True Patriot Love - Is Canada’s Housing Crash Just Getting Started？ ft. Ben Rabidoux

00:00:00.000 We've really never seen a long grinding housing cycle.

00:00:02.040 And what's alarming to me is we're now at the point where I'm seeing power of sale, kind of the equivalent of what the Americans may recognize as foreclosures, court-ordered sales that are selling at half of the previous selling price from 2022 in certain markets.

00:00:17.020 That's incredible.

00:00:18.420 So we are seeing certain pockets of real price stress here in Canada that I wouldn't have even thought we would see, even being as concerned as I was in kind of 21-22 about the direction of the market.

00:00:30.000 this has fallen more than I would have expected. Today on True Patriot Love,

00:00:38.580 Under the Pillar Housing, I have Ben Rabideau here with me. And Ben is a founder, is the founder

00:00:45.580 of Edge Really Analytics. And I got the opportunity over the weekend to go through

00:00:50.220 his last report. And for those of you who love real estate, and I do, and Ben, welcome.

00:00:56.300 thank you i uh my background ben so it's very interesting to me because of course you know

00:01:03.660 growing up in an italian family we were always building things and the first thing i did uh

00:01:09.020 after i got my cpa is i got into commercial real estate um and in my industry i ended up building

00:01:15.340 about a billion dollars in assets uh undertow and i had companies that actually went out and

00:01:21.900 build properties for other people and and it was a it was a wonderful pastime for years you know i'm

00:01:28.140 i'm getting up there in age right now but for years i loved it and i the construction business

00:01:34.140 um was always near and dear to my heart and because my father had started up uh started

00:01:39.260 off on the residential side i spent a lot of time with him you know months years with my uncles and

00:01:46.060 my dad uh renovating houses so you know welcome to the show you know i took a look and i really

00:01:52.860 enjoyed your report you know they sent me a note last night i really enjoyed going through it

00:01:57.580 and let's kick let's jump into it because it really does um highlight some of the things i've

00:02:03.180 been saying on previous shows and the last show i did on real estate i had uh chris cepito from real

00:02:11.340 the real estate group come in they just got bought out or they bought out remax i had him come in and

00:02:16.300 i sat down with him and i said chris here's how i see it and you know what i think you and i are

00:02:20.940 kind of on the same page on the way we're seeing this uh go down so let's kick it off tell us a

00:02:27.020 little about your your company yourself and then tell me about interest rates for a while yes

00:02:33.900 Certainly. So I founded an institutional research firm back in 2011. So that's called North Cove

00:02:41.500 Advisors, still operational today. And we work with a number of the largest asset management

00:02:46.460 companies globally. And for them, I track Canadian macroeconomic trends with specific focus on

00:02:52.060 housing and consumer credit. In 2021, I got the idea to take that same institutional quality

00:02:59.660 research and make it accessible to real estate professionals somewhat selfishly with the idea

00:03:04.140 that I could sort of build out my network and gather you know important kind of frontline intel

00:03:08.620 to help inform my institutional clients and as these things tend to go you you start a business

00:03:13.920 with one directive and then it it sort of weaves and it becomes something you didn't anticipate and

00:03:18.460 I've discovered that actually I really enjoy the speaking element of edge realty analytics that the

00:03:22.920 the conversations I'm having with a lot of real estate professionals and so edge realty analytics

00:03:27.220 now takes up a good chunk of my time. And we produce several recurring monthly reports.

00:03:33.540 And one of the things we do try to track is the direction of interest rates. And that's probably

00:03:37.300 a good place to start because we are in somewhat in limbo right now. It's a bit of a strange time.

00:03:42.420 Had we had this discussion eight or nine weeks ago, I think my outlook would be a little bit

00:03:46.180 different. I think we were on sort of a glide path to slightly lower rates, not dramatically

00:03:52.180 lower. We weren't going back to zero interest rates, but I think you could have had a couple

00:03:55.380 more rate cuts it's really it's really different today because the conflict in iran i don't know

00:04:02.260 if we're calling it a war what are we calling it now so the conflagration in iran is is upending

00:04:06.820 global energy markets yeah and it's a real problem so there's a couple things happening right now we

00:04:11.620 know that um we are going to get some very hot inflation readings here in canada the next few

00:04:15.860 months we can see that there's there's some indicators that we can track that that tell us

00:04:20.020 where inflation is going and one of them is the industrial product price index and the other is

00:04:25.220 the raw materials price index this is like price index of goods that are the raw materials that

00:04:30.340 are going to the factories well if that spikes you know that down the road they'll try to pass

00:04:34.580 that cost on the consumers well we just had one of the hottest readings in 40 years last month

00:04:39.380 so big monthly increase in raw materials we know that's going to filter through to end pricing

00:04:44.660 so we are going to see next month we'll probably see cpi over three percent the month after that

00:04:48.740 we're probably three and a half like it's it's going to be a a pretty dramatic creep higher

00:04:53.380 Now, if you're the Bank of Canada, it's a tricky spot because they can raise interest rates all

00:04:58.220 they want. They're not going to reopen the Strait of Hormuz. So what they've said very clearly is

00:05:02.860 they will try to look through the initial impact of inflation. But what worries them is what we

00:05:10.460 call inflation expectations. And this is a bit of a strange concept, but I'll just explain it very

00:05:15.520 quickly for the listeners and viewers. There's an element of inflation that's psychological.

00:05:20.620 and by that I mean if you believe that the price of goods and services are going to increase a lot

00:05:26.320 in the next year you might rush out and buy more today so if you're like a manufacturing company

00:05:31.340 you're afraid raw materials are going to go up you're going to stock yourself today if you're

00:05:34.580 going to thinking of building a new deck and you think the price of lumber is going to go up 30

00:05:37.960 next year maybe you borrow off a HELOC and you build it today so when you multiply that dynamic

00:05:43.740 across an economy when people fear future inflation they spend more today and that in a roundabout way

00:05:48.480 creates inflation. That's the pernicious effect that we're facing. It's not so much the war in

00:05:53.200 Iran that's got the bank kind of concern. It's how that might influence consumer spending behavior.

