Latest news with #MikeMoffatt
Globe and Mail
a day ago
- Business
- Globe and Mail
Real estate is not a financial slam dunk, Canadians are learning the hard way
Let's finally dispense with the idea that housing is a foolproof financial asset. The Canadian real estate free-for-all is over. The market hasn't collapsed, by any means. But some of the hottest pockets, including Toronto and Vancouver, are struggling. Condo sales have crashed. Nationally, average home prices are about 15 per cent off their peak, according to the Canadian Real Estate Association (CREA) data. The housing hangover should have lots of Canadians questioning their faith in real estate as an infallible asset incapable of depreciating. 'It seems like every generation has to put their hand on the stove and get burned before they realize that wasn't such a good idea,' said Mike Moffatt, an economist and founding director of the Missing Middle Initiative. The last Canadian housing bust coincided with the early-1990s recession and lasted nearly a decade. But memories are short for such things. Starting in the early 2000s, Canadian housing went on a run for the ages, with the average national price of a home rising fivefold. It was an era that converted masses of Canadians to real estate evangelists who poured their savings into the market and began treating their homes as retirement funds. The investment that has outperformed stocks and Canadian real estate so far this century A speculative mindset toward housing was reinforced by the market's incredible resilience over a two-decade streak. Unlike U.S. housing, Canada's market didn't go bust in the global financial crisis – an episode precipitated by U.S. subprime lending and vast mortgage securitization that we managed to mostly dodge. Canadian housing soon took on a global profile as one of the world's most overpriced markets. But the more the predictions of its demise didn't come true, the more Canadians were seduced by the fortunes that could be made in real estate. 'It led people to believe that maybe this is a permanent fixture,' Mr. Moffatt said. Beyond practicalities, there are lots of good reasons for owning a home. The security that you might not have as a renter. The forced savings of regular mortgage payments. And the upside of leverage, since you can benefit from the appreciation of the home's whole value, not just your down payment. But as a pure investment case, housing was never as strong as it seemed. Consider how the housing market has performed against the stock market over the long term. Since 1980, the average Canadian house has risen at an annualized pace of 5.5 per cent, using historical data from CREA. The S&P/TSX Composite Index over the same time generated a return of 8.9 per cent a year, after factoring in reinvested dividends. That's an enormous difference. In dollar terms, a $100,000 investment in the average Canadian home would have grown to $1.1-million over those 45 years. The same amount of money parked in the stock market would be worth $4.8-million today. This is a wildly generalized example that doesn't account for regional market differences, property type and host of other factors. Real estate agents are advising clients to delay listing as buyers drive negotiations There are also tax implications to consider. Profits earned from the sale of a primary residence in Canada are typically exempted from tax, whereas capital gains on stocks are usually taxable. On the other hand, real estate transactions are laden with fees and commissions, while a broad stock market index fund can be owned virtually for free these days. The point is not to make a case for stock investing in lieu of owning a home. But viewing property through an investment lens was always flawed and problematic. It encouraged people to spend more on housing than they should. To forsake other investments and overcommit to real estate. And to rely on home equity to finance their retirements. 'One of the most dangerous things in our economy is the retirement risk people are facing,' said Rob McLister, a mortgage strategist and editor for 'If real estate performance doesn't meet their expectations, that could be a serious problem for a lot of people.' A house can be a wonderful thing, not just a place to hold one's stuff. But neither is it the surefire investment it once appeared to be.
