor driving up prices and suggests that increasing supply is crucial to lowering prices. However, it also discusses the complexity of balancing this with the interests of current homeowners, whose financial well-being is tied to high home values.

💡Housing Investors

Housing investors are individuals or entities that buy properties not for personal use but as a means of generating profit. The video explains that a growing share of housing is being bought by investors, which exacerbates the housing affordability crisis. It notes that in 2023, investors made up 30% of home purchases, which makes it harder for first-time buyers to enter the market.

💡Speculative Value

Speculative value refers to the anticipated increase in the value of an asset, such as a house, based on market conditions rather than intrinsic qualities like location or condition. The video argues that many buyers view homes as investments, which inflates prices and drives demand. It suggests that this speculative view contributes to Canada's housing crisis, as homes are seen more as financial assets than as places to live.

💡Renting

Renting is the act of paying for the use of a property without owning it. The video contrasts renting with homeownership, suggesting that in other countries, like Germany and Japan, renting is more culturally accepted and common. In these places, homes are often viewed as utilities rather than investments, which helps keep housing costs more affordable.

💡Multigenerational Wealth

Multigenerational wealth refers to the financial assets and resources passed down from one generation to the next, often through homeownership. The video touches on how some Canadians see owning a home as a way to accumulate wealth for their children and grandchildren, reinforcing the idea that housing is not just for living but also for building financial security.

💡Housing Policy

Housing policy refers to the government strategies and regulations aimed at managing the housing market. The video criticizes the political reluctance to address the root causes of high home prices, noting that no politician wants to lower home values, as it would harm the majority of homeowners. The video suggests that the focus on increasing housing supply is one politically safer way to address the problem.

💡Cultural Differences in Housing

Cultural differences in housing refer to how different countries and societies view housing. The video compares Canada to countries like Germany and Japan, where renting is more common and home prices don't always appreciate. These examples are used to question whether Canadians can shift away from seeing homes as primarily investment vehicles and more as places to live.

💡Real Estate Market

The real estate market is the broader economic system through which properties are bought, sold, and rented. The video discusses how Canada's real estate market is heavily driven by investors and speculative buying, which raises prices and limits affordability for regular buyers. It also touches on how real estate contributes significantly to Canada's GDP through jobs in construction, real estate sales, and related industries.

Highlights

Canadians say they want lower housing prices but hesitate because two-thirds are homeowners.

Homeowners face a conflict of interest, wanting lower prices for future generations but fearing loss of equity.

Politicians avoid directly advocating for price drops due to the negative impact on homeowners.

A lack of housing supply is often cited as the reason for unaffordable home prices.

The growing presence of investors in the housing market is making it harder for first-time homebuyers.

Between 2014 and 2021, 19% of homes were bought by investors, rising to 30% by 2023.

Investors purchasing multiple properties create a speculative market, raising home prices.

Cultural comparisons: Germany and Japan approach housing differently, prioritizing rentals or accepting depreciation.

Germany's rental culture emerged post-WWII due to a housing crisis, leading to affordable renting being normalized.

In Japan, homes are often built with short lifespans and are not viewed as long-term investments.

The speculative value of homes in Canada contrasts with other nations, where homes are seen as tools for living rather than wealth creation.

Government benefits from rising home prices through increased tax revenues, creating a dependency on high prices.

Developers build homes with investors in mind, needing to pre-sell 70% of units before getting financing.

Without owning property, renters face insecurity about when they may need to leave or relocate due to price hikes.

The future of Canadian cities is at risk if younger generations are unable to afford homes, leading them to leave urban centers.