00:05:59.780 And so the bottom line here is, you know, two months ago, I would have said direction of interest

00:06:03.900 rates is lower. Today, I think that if inflation expectations start to trend higher, we will see

00:06:10.180 rate hikes later this year. And that's a bit of a concern. Right. Yeah, for sure. Well, you know,

00:06:15.680 ben during covid we saw you know your example is is bang on and we saw it right because as people

00:06:22.640 decided were worried about supply and supply chains they went out and hoarded a bunch of

00:06:27.520 goods drove up prices and you know that's exactly you know when we start to see oil and gas

00:06:33.600 challenges like we're seeing now um you know we we just had a similar show uh where we talked about

00:06:40.320 oil and the effects of this on canada and a lot of it was interesting because a few of the guests

00:06:45.440 that came on uh we're a little surprised at the number of impacts this has so far away from the

00:06:51.760 strait of her moose and i was like no this this resonates straight through the economy it makes

00:06:56.640 it right to your dinner table to your recreation to anything you're doing to your business which

00:07:01.920 then drives you know uh huge inflation and you know that's why us not foreseeing this is so crazy

00:07:11.600 to me right now so you know and i might talk to the listeners all the time about you know in 1973

00:07:18.000 we had this same identical thing almost happen in canada with the embargo um and then when it was

00:07:24.080 done and we started petro canada and then we sold petro canada and then we seem to have kind of

00:07:28.880 turned our back on the fact this could ever happen again i find that so bizarre because we did have

00:07:35.040 a national strategy for such an occurrence and that took place but yeah it's really interesting

00:07:40.160 and well it's a great point though if i can just jump in because one of the things that's frustrated

00:07:44.480 me is in the last few years this sort of especially coming out of covid this view that like

00:07:49.280 we were past the need for traditional hydrocarbon as an energy source and that it was this kind of

00:07:54.400 terrible thing that we should be ashamed of as canadians that we were producing and that's it

00:07:58.720 i mean nothing could be further from the truth we're probably another 20 years away from peak

00:08:02.320 oil demand and that's going to be a long plateau after that we're going to be using hydrocarbons

00:08:06.320 for both of the rest of our lives anyways um and so the option is do we produce it ethically here

00:08:11.760 in canada to a higher environmental standard or do we outsource it to other regimes including

00:08:16.640 regimes with terrible human rights records and then import that oil here like to me this is a

00:08:21.200 no-brainer but we kind of lost our minds as canadians in the last few years and we we

00:08:24.800 villainized what has been our most important industry yeah yeah we definitely did you know

00:08:30.160 dan mctagg comes on the show once in a while same thing he just he just goes off um so no i appreciate

00:08:36.080 that hey talk to me about rents because this is an interesting one i was just uh you know uh

00:08:42.320 working on a show talk about uh rent first buy um so talk to me about rents because this is an

00:08:48.240 interesting one because all you know uh coming out of covert you know everyone was buying as

00:08:52.960 many properties as they could they were trying to lever one after another you know even my own

00:08:58.400 accountant who i just saw for my own personal tax uh submission you know i i went in he says oh man

00:09:04.560 he says you know i got eight i got eight houses now you know and i'm like dude eight houses like

00:09:09.520 what are you doing right and uh are you getting any rent for them and he's like yeah no they're

00:09:14.080 all rented i said well just you know keep your fingers crossed so take me through the rent

00:09:19.040 scenarios right now fascinating story um and and one of the yeah one of the crazier things that's

00:09:26.640 happening in the broader canadian economy i i'll just say up front i'm very negative on rents

00:09:30.560 negative in the sense that rents themselves are going to trend lower that's fantastic if you're

00:09:34.640 a consumer and a renter it's also in a roundabout way it's very good for the next generation of home

00:09:39.360 buyers right a lot of the challenges for first-time home buyers is saving the initial down payment

00:09:44.080 and the fact that rents are so high is a real hurdle so i actually view it that that falling

00:09:48.800 rents are a good thing we've seen falling rents now for most of the last year and a half no nobody

00:09:52.560 saw that coming this was something i was pounding the table on a couple years ago um that people

00:09:57.200 would be surprised how quickly the rental market cools. So why did I come to that conclusion and

00:10:01.780 why am I confident that this trend is going to continue? So you have to go back to the post

00:10:06.040 COVID population boom. We discussed this very briefly off air. In 2022 or 2023, I testified

00:10:13.920 to the Standing Committee of Finance on the cost of living. And one of the things I flagged is,

00:10:17.940 look, the immigration policy at the time was just absurd and it was disproportionately impacting

00:10:23.460 the renter cohort, because you have to understand that peak in Canada in 2024, population grew by

00:10:29.700 1.3 million people in a single year. 800,000 of those were what we call non-permanent residents.

00:10:37.380 So that's broadly speaking, that's international students, temporary workers, asylum claimants.