Yahoo
4 days ago
- Business
- Yahoo
Seniors rarely downsize — here's why that's hurting first-time homebuyers
Realtor Barry Lebow specializes in helping seniors downsize — moving out of the family homes they've lived in for decades to a smaller place that's a better fit for their aging lifestyle. From the outside, that might look like the natural progression: feeding a healthy bit of turnover into the housing supply as move-up buyers seek their own family home. But the reality is a bit different when it comes time to sell, Lebow, who works in the Greater Toronto Area, said in an interview. "Our customers are not always happy customers," he said. "Almost all seniors do not want to move." Experts say it's a myth that seniors who own their homes are keen to downsize to fund their retirements, when the reality is they're largely staying put, in part because they don't like the downsizing options, making it harder for young prospective buyers to break into the housing market. Seniors are in fact the demographic that's least likely to move, according to data from the 2016 census. "It's actually quite rare," said Mike Moffatt, founding director of the Missing Middle Initiative at the University of Ottawa. Lebow said that when seniors do move, it's often because they're facing mobility or money issues — or both. He acknowledged there's a type of older Canadian who's keen to cash out on the family home, move into a smaller condo or apartment and take on a new lifestyle. But these are the unicorns, he said. In his work, it's common to come across seniors with three- or four-bedroom houses and no children at home to fill them anymore. More space than they need, in all likelihood, but no motivation to let it go. "Moving is a traumatic experience," Lebow said, whether it's the financial cost or the emotional toll of changing addresses and purging years of accumulated belongings. Beyond the typical home showings and paperwork, his job has ranged from rehoming a pet dog who couldn't be accommodated in a new abode to acting as de facto mediator when the prospect of mom or dad downsizing becomes a tense family conflict. Some of his clients are also facing cognitive decline, Lebow said, and only see their real estate agent as the guy trying to throw them out of their home. "Believe me, I've been yelled at," Lebow said. A Canada Mortgage and Housing Corp. report from November 2023 also found that while there was a bit of a shift toward downsizing as Canadians age, that trend is still limited to a minority of older households. There's also minimal movement to condos or rental properties as Canadians age, the report found. Data from CMHC indicates the "sell rate"— the proportion of Canadians older than 75 who are cashing out of the housing market — fell steadily between 1991 and 2021. Canadians are living longer and might also be in better financial shape as they get older, the agency said, letting them age in place. "In order for them to leave, they would need something that met their needs as much. And often, that doesn't exist," Moffatt said. Among the biggest factors motivating — or hindering — a move are cost and lifestyle, he said. Many seniors still want to be able to garden and host family over the holidays, he said, which makes a one-or-two bedroom condo in the downtown core unappealing. Moffatt said many older Canadians are keen to stay in their existing neighbourhoods, but smaller options are not readily available. Modern infill units set up for street-level access in older, residential neighbourhoods are the kinds of options many seniors need to give moving a second thought. The kind of sixplex-unit zoning recently up for debate at Toronto city council would create the kinds of units that would be right for many would-be downsizers, Moffatt noted. Toronto ultimately decided last month to broaden sixplex zoning to only some wards, leaving the others to opt in if they choose. Moving houses is also expensive when it comes to hiring movers, staging costs and the myriad of taxes and fees for real estate agents and lawyers. Measures to reduce the tax burden seniors face when moving can help to encourage more turnover of family homes, Moffatt said. The Liberal government tabled legislation in May to waive the federal GST on new homes, but it only applies to first-time homebuyers. Moffatt said it would "absolutely" help improve supply in the housing market if that policy were extended to downsizing seniors. Such a move could sweeten the deal for seniors who are open to getting into a smaller condo unit but don't see the financial value in the move. That could spur a positive domino effect in the market: Moffatt explained that when move-up buyers are able to leave behind their starter homes to take on seniors' larger properties, that opens up more supply at the bottom of the housing ladder for first-time buyers. The Canadian Press reached out to Finance Minister François-Philippe Champagne to ask if the federal government would consider expanding the GST rebate to seniors. A Finance Canada spokesperson did not mention seniors in their response, only saying in an email that the GST rebate is meant to help first-time buyers enter the housing market by lowering upfront costs to buying a home and spurring the construction of new housing across Canada. "Incentivizing or reducing the barriers to building housing across the board benefits everyone," Moffatt said. "It is kind of an irony, but one of the best things we can do to help first-time homebuyers is to make it easier for seniors to move into new housing." This report by The Canadian Press was first published July 25, 2025. Craig Lord, The Canadian Press Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Globe and Mail
29-06-2025
- Business
- Globe and Mail
The bitter truth is that cheaper housing means a retirement crisis for homeowners
