Best Developer Investment, CEO WEHBA, Planner Mike Collins-Williams

The best investment according to the CEO of the local Builders Association.  The opportunities and risks for builders and real estate developers. The membership group attended by the who’s who in local real estate. That and more on todays episode of the Truth About Real Estate Show For Canadians!

My name is Erwin Szeto, host of this 300+ episode show since 2016, ranked #81 in Business on iTunes. Happy holidays everyone and what a week!

The US Federal Reserve, the folks who control interest rates in the US just announced they are holding the rate and expect to cut rates three times next year. Assuming .25% each cut that’s ¾ of a percent sending stock markets soaring and i’m a bit surprised Jerome Powell is sharing their plans for cuts.

The implication to real estate investors is many expect the housing prices to go up once rate cuts begin in the US.

The implication for Canadians is our own Bank of Canada increased rates faster and higher than the Americans did so the natural expectations is they will cut steeper and faster than the Americans so we should expect more than three cuts in 2024. 

The market expects rate cuts of 1.25% to 1.50% by the end of 2024 and cuts to come as early as the spring.  Based on history, cause and effect, we should expect to see the market pick up in activity and increased demand pushing prices up which is good news to many current investors.

My clients are taking advantage financing their acquisition of US income properties using their HELOC.  Since HELOC interest rates being variable, expecting to fall and it’s cheaper financing than what the American lenders are offer, as long as they can cover the interest and payments, this makes a lot of sense.  The positive cash flow and no rent control will help a lot to reduce the risk of such investments.

I really can’t wait till I sell some properties here and buy houses down south.  The timing seems appropriate too according to Shark Tank’s Barbara Corcoran who’s saying the US real estate market will go up once the interest rate cuts begin.


We Canadians with lots of HELOC have a strategic advantage over the Americans since American banks only offer 30 year fixed mortgages.  Their buyers should stay on the sidelines longer because who wants to lock in near peak interest rates.

Best Developer Investment, CEO WEHBA, Planner Mike Collins-Williams

On to more serious matters.

I’d like to take a moment to reflect on the human beings negatively affected by investing on pre-construction or speculation. There have been many and will be many more people losing their 15% deposits on pre-construction condos and houses and they’re on the hook for any costs and losses incurred by the builder when they resell the property.

In combination with a slowing economy and job losses it’s just awful out there.  

In a country with massive affordability issues someone was going to get burnt and let’s not forget renters who are praying to stay in their rent controlled units as a move could be a disaster in having to pay today’s outrageous market rents.

A friend of mine told me he rented out his downtown Toronto condo, two bedroom, two bath for $3,500 plus utilities and it’s still negative cash flow. Rent went up $500 over a two year period.

If the federal Liberals wonder why their polling numbers look so bad… well they didn’t have the courage to force municipalities to revise their zoning to allow for higher density and they’ve simply allowed immigration to exceed the supply of health care, education and housing.

While the Canadian economy is shrinking in real GDP terms.  The numbers are even worse when you remove the economic growth from immigration.  Housing affordability hasn’t improved much either and it’s about to get worse.

Royal LePage is forecasting Toronto housing prices to increase by 6% by end of 2024.  Between rate cuts and rising prices, this is why I’ve recommended my clients to wait for a rising market to sell to maximise their sale prices.  We investors need all the help we can get with investment properties so out of favour in the current market.

The housing crisis still exists, there are deals out there for short term gains for those with deep pockets and strong stomachs.  I still believe those who create housing, as they always have will continue to be a profitable investment business hence we have a serious expert today in Michael Collins-Williams who is the CEO of the West End Home Builders’ Association.

MCW as he’s known to his friends, has spent his entire working career in Planning and Building with a degree in such from Ryerson University, followed by 18 years at Ontario Home Builders’ Association before taking the big job as CEO almost 3 years ago at the West End Homes Builders’ Association.

I know several members of the West End Homes Builders’ Association.  They are an close knit, active community of members with the major players including folks with hundreds of millions worth of real estate.  Cool party is the crazy rich builders are approachable and humble in my experience.

With all the development craze I’m seeing on social media, if you’re one of them, I can’t recommend enough you check out your local, non-profit, Builders’ Association for low price, high value networking.

There’s a saying in Chinese, the best things are cheap and quality which is why I’m so frugal :).