00:10:41.820 They're all renters. So another way of saying it is we dropped 800,000 renters in the population

00:10:47.340 in a single year, and we dropped two and a half million over a couple of years. Well,

00:10:51.940 like, of course the rental market is going to go crazy. So we saw a dramatic run-up in rents. It

00:10:56.340 was unfair, disproportionately hurt low-income Canadians. One of the worst policy blunders,

00:11:02.120 I think, in the last 50 years in Canada. Crushed the Canadian consensus on immigration. It's going

00:11:06.640 to be a generation to put those pieces back together. Now, concurrent with that, though,

00:11:12.520 the government, to their credit, rolled out some programs that would heavily incentivize

00:11:19.040 the construction of rental properties. And that is probably been the most successful government

00:11:26.100 program in history with regards to bringing new supply to market. So if we take a snapshot today

00:11:32.140 of what's currently in the construction pipeline, there's about 205,000 rental units being built

00:11:37.460 across the country. That's equivalent of about 7.5% of the existing rental stock. So we're going

00:11:43.200 to grow the rental supply by 7.5% nationally. That does not include the condo units that are

00:11:48.280 going to become rentals they're just purpose-built rentals in the pipeline it's a ton of supply so

00:11:53.300 kudos to the government for getting one thing right the problem is we've now unwound some of

00:11:59.280 those immigration policies and now rather than adding a bunch of temporary residents we're seeing

00:12:05.400 declines in that cohort and not small declines either we're talking 400,000 annual decline in

00:12:11.540 a key cohort of rental renter demand so now you have a confluence of factors where the government

00:12:16.620 is trying to reduce the number of temporary residents in the country. That is the key source

00:12:21.340 of incremental rental demand. And at the same time, we are about to see a wall of supply in the rental

00:12:28.400 space come online in the next year and a half or two years. It's the perfect storm for the rental

00:12:32.720 market. And so, you know, perfect storm in a bad way, right? So we will continue to see rents grind

00:12:38.640 lower in some places quite dramatically. And where I do worry is, you raise an important point that

00:12:46.060 in that kind of post COVID housing craziness that we saw, we know that a lot of, a lot of that

00:12:53.120 increase in demand came from investors. Um, I wonder as we go forward, especially through this

00:12:58.520 year, we have a lot of mortgages renewing this year at higher rates that gets worse if we get

00:13:02.500 bank candidate rate hikes. So now you have a situation where people are going to be renewing

00:13:06.440 at higher rates and the rents are falling. To me, that's a bad setup for kind of some of the

00:13:12.600 smaller landlords that bought in that kind of 21 to 23 window yeah you know it's interesting i tell

00:13:19.140 this story and i've told it a few times on different shows so i was in the states during

00:13:24.180 the mortgage meltdown and uh i had uh i was living there and i had a business and quite frankly i saw

00:13:31.600 the the huge shocks that hit the market at the same time and this isn't the same but it has some

00:13:37.220 you know it's a weird set of circumstances that are converging and if if you look at the the show 0.99

00:13:43.600 i did before i came on with you we were basically talking what to do with 2.3 million uh immigrants 0.99

00:13:52.060 who are waiting to see their next step in canada they're not going to get pr and what do we do

00:13:56.980 where do they go how do we help them transition back to their home countries what do we do

00:14:01.580 So to your point, you know, it's a storm that drives rents the opposite direction of what these investors wanted.

00:14:11.180 And for those people who got out and started putting together these multiple, I call them pancake mortgages, where they mortgage off each other, they're sitting there like as these people are leaving, their houses are empty.

00:14:22.940 They can't meet their commitments.

00:14:24.400 And, you know, I looked at your report last night and, you know, you have a slide.

00:14:30.020 to me it's it's actually so telling it's it's asking rents are now negative in all six of the

00:14:37.220 largest uh metros uh over the past two years so so basically it's showing you know the chart shows

00:14:45.620 that basically rents are just going down down down in every metropolis in canada that that can't be

00:14:51.780 good and it can't be good for those people who now are uh got out there and you know we kind of baited 0.97

00:14:56.580 them a little right we brought these people in we had this open immigration system so then a bunch 0.72

00:15:01.140 of people went out and they started buying houses to rent them out uh you know said okay no matter

00:15:06.500 what you know like uh like my dad used to tell me and i used to argue with him no no you know

00:15:12.420 no matter what uh housing prices are always going to go up and i'd say no they don't always go up

00:15:17.860 um i was in a place once in in florida in the panhandle florida and dad i saw it go the opposite

00:15:24.740 away right so you know i've lived through a meltdown so i know what that's like but

00:15:30.020 well can i jump in because i think you're absolutely right canadians we have been conditioned

00:15:34.500 to every housing cycle in the last 20 years being very short and very shallow like the the financial

00:15:40.100 crisis was nothing in canada it was a six month affair and within a year we were back to record

00:15:44.740 high house prices covid was nothing right so we've really never seen a long grinding housing cycle

00:15:49.860 And what's alarming to me is we're now at the point where I'm seeing power of sale, kind of the equivalent of what the Americans might recognize as foreclosures, court-ordered sales that are selling at half of the previous selling price from 2022 in certain markets.

00:16:04.960 That's incredible.

00:16:06.500 So we are seeing certain pockets of real price stress here in Canada that I wouldn't have even thought we would see, even being as concerned as I was in kind of 21-22 about the direction of the market.

00:16:17.780 this has fallen more than i would have expected yeah no for sure hey let's let's move over for

00:16:24.360 a minute to to basically uh housing you know single dwelling residence and you know i looked

00:16:30.600 at your chart and uh you know the reason i mentioned you know that uh i would never do it

00:16:36.240 but quite frankly i know some guys are still in it and they're still trying to make it but

00:16:40.040 single family dwellings oh my goodness the bottom dropping out right now and you know

00:16:47.560 previous show that i did with chris i talked about it i said you know it's a little bit of the if you

00:16:52.760 look at demographics you know and i love demographics i'm a cpa by trade um and i like

00:16:58.200 numbers uh you know you look at the aging population combined with the aging of all our

00:17:05.480 housing inventory you know you got homes that are 60 70 80 years old in the market

00:17:11.720 you know how long can they stay you know can you renovate them can you do something with them

00:17:16.520 you got housing prices you got the failing condo market that's kind of competing with you in that

00:17:22.360 market you know where do you see it all going and i guess i i know this is a tough question but i'm

00:17:28.280 going to ask it and i ask everyone ben where is the bottom here there's a lot to that question

00:17:34.920 yeah well look first of all i think we need to be really careful to break it down regionally

00:17:41.160 We're in a strange time in Canada where if we look at the headline house price index nationally, we're down about 20% from peak, which is already the steepest house price correction for peak that we've seen in four decades.