John Turley-Ewart is a contributing columnist for The Globe and Mail, a regulatory compliance consultant and a Canadian banking historian. Economists choose their words judiciously. That is why National Bank of Canada's June Economic Monitor report is notable. The authors say Canada's largest real estate market, Ontario, is in 'disarray.' In British Columbia, the market is 'struggling.' Nationally, it 'continues to slow.' Canada's housing problems are worsening. Federal Housing Minister Gregor Robertson, when asked by a reporter in May if home prices should drop, was clear: 'No, I think we need to deliver more supply, make sure the market is stable. It's a huge part of our economy.' His words left many scratching their heads, including Mike Moffatt, an economist and the founding director of the Missing Middle Initiative, a project based at the University of Ottawa's Institute of the Environment. 'It's simply not possible to restore broad-based affordability to the middle class without prices going down,' he told The Canadian Press. For homeowners, borrowing money is easy. But how do renters borrow money? So why the Housing Minister's emphasis on price stability? Ottawa does not want to trade one crisis, housing affordability, for another, a middle-class retirement disaster. Cheaper homes are the obvious solution to Canada's housing crisis at first blush, a point made in these pages by The Globe and Mail's editorial board. Increase supply to meet demand, and prices fall. Over the last 20 years, home prices to income ratios have risen over 70 per cent, as supply stalled while demand intensified. Ontario's Building Industry and Land Development Association's recent data paints a picture of what 'disarray' looks like. New home sales in the Greater Toronto Area are '87 per cent below the 10-year average.' Based on that average, GTA new home sales should have been about 2,750 in May. Instead, new home sales came in at 345. Dr. Moffatt has helped define what should be affordable for Canada's middle class using the country's National Housing Strategy Act: 'Any young middle-class family should be able to afford a 3-bedroom home in any community.' Such homes are almost always ground-orientated, single-detached, semi-detached or townhouses. What sets these homes apart, according to Dr. Moffatt, is that 'only the growth of ownership-based homes with three or more bedrooms is strongly correlated with the population growth of children under the age of five.' Two decades ago, a young middle-class family in B.C. or Ontario typically spent 40 to 45 per cent of disposable income on such homes. Today, the number is roughly 60 per cent, according to Canada Mortgage and Housing Corporation. Prime Minister Mark Carney's housing plan, promising billions in financing and building 500,000 new homes a year by 2035, leaves to the imagination exactly what types of units will be constructed. If Mr. Robertson is to be believed, the vast majority will not be ownership-based, three-bedroom or more, ground-orientated houses that can accommodate middle-class families with children under five. They would undercut the pricing on similar existing homes. The real reason housing got expensive, and why it will get cheaper For young and older homeowners, equity from the future sale of their houses is the critical piece solving their retirement puzzle. Only 38 per cent of the current workforce has the benefit of an employer-registered pension plan, with most being dependent on their own resources. Yet, less than 40 per cent of Canadian tax filers contribute to a registered retirement savings plan or tax-free savings account. Canada Pension Plan and Old Age Security payments won't suffice. The average CPP monthly payment is about $900 at age 65, while OAS is essentially meant to assist the poorest seniors. Today, and for much of the last decade and more, many middle-class Canadians have been saving for retirement through their mortgage payments. The expected payout comes when they sell their homes and use all or a portion of the equity to generate passive income for retirement. In B.C., where the average house price is about $1-million, and Ontario, where it is roughly $860,000, a dramatic decrease in prices of 40 to 50 per cent is needed to restore affordability, given the median after-tax household income in Canada is $70,500. But this would cut retirement income by thousands annually for homeowners depending on their home equity to finance their later years. To maintain price stability, Ottawa is counting on a strong future economy to boost incomes and close the affordability gap. Dr. Moffatt's research suggests that could take roughly two decades or more to produce results. Canada's Housing Minister has to make a Sophie's choice on housing, as he faces two evils. The first is an affordability crisis keeping young families out of the market. The second is a future retirement crisis for homeowners vulnerable to price shocks because they have all their financial eggs in a real estate basket. Mr. Robertson's emphasis on market stability suggests he has chosen to save many existing homeowners from a future in which retirement marks a quick descent into poverty.
Yahoo
26-06-2025
- Business
- Yahoo
Is Canada setting itself up for a big home price spike in 2030?
Prime Minister Mark Carney has said he wants housing to be more affordable for Canadians. It won't be easy: Housing prices across Canada fell two per cent year-over-year, as of May, but there would need to be much larger drops to make housing affordable for many people. On this episode, we talk to Mike Moffatt, founding director of the Missing Middle Initiative at the University of Ottawa, and co-host of the podcast on housing, the Missing Middle. The name, Missing Middle references many things — the decline in the young urban middle class, the polarization of our politics, and also the missing middle in housing — we have giant condo towers, mid-rise towers and houses, but not enough of the multiunit housing complexes that lie in the middle. Moffatt explains his theory of why housing prices have soared, how the politics of the past few decades have brought us to where we are today, and his view on what needs to happen to bring housing prices back down to earth. If you have any questions about the show, or if there are topics you want us to tackle, email us: downtobusiness@ • Email: gfriedman@ | Twitter: GabeFriedz Canada's auto industry at 'hinge moment' between survival and slow death Canada gets wakeup call that world 'unstable and dangerous place Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Calgary Herald
26-06-2025
- Business
- Calgary Herald
Is Canada setting itself up for a big home price spike in 2030?
Article content It won't be easy: Housing prices across Canada fell two per cent year-over-year, as of May, but there would need to be much larger drops to make housing affordable for many people. Article content On this episode, we talk to Mike Moffatt, founding director of the Missing Middle Initiative at the University of Ottawa, and co-host of the podcast on housing, the Missing Middle. Article content Article content The name, Missing Middle references many things — the decline in the young urban middle class, the polarization of our politics, and also the missing middle in housing — we have giant condo towers, mid-rise towers and houses, but not enough of the multiunit housing complexes that lie in the middle. Article content