You can connect with MCW on Twitter:, website is and Mike is happy to speak to anyone interested in joining, just reach out!  Just tell him you heard him on this show.

Please enjoy the show!



This episode is brought to you by me! We don’t have sponsors for this show. I only share with you services owned by my wife Cherry and me.  Real estate investing is a staple in my life and allowed me to build wealth and, more importantly, achieve financial peace about the future, knowing our retirement is taken care of and my kids will be able to afford a home when they grow up.  If you, too, are interested in my systematic strategy to implement the #1 investment strategy, the same one pretty much all my guests are doing themselves, then go visit and register for our next FREE Online Training Class.  We will be back in person once legally allowed to do so, but for now, we are 100% virtual.

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** Transcript Auto-Generated**

Erwin 0:00
The best investment according to the CEO of the local Builders Association, the opportunities and risks for builders and real estate developers, the membership group attended by the who’s who and local real estate. That and more on today’s episode of The Truth about real estate show for Canadians. My name is Herman Seto host of this 300 Plus episode show since 2016. This show is ranked number 81. On business in business category on all of iTunes. Happy holidays, everyone in what a week, the Federal Reserve in the US. The folks who control interest rates in the US just announced they are holding rates, and they expect to cut three times next year. Assuming point two 5% Cut each. Each of those cuts, that’d be a three quarter of a percent. And it’s been sending the stock market soaring. And I’m a bit surprised Ron Powell is showing his hands so early in doing a complete reverse on everything else he’s been talking about, up until this point in sharing their plan for cuts. So yeah, everything they tried to fix is all being undone pretty quickly, just based on his words. Anyways, the application to real estate investors to real estate is a is that many expect housing prices to go up go up once rate cuts begin, including shark tanks Barbara Corcoran, as she believes that real estate prices will reverse as soon as the interest rates begin. I’ve included that note in the shownotes. I link to the article in the show notes and interview of shark tanks Barbara Corcoran. The implication for Canadians is their own bake candidate increased rates faster and higher than the Americans did during the last two years. So it’s natural the natural expectation that the bet candidate will cut steeper and faster than the Americans. So we should expect more than three cuts in 2024. The markets are already expecting a rate cuts about four or five rate cuts in the tune of 1.25 to 1.5% by the end of 2024. And those cuts are coming expected to start maybe as early as spring like March ish. So based on history, cause and effect, we should expect to see the market pick up the real estate market pick up an activity increase an increased housing demand pushing prices up, which is a good news, which is good news to many current real estate investors. And this is notice to anyone who’s been sitting on the sidelines who’s looking to get into the market, we’re probably at the bottom, we’re approaching the holidays, and that’s typically a great time to buy. And again, we’re looking the market is expecting rate cuts in the spring or even mid year of 2024. My clients are taking advantage by financing their acquisition of US income properties using their home equity line of credit. Since home equity lines here in Canada, their their interest is is variable because it’s based on the prime rates and with rates expect them to fall in Alright already a current hit home equity line prices, interest rates, it’s cheaper the financing is cheaper financing than going through an American lender. And as long as they can cover the interest and payments, this makes a lot of sense. Positive Cash Flow and no rent control, of course will help a lot in reducing the risk of such investments. I really can’t wait. Based on the information that’s been coming out, I really can’t wait. And also, unfortunately, the extensive amount of research I’ve done in investing in the States, I really cannot wait to sell some Ira properties here. As mentioned in the past, I might have three houses being listed the first second week of January. The timing seems appropriate to again, as mentioned shark shark tanks Barbara Corcoran saying the market is about to pivot. We can end with lots of HELOC. And I’ll have a lot more HELOC. Once I’ve sold three houses will have a strategic advantage over the Americans. This is again the Americans American banks only offer the currently at this time. They currently only offer 30 year fixed mortgages. So they are more expensive in terms of rates. So thereby, you would have to expect that American buyers will stay on the sidelines longer, which would give Canadians the flexibility and the strategic advantage of of getting in for the Americans do because why would an American want to get a new mortgage today at near peak interest rates onto more serious matters. I’d like to take a moment to reflect on the alternative humans out there being negatively affected by investing on pre construction or speculation. There have been many, I’m hearing this all over. It’s all over social media all over Reddit. I’m hearing in my circles as well. There will be many people who will be walking away from their 15% deposits on pre construction condos or houses and they’re on the hook for any additional costs and losses incurred by the builder and when they go to resell that property, in combination with a slowing economy, there’s job losses out there, pretty much all the banks are cutting of how our finance more cuts as well. And they’re supposed to be the most solid institutions that we have in Canada. In a country with massive affordability issues, someone was going to get burnt. And let’s not forget the renters who are praying to stay in their rent controlled units, as a move could be a disaster and having to pay today’s outrageous market rents. A friend of mine recently told me that his downtown Toronto condo that he’s owned for about two years ish bought pre construction, it’s a two bedroom, two bath, and he rented it out for $3,500 Plus utilities. This is in the Liberty Village, which just west of downtown Toronto, and that’s still negative cash flow. So that’s not an easy investment. For many. This list investors pretty pretty well deep pocketed. And the rent has gone up $500 over a two year period. That’s pretty rough for most tenants out there. If the federal Liberals wonder why their polling numbers are looking so bad, well, the bills come due all that spending they did all the reckless fiscal and monetary policy they’ve been doing. And also the fact that did not have the courage to force municipalities to revise their zoning to allow for higher density. And they’ve simply allowed immigration to just exceed the supply of health care, education and of course, housing. All the while the Canadian economy is shrinking in real GDP terms. The numbers are actually even worse. If you remove the economic growth from directly from immigration. If you remove immigration, we are we are actually negative four quarters in a row in terms of GDP, real GDP per capita. And housing affordability hasn’t improved that much. And it’s about to get worse, roll up page. They’re all over the news this week. As they’re forecasting Toronto housing prices to increase by 6% by the end of 2024. So price movement is going to reverse is what they’re predicting, between rate cuts and rising prices. This is why I’ve recommended to my clients to wait for a rising market. So to wait till spring to sell or later, they can hold as long as they want as long as they can to sell in order to sell and maximize their sell prices. We investors need to need all the help we can get as investment properties that have long term tenants in them. They are incredibly out of favor in today’s market. So help is on the way not help the markets improving. So that will definitely help all investors.