00:17:56.020 But having said that, we have parts of the country, particularly Saskatchewan, parts of Manitoba, Quebec, parts of Atlantic Canada, where house prices are at record highs and still rising high single digits every year.

00:18:08.640 And that's being offset by this this tremendously deep housing cycle in southern Ontario and BC. So it's a really strange dynamic where it's it's hard to make blanket statements about about where housing broadly is heading. What I would say is on a short term basis, I think that we're probably going to see like we're now at the point where I think we can we can make a case that we're close to a bottom here in Ontario.

00:18:37.620 That's not to say I think prices are going to come rocketing back. I think if you look at the

00:18:41.420 last real housing cycle in the late 80s and through the 90s, we had about a two-year grind

00:18:46.300 lower, two, three-year grind lower in pricing. And then it basically kind of moved more or less

00:18:50.720 sideways for five or six years. And I think that's a decent way to think about how these cycles tend

00:18:55.340 to play out. We're at the point now where I think prices are going to start to form a bottom. Maybe

00:19:00.600 it's another 5% lower, maybe from here. And then I think it's going to start forming bottom. The

00:19:06.660 reason I say that and I'm focusing on Ontario specifically I think um it's a different case

00:19:12.040 to be made in BC in which we can talk about but but as it relates to Ontario what I'm seeing is

00:19:16.540 when we look at inventory trends resale inventory they're actually starting to

00:19:20.400 to stabilize and they're actually starting to fall in a lot of big metros in Ontario so the number of

00:19:24.440 homes listed for sales coming down home sales are now coming in higher than they were a year ago

00:19:28.260 but most importantly to me is if I look at what's under construction for single family

00:19:33.420 we're back to 30-year lows. So there's no new supply coming. And that's generally,

00:19:39.260 once you see that, you're generally pretty close to a bottom. And so we'll see. The affordability

00:19:48.160 picture is not great, but it has improved dramatically over the last few years. A lot

00:19:52.640 of that gets upended if we get a big, if in fact the Bank Canada hikes rates a few times later this

00:19:57.140 year, we could be having a different discussion in six months' time. But if I took a picture of

00:20:02.040 market today i think we're probably going to see the market start to stabilize in ontario now bc

00:20:07.800 is a different story i don't know how much your viewership is out in bc um listen i'll just tell

00:20:13.240 you i i think i think the the provincial governments uh allowing undrip um to be

00:20:21.160 codified into law which is the the united nations declaration of the rights of aboriginal peoples um

00:20:26.920 Um, and forcing the legislative branch and the judicial branch should say to, to sort of

00:20:32.400 interpret all laws through that lens has been disastrous. So we had a major decision last year

00:20:38.940 where the courts deemed that Aboriginal groups would have coexisting title on land. Like what

00:20:46.400 the hell does that even mean? Like if you're a lender, you can't lend on something if you don't

00:20:50.880 know who owns the collateral. So the way I see it, BC is a very different situation until they get

00:20:55.480 that resolved and you get clarity that that province it's just going to continue to grind

00:21:00.660 lower and i hate to say it but that province is uninvestable right now i mean that is a catastrophe

00:21:04.480 i don't think canadians have yet appreciated how far down that rabbit hole they've gone

00:21:08.480 that's a whole separate discussion if we then take a step back i think alberta's going through

00:21:13.040 sort of a normal cyclical adjustment the price is going to grind a little lower there's a lot

00:21:16.880 of supply coming very much in contrast with ontario alberta's got a lot of supply coming

00:21:21.040 and i think that's broadly similar with quebec as well they're in a bit of a cyclical adjustment

00:21:24.680 but but so if you're looking for a bottom i think ontario is close bc has zero bottom until they get

00:21:28.920 this figured out and that's kind of where we're that's kind of where we're at you know it's and

00:21:33.880 i and i interesting because i i'm praying that you're right so and and yeah i hope you're right

00:21:39.880 because i you know i have friends and family that uh still own real estate here in ontario

00:21:45.240 um and so you know fingers crossed my my big worry right now a little bit is kind of what you

00:21:51.320 mentioned at the beginning of that uh at the beginning of the segment on single family dwellings

00:21:57.560 and homes um you know as we saw kind of people retiring so covet was this weird time when uh and

00:22:04.680 i was building a house and quite frankly it was a weird time because you saw all these people the 0.89

00:22:10.680 older baby boomers who were smart to get out were starting to exit and they were starting to move 0.98

00:22:15.240 to these other you know pei new brunswick they were starting to you know and so you saw this kind 0.83

00:22:21.560 of boom happening and all these other places you know given you know that a large portion of our

00:22:27.000 wealth is held by that generation and held by a small amount of people in canada you know all of

00:22:32.040 a sudden you start to see all those people exiting right so now they actually their kids their kids

00:22:37.320 are kind of left but their kids are left with a smaller amount of uh funds because quite frankly

00:22:43.800 the parents are giving some money to them right now to get started so you have a really odd

00:22:48.600 dynamic that is my biggest concern for the housing market in in bc ontario bc forget about it quite

00:22:56.040 frankly as you mentioned i i think that issue they've went from uh over inflated kind of you

00:23:02.360 know market based on all these weird uh i'm going to call them sam cooper effects and then quite

00:23:09.160 frankly into what they're doing now with the indigenous but but the rest of the you know

00:23:14.560 Ontario and and even parts of Quebec I think they're seeing a little bit of uh the migration 1.00

