Rather late to the party, but wanted to let you know I agree on all points Kareem, with one exception. Although Trudeau's liberals did not "start" the housing crisis, they most certainly escalated it with questionable policy. Furthermore, they were swept into power by blaming the prior government for exactly that and promising to fix it. Then, when elected, did absolutely nothing. Now, we have a far bigger problem to address. This is not an anti Liberal or pro CPC comment. It's one about holding governments to account and learning that in the next election cycle when promises are made, be very wary unless actual plans (not promises) are provided.
I read a book awhile ago that really changed my views on some this stuff called Rethinking The Economics of Land and Housing. (It's long though!) It talks about some similar things to your post in terms of the effect of low interest rates (which also inflate prices of other assets to some degree) and credit on housing prices, but also some ways that residential land is different from other assets. (Those include basically that quip 'they are not making more of it', but also how a lot of its value comes from public infrastructure and also land-use regulation.) Land-use is one thing that maybe fills in the gap in terms of why low interest rates and loose credit in Canada specifically led more to bidding up existing properties compared to, say, the kind of huge McMansions you sometimes saw in the US pre-2008 crash.
One part of demand is just like, demand for land that housing can be built on is naturally going to grow relative to 'usable' supply as the population grows (especially if city boundaries are limited by geography or policy but also just because people cannot commute forever). Interest rates changes are obviously good news and so is trying to reduce investment, but I think there are also plausibly ways that land prices (a big factor in home prices!) and demand for land don't act identically to demand for housing units.
Here is the direct quote, the first paragraph actually, of your first link, which you rely on for the strawman argument that "supply is the sole determinant of housing prices":
Quote "Finance Minister Chrystia Freeland says the country needs a boost in the supply of housing to help make prices more affordable, but suggests there may be other steps governments can take."
Your entire analysis proceeds from a misinterpretation. I am curious, Mr. Kudus, whether this misinterpretation arises out of carelessness and haste, or out of an attempt to create a narrative. You are obviously an educated individual, so this sort of basic error in reasoning is a surprise to say the least. Looking forward to your response.
I also love how we went from being below the us and uk in housing supply in one chart to “being sandwiched between the us and uk” in your other chart supposedly showing the same data in a different context. Lol. Manipulate the numbers? Or they arent actually the same? Your very first argument and you showed how you don’t understand how numbers work or what the word context means.
Good article! You might some of the links here insightful, particularly around the Construction Duration Continuum, BuildForce Canada's findings about skilled labour shortages, and housing concentration.
And 1 million immigrants + a year doesn’t help either when we only build a couple hundred thousand . Except you won’t say that, will you?
Rather late to the party, but wanted to let you know I agree on all points Kareem, with one exception. Although Trudeau's liberals did not "start" the housing crisis, they most certainly escalated it with questionable policy. Furthermore, they were swept into power by blaming the prior government for exactly that and promising to fix it. Then, when elected, did absolutely nothing. Now, we have a far bigger problem to address. This is not an anti Liberal or pro CPC comment. It's one about holding governments to account and learning that in the next election cycle when promises are made, be very wary unless actual plans (not promises) are provided.
I read a book awhile ago that really changed my views on some this stuff called Rethinking The Economics of Land and Housing. (It's long though!) It talks about some similar things to your post in terms of the effect of low interest rates (which also inflate prices of other assets to some degree) and credit on housing prices, but also some ways that residential land is different from other assets. (Those include basically that quip 'they are not making more of it', but also how a lot of its value comes from public infrastructure and also land-use regulation.) Land-use is one thing that maybe fills in the gap in terms of why low interest rates and loose credit in Canada specifically led more to bidding up existing properties compared to, say, the kind of huge McMansions you sometimes saw in the US pre-2008 crash.
One part of demand is just like, demand for land that housing can be built on is naturally going to grow relative to 'usable' supply as the population grows (especially if city boundaries are limited by geography or policy but also just because people cannot commute forever). Interest rates changes are obviously good news and so is trying to reduce investment, but I think there are also plausibly ways that land prices (a big factor in home prices!) and demand for land don't act identically to demand for housing units.
Here is the direct quote, the first paragraph actually, of your first link, which you rely on for the strawman argument that "supply is the sole determinant of housing prices":
Quote "Finance Minister Chrystia Freeland says the country needs a boost in the supply of housing to help make prices more affordable, but suggests there may be other steps governments can take."
Your entire analysis proceeds from a misinterpretation. I am curious, Mr. Kudus, whether this misinterpretation arises out of carelessness and haste, or out of an attempt to create a narrative. You are obviously an educated individual, so this sort of basic error in reasoning is a surprise to say the least. Looking forward to your response.
Well written Kareem! I would love to talk housing with you. Are you based in T.O.?
I also love how we went from being below the us and uk in housing supply in one chart to “being sandwiched between the us and uk” in your other chart supposedly showing the same data in a different context. Lol. Manipulate the numbers? Or they arent actually the same? Your very first argument and you showed how you don’t understand how numbers work or what the word context means.
Good article! You might some of the links here insightful, particularly around the Construction Duration Continuum, BuildForce Canada's findings about skilled labour shortages, and housing concentration.
https://open.substack.com/pub/civicsfactor/p/housing-affordability-needs-a-workforce
https://open.substack.com/pub/civicsfactor/p/show-your-supply-and-demand-math