00:23:20.300 of the baby boomers I'm hoping you know the kids come back I'm hoping the kids stay um and that we 1.00

00:23:28.060 won't see a similar like a a more uh rapid decline than what you're saying but that is my worry right 1.00

00:23:35.700 now I do I do stress about the fact that as wealth leaves the market wealth is going to other

00:23:41.300 countries wealth is finding other places to live and that's going to leave quite a significant void

00:23:46.580 in the major cities of Canada right now can I put some numbers to that because I think you're

00:23:51.180 you're you're touching on something that I think is a is a longer term theme in Canada so when you

00:23:57.620 asked me about housing I was very clear to say in the near term this is what I think things might

00:24:01.520 look and what I near term I mean in the next year or so I think we could see everything I said

00:24:05.460 kind of play out. Longer term, what I'm wrestling with is exactly what you've put a finger on,

00:24:11.320 which is that when we look at the share of single family homes in Ontario and BC owned by people

00:24:18.120 who are over 75, if we extrapolate from the last census, which was 2021, we're probably looking at

00:24:24.780 somewhere around 24% of all single family detached homes in Ontario and BC owned by people who are

00:24:32.240 75 or older. And it's almost one in nine over 85. We're going to get the hard numbers when we get

00:24:39.480 the census data next year, but that's what it looks like to me extrapolating from those trends.

00:24:44.540 So all that to say, there will be an enormous transfer of particularly detached homes from

00:24:51.140 the older cohort to the younger cohort. And an open question is that what price can those transact

00:24:57.500 given that the younger cohort can't afford necessarily those prices. So this is why I

00:25:01.620 said like I could see a scenario where this market just goes sideways and and and it might do that

00:25:08.060 for five six seven eight years which is similar we saw in the 90s hopefully incomes continue to

00:25:12.680 catch up and you kind of bridge the affordability gap that way to me that's more a story for the

00:25:16.780 2030s as it plays out but it's a real thing for sure it's a real concern and then broadly I also

00:25:21.860 think you you put you commented on something else it's a huge issue which is just over taxation and

00:25:27.240 last lack of competitive in this year in Canada it's a structural issue we got to get this figured

00:25:30.820 out because we are going to bleed out the entrepreneur class and it's just it's hard to

00:25:35.540 be super optimistic in the near term until we figure something out on that front yeah yeah

00:25:40.980 you know and well you know i'm not going to go into productivity because that's a whole other show but

00:25:47.460 um condos let's talk about that because we're on the the housing so you know i don't even know where

00:25:53.860 to start with condos so again you know did they are they going to level out are they going to

00:26:00.660 level no no okay no so i was really clear again when yet when i was talking about where i think

00:26:05.700 market's going i said single family and i said that for a reason i thought single family probably

00:26:09.140 flattened there will be no bottom in the condo market for a few years in particular in ontario

00:26:14.020 the issue that we face right now and is that back in kind of 21 22 um a lot of these these condos

00:26:22.660 were pre-sold to investors. Um, and back then, and so, so these are the units that are completing

00:26:28.520 today. So the brand new builds that are coming today were pre-sold back in kind of that 20,

00:26:32.780 21, 22 period. And the idiocy at that time, and something that I was very actively flagging was 0.56

00:26:38.680 these people were paying 30% above comparable resale at that time. So in other words, 0.98

00:26:46.420 that the value of their condo had to increase 30% just to catch up to resale the next five years

00:26:51.600 when it completed, or they'd have an issue with getting their financing. Well, rather than going

00:26:56.280 up, it's gone down. And so now we're having these condo units complete and they're contractually

00:27:03.060 obligated to deliver 1,400 a square foot, let's say. The unit's only worth nine, maybe 800 a

00:27:08.140 square foot based on comparables in the area. It's a disaster. And we still have a couple more

00:27:13.320 years of very high completions on deck. And so it's hard to be optimistic for the rental market

00:27:18.200 specifically it will continue to grind lower i think until 2028 having said that everything is

00:27:24.240 cyclical and the condo market is hyper cyclical and one thing i can tell you with certainty is

00:27:28.720 come the 2030s there will be almost zero new completions for several years running of condos

00:27:35.040 in the big cities and we'll actually have the opposite problem right we won't have enough

00:27:39.440 condos i believe for it will be there'll be a shortage everything's cyclical and the thing

00:27:43.200 with condos is by the time you realize you've overbuilt which is kind of where we hit in 2022

00:27:47.880 too. You got a long, you know, five year run of, of, of high completions coming, but the opposite

00:27:54.440 is true. By the time you realize you don't have enough supply, it's five years to bring new

00:27:57.480 supply. So market is hyper cyclical. We're going through a nasty phase. It's going to be another

00:28:02.340 couple of years where this grinds lower, but the 2030s, I think you can make the argument. It will

00:28:06.700 be the opposite dynamic will be, will be undersupplied in some, some markets, you know,

00:28:11.520 Ben and you know bring it up again when I was in Florida we saw condos go to $75,000 so I remember

00:28:19.240 that were condos were like half a million went to 75 and we were we're like oh my goodness is

00:28:25.000 there a floor to this and then all of a sudden there was we all ran out we bought them again

00:28:29.120 and they went up for a short period of time now they're going back down again but you're right

00:28:32.760 different setting issues today but you're you're absolutely right yeah but you know it does ride

00:28:37.240 back and people do come in and they will buy them back it just the challenge is sustaining right and

00:28:42.520 and uh as we go through these some of the crazy policies now that you're looking at you know

00:28:47.080 there some of the the properties that i'm seeing now you know uh you you might have gone on and

00:28:52.760 you love that condo but the guy beside you he actually bought as a rental unit so now he's

00:28:59.480 transitioning people through your neighbor is changing every like you know six months to a

00:29:04.840 year so you've got uh you know two neighbors a year coming through your building they're you

00:29:10.120 know they're beating up your building they're knocking it you know there's a lot of issues

00:29:13.800 now with the way people buy condos the longevity longevity the the maintenance of them quite

00:29:19.800 frankly is a way different animal than it was 10 years ago where most of the people in your

00:29:25.960 building you knew you knew their kids you know they you knew if they had a dog well that's all

00:29:31.080 changed right because people are coming in and out of condos that rapid fire right now

00:29:35.400 because they're all renting them out so whole it's a great point to watch yeah it's interesting to

00:29:40.200 watch and i'm uh you know i i just uh i was supposed to be in dubai before uh this conflict

00:29:47.960 war you know as you mentioned um was taking off and a friend of mine called me and he said you

00:29:53.800 know that i was looking at a building uh at a property and he said uh don't bother coming down

00:29:59.640 he said the property is basically flooded from top to bottom um and he said by the way before

00:30:07.240 you come down here he said the buildings aren't built very well and i said what do you mean he

00:30:11.560 says he says the construction was so fast and we were throwing things up so rapidly that a lot of

00:30:18.360 the properties that are there just didn't hold up over time and i'm like oh wow that's crazy and

00:30:25.160 we're starting to see some of that it's interesting we went up so fast with so many buildings in

00:30:30.600 different parts of canada you know you're starting to hear these stories of you know like there's

00:30:35.000 fires that go on for weeks behind walls and uh some of the crazy stuff that you're now hearing

00:30:40.520 in in buildings that because we were we were throwing them up rapid fire right we were moving

00:30:45.400 at such a fast pace so no you're right and one of the things that is kind of i guess kind of

00:30:52.280 of incentivized some of that bad behavior is the fact that the way that we finance condos in Canada

00:30:57.680 is a little different than in the U S like in the U S you can, you can get financing to build

00:31:01.720 somewhat on spec. And in Canada, we don't do that. You have to pre-sell them. The problem

00:31:06.380 with pre-selling them is that we, we allowed for years, people to assign their rights to close

00:31:11.780 prior to completion. And so all these people who were buying these condo units, ostensibly for

00:31:17.780 future delivery had no intention of actually taking delivery. They were just going to flip

00:31:21.320 the contract for a huge profit. And when you create that sort of incentive structure, there's

00:31:25.980 no sort of market check on construction quality. There's no accountability around kind of cutting

00:31:33.160 corners on the parts of developers. So if you create that incentive structure, this is what

00:31:36.520 you're going to get where people will cut those corners. And that's where we're at today. I share

00:31:40.480 your concern. I think we've got a real problem there. Yeah. Remember you used to interview when

00:31:44.520 before you bought a condo, you used to go in and interview the board. You'd meet with the board

00:31:48.340 chair right now people just buy people just were buying them great they would go on the market and

00:31:53.220 people wouldn't even sight unseen yep and they were buying these condos so let's talk let's talk a

00:31:59.780 little bit you you hit on it earlier delinquencies so now we're starting to see you know and powers

00:32:05.700 of the you know i call them power of sales but uh you're starting to see things drop and you know

00:32:11.620 So again, and not to beleaguer, drone on about my US experience, but I learned very quickly

00:32:19.920 in the US when I went through it, there's this half, half, half, half rule.

00:32:24.140 And it's crazy when the banks come in and they take possession of properties and they

00:32:29.300 sell them off, they tend to sell them off at a lower amount.

00:32:33.120 And then that lower amount then creates the new market standard for the area.

00:32:37.900 and then you know the problem is it goes on for a while then there's a bunch of delinquencies again

00:32:44.300 the bank comes in and they have to sell them at half again and so what happens is you have this

00:32:48.780 half half half rule you know and that's kind of the reason i saw all these condos and buildings go

00:32:54.860 uh to these crazy prices in those days but are we're in a little bit of that spiral right now i

00:33:00.780 i saw in your report which i really enjoyed i saw these homes they beautiful homes actually uh going

00:33:08.780 out for like 46 of uh you know top market value what what's happening out there yeah so those are

00:33:17.100 specifically power of sale which is kind of judicial short sales or foreclosures for your

00:33:22.780 american listeners um in canada the the one saving grace we have is that in a in a power of sale or a

00:33:30.460 of foreclosure. They're judicially obligated to try to get the best price. They can't just fire

00:33:35.660 sale it. Now, having said that, what that means in practice, though, is they might list a home for

00:33:40.440 sale at what they think is the market value. If they don't get a bid, they'll cut it a couple

00:33:44.300 weeks later and cut it and cut it and cut it. And so what we find is these power of sale, they

00:33:48.180 actually will find the market price, right? And so they'll just keep cutting into, and that's

00:33:54.720 what we're seeing. And so they are leading the prices to the downside. Where it's a concern,

00:33:59.300 it's it's much more of an alarming trend in Ontario right now I don't want to overstate it

00:34:05.980 because like today we're basically only back to kind of long-term averages for for mortgage

00:34:11.360 delinquencies that they were so low for so long that we've come alarmingly off that base but if

00:34:16.580 you took a snapshot today we're only at about the long-term average but what's concerning is how

00:34:19.900 quickly they're rising so the work that I did we looked at the number of delinquent mortgages in

00:34:25.120 Canada, I'm sorry, in Ontario specifically, and it's rising on a monthly basis at the fastest

00:34:30.380 rate since the financial crisis. And we're seeing that month after month, it's increasing, it's

00:34:34.240 increasing, it's increasing. So there's some serious stress there in Ontario specifically,

00:34:39.620 the rest of the country, BC is seeing, again, similar trend. The rest of the country looks

00:34:45.180 okay right now, but man, Ontario looks like a real problem. And there's definitely an issue

00:34:49.380 with mortgage delinquencies in Ontario. Part of that's related to the backup and interest rates.

00:34:54.840 this is a heavy year for mortgage renewals it's the heaviest year on record for renewals so there

00:34:58.760 are people renewing higher some of that's related to falling rents right now that the international

00:35:04.200 students have gone a lot of these towns that had like the places where we're seeing the steepest

00:35:08.920 drop in prices are the places that saw a lot of foreign students come in right so the waterloo is

00:35:15.080 the brampton so those places are getting hit really hard right now so there's that dynamic as

00:35:19.080 well and then also if we look at the economic data private sector jobs are contracting in ontario

00:35:24.040 right now on a year of year basis. We never see that outside of recession. So central Canada is

00:35:28.080 really hurting right now. It's being offset by strength on the prairies. But if you kind of

00:35:34.140 disaggregate that, disaggregate that data, Ontario looks like it's sort of skirting along the edge

00:35:39.560 of a recession. And so all those things are coming together and you're seeing this dramatic

00:35:43.680 rise in mortgage delinquencies, big uptick in power of sale. Even if I'm right and the market

00:35:49.100 kind of stabilizes, there's a long runway of rising power of sale from here. We're going to

00:35:53.680 another year of this i think where it continues to rise even in a stabilizing market and that

00:35:58.400 confuses a lot of people but you having been a student of the us experience you'll know that

00:36:02.960 the market found a floor in prices even as mortgage links continue to trend up that's

00:36:07.520 very common in these cycles the market will bottom but you got a long tail of these distressed

00:36:11.920 borrowers and it takes years to play out it does you know it's funny i remember the days

00:36:16.240 where my dad and i used to go in and we'd go to the local banker and they'd have a picture of all

00:36:21.120 the power sales on the window we used to go into and you know used to go meet him and talk about

00:36:26.480 which one you know it was good to buy and how much and negotiate now it's it's a little different

00:36:32.320 world but i i do remember those days that's how old i am so but uh you know i wanted to talk about

00:36:38.400 brampton because you know and there was a really good article in the globe and mail and i know you

00:36:43.200 you know you do a lot of writing and and work for different newspapers um and you know they they took

00:36:49.440 a look at uh brampton and they said you know because of the stress on the market because of

00:36:57.280 all the immigration policies the multi-generational homes being almost uh seven times higher than the

00:37:04.240 rest of canada um and uh you know the students and everything else they're now seeing one of

00:37:11.680 the highest delinquencies up in brampton in canada and yeah the highest i believe the highest and you

00:37:18.640 know it also you know you and i hit on it before the show and you know i tell the story on a on

00:37:25.280 another show and i won't get into the whole story but it's at a at a dinner party and everyone at

00:37:30.960 the dinner party that i went to is from another country and they all own five or more homes and

00:37:37.520 so there's 30 people at this dinner party and i left and i said to my wife in the car and i said

00:37:42.320 we the only one who doesn't own five homes right like that homes being condos whatever right and

00:37:48.000 i said but i said but you know half those people you know they just got here a year or two ago and

00:37:52.640 quite frankly i don't even know if they're working i said how are they you know how are they doing

00:37:56.640 this right and so there were these you know and i didn't want to get into anyone's business but

00:38:01.600 you know i said she said well she says you know they know this mortgage broker and his name's this

00:38:06.240 and so the next party we go to the guy i'm sitting there and this gentleman comes up wonderful

00:38:11.200 gentleman really really uh funny creative guy he sits down he says paul with your business he says

00:38:17.200 i can get you at least a dozen homes and i said i don't want a dozen homes i don't want to like i

00:38:22.240 don't i really not interested right and i said why would you even do that and he says because you can

00:38:27.520 and it works you get great rents you put students in them you do all this i said man i said that's

00:38:32.080 stressful how do you do that and you know and he said well this is our model and i said no that's

00:38:37.520 not really a sustainable model so is it is part of it all the things i laid out or was it never a

00:38:43.280 sustainable model well look there there's there's a lot going on with the branford story so so let's

00:38:50.160 let's address a couple things off the top the globe discussed the declining enrollments in

00:38:57.120 temporary international students absolutely a factor you used to be able to make the numbers

00:39:01.120 work by putting 10 kids from india in a basement you can't anymore because they're no longer here 0.89

00:39:06.000 without a doubt that was a thing um higher interest rates a thing soft economy is a thing 1.00

00:39:10.640 and the reality is when you have a community that skews more towards newer Canadians you also tend

00:39:16.360 to have a higher share of self-employment and a lot of those industries tend to be much more

00:39:20.600 cyclical they're construction and trade related so when you get a bit of a softening in the economy

00:39:24.900 it's not entirely unexpected that you would see those areas get hit a little harder all of that's

00:39:29.100 legitimate all that was discussed by the globe what was not discussed because it's not politically

00:39:33.040 popular is the fact that Brampton is the fraud capital of Canada right we knew this I mean I'll

00:39:38.220 you an anecdote i met with the the ceo of a of a private mortgage insurer this is a decade ago

00:39:43.980 and and even back then i was concerned with mortgage document fraud and i said how are

00:39:47.820 you guys thinking about this and the i kid you not the first thing he said because look we know

00:39:51.340 all about brampton okay this is what he said to me so it's been an open secret in the mortgage

00:39:56.620 industry for a long time there is an issue with mortgage document fraud i would encourage all of

00:40:00.700 your listeners and viewers to look up cbc just type in cbc undercover mortgage document fraud

00:40:07.260 it was from 2024, I believe. Fascinating undercover research by CBC on the pervasiveness

00:40:14.860 of fraud in certain areas. And Brampton was kind of the epicenter. So look, I've been talking about

00:40:20.280 this forever on Twitter. I get a lot of flack for it. It's an open secret in the mortgage industry

00:40:24.160 that there was rampant document fraud. That's coming home to roost as well, but it's not

00:40:27.240 politically popular to talk about. Now, interestingly, here's something to contemplate.

00:40:31.960 um back in the 2025 budget the government said that they will bring in

00:40:37.720 sort of um automatic income verification direct income verification through cra so if you're a

00:40:45.520 lender somebody comes into you and says here's what i make here's my job letter i make 100k

00:40:49.760 whatever it is they can immediately verify that with cra okay that was promised in the 2025 budget

00:40:55.480 the mortgage industry in their pre-budget submission the lobby group pushed hard for

00:41:00.740 this because they themselves recognize that this is a serious problem in the industry and they need

00:41:04.840 help weeding it out. This has been a thing in the US for 20 years. You could automatically verify

00:41:09.560 your tax documentation through, in their case, the IRS. It was promised in the 2045 budget. We

00:41:16.260 have not seen that yet. And to me, I sort of wrestle with, is the government so incompetent

00:41:25.220 that they don't recognize how big a problem this is and how easy it is to fix? Or do they recognize

00:41:30.720 that it's such a big problem that it's going to be hard to unwind it without creating collateral

00:41:35.120 damage in places where this was pervasive and i don't know which one of those makes me you know

00:41:40.320 more uncomfortable but neither of them is a good story but it is absolutely a thing that we had a

00:41:45.920 serious issue with document fraud in some of those areas and if you doubt that look up that cbc

00:41:49.280 documentary it'll blow your mind i will i will hey ben and i want to i gotta ask you this question

00:41:56.480 and your opinion on all this affordable homes i know you know the the budget update came out the

00:42:03.600 other day last week on thursday we got the the document we're doing a show later today on it

00:42:10.000 and it has all this affordable home uh subsidization you know billions and billions

00:42:18.080 of dollars going into building new homes you mentioned it earlier is there any concern about

00:42:23.520 oversaturation of affordable homes like that you know and i look at it and i think to myself

00:42:29.040 it's kind of weird because you know having a financial background i kind of look at this and

00:42:34.480 i think to myself okay we have homes that aren't selling we have condos that aren't selling we have

00:42:41.280 rental rates dropping and now we're going to take government money and we're going to build and

00:42:45.840 subsidize more affordable homes and then i you know something's counterintuitive to it i can't

00:42:52.160 get it in my head that it makes sense um i'm struggling with it am i wrong am i right am i

00:42:59.440 just you know should forget about it what any thoughts on how are you looking at it right now

00:43:06.000 yeah i spend less time in the affordable end of the market because it's it's it's something that

00:43:10.640 does it's such a small like the actual government sponsored affordable market is such a relatively

00:43:15.680 small part of the market doesn't really move that the broader themes um i think from a high level

00:43:20.800 i would personally rather see more effort placed at just getting out of the way levying less taxes

00:43:28.160 on new development for example i mean for you know roughly a third of the cost of a new home

00:43:33.120 is various levels of taxation we tax housing the same way that we do cigarettes and alcohol it's

00:43:38.480 it's taxed like a sin and so we kind of screw the next generation on on this i for from from my

00:43:43.600 perspective i get less interested i i know there's a need for that there's very legitimate especially

00:43:49.040 today with the cost of living there's a legitimate need for affordable housing i don't have a view on

00:43:53.360 what that should look like but i have much more conviction that the government could move the

00:43:57.280 needle a lot further if they tried to get out of the way help help municipalities get out of the

00:44:02.880 way on zoning issues remove taxation and and try to bring more supply and in general when you bring

00:44:08.960 more supply you tend to get lower prices and that benefits everybody except well except existing

00:44:13.280 homeowners let's say yeah no i'm with you and you know we haven't even gotten into it but there's a

00:44:18.640 whole other show on uh the supplies to build and quite frankly helping helping them actually bring

00:44:24.800 some of our pricing back to pre-covid rates but which never happened again but and as a builder

00:44:30.240 that drives me absolutely batty all the time um ben do me before we go tell us a little bit more

00:44:37.760 about your company how do you get the report um because you know i think for those listeners and

00:44:44.320 for our viewers you know her getting to know true patriot love if you're interested in real estate

00:44:50.320 you know and you're interested in the analytics of real estate you know the your report is amazing

00:44:56.640 so tell me about how you get it where you get it um because i want to make sure the viewers know

00:45:01.280 before we go thank you very much for that so you can check it out edge analytics.ca there is a

00:45:07.440 sign up link there and in fact i'll give you a discount code for your listeners viewers edge 30

00:45:12.640 I'll just say it here. We'll drop the monthly price to $30 a month, which I think is a steal.

00:45:18.240 I will warn your viewers, though, you can't sign up with a generic email. You can't have no hotmail,

00:45:22.660 no Gmail has to be verifiable professional email. And the reason for that is I have a comparable

00:45:26.580 professionally institutionally priced product. And so I can't have I can't have my research

00:45:32.240 floating around, you know, without me knowing who's getting it. So so so that's the only caveat.

00:45:37.140 But but otherwise, thank you very much for the kind words. Appreciate it.

00:45:39.500 yeah thank you ben and thank you for taking the time hey i want to have you back in a few months

00:45:45.160 when receivers things sort of balance out and i think in my mind i think after the summer we're

00:45:50.980 going to see kind of another phase of what's going to happen in housing in canada um and of course

00:45:57.540 always you know when the fall comes you get a feel for what was built over the summer so

00:46:01.580 i really appreciate it and it was it was great to do this with you today and i look forward to

00:46:06.940 seeing you soon. My pleasure. Thanks for having me.

True Patriot Love - May 17, 2026

Is Canada’s Housing Crash Just Getting Started？ ft. Ben Rabidoux

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