The housing crisis still exists, though, it’s actually gonna get worse with the lack of new development going on. There are deals out there for short term gains for those with deep pockets and strong stomachs. Like I mentioned, there are literally percussion, Washington Well, there are newly built condos and houses that are being returned to builders, you better believe those builders are motivated to let those things let those things go at deep discounts. So there is opportunity for those who can stomach it and have the deep pockets. I still believe those who create housing will, they will continue they always have and they will continue to be profitable investment businesses if executed correctly. And hence we have a very serious expert today. And our guest is Michael Cohen Williams, who is the CEO of the West End West and Home Builders Association. MC w as he’s known to his friends. It’s an acronym for his name, has spent his entire working career in planning and building it with a degree in such from Ryerson University, followed by 18 years at Ontario homebuilders association for taking on the big job as a CEO for almost the last three years at the west end Home Builders Association. I know several members of the West End homebuilders Association, that’s a mouthful. And they are a close knit active community of members with the most major players there, including folks with hundreds of millions of dollars worth of real estate. The cool part is that these crazy rich builders are very approachable and humble. In my experience. With all the development craze I’m seeing on social media, if you’re one of them, I can’t recommend enough that you check out your local nonprofit Builders Association or the Ontario Builders Association, because the prices are quite a precedent members but it’s quite low and expect high value networking. There’s a saying in Chinese. My parents always said it. And I say find the direct translation is the best things are cheap and quote high quality, which is why I’m so frugal and always on the hunt for good deals. You can connect with them CW on Twitter. I’ve given the short link it’s J CW. Again links are in the show notes. website is www dot West and HBA dossier. Mike is happy to speak to anyone interested Joining. So just reach out, tell him you heard him on this show. Please enjoy the show. Happy Holidays, folks.

Hi, Mike, thanks

Unknown Speaker 10:12
for coming on the show. Thanks for having me excited to be here.

Erwin 10:15
So what’s keeping you busy these days?

Speaker 1 10:18
The fun never stops in the housing industry. You know, I guess the market has slowed. But there’s a lot happening in terms of public policy at the municipal level, provincial level, some big federal announcements recently. And you know, despite sales, not exactly bursting at the seams, the last number of months, you know, there’s there’s a lot of stuff still under construction, there’s a lot of activity of that has

Erwin 10:44
many builders actually taking a pause in terms of building because for example, like one of my neighbors, actually one of my kids friends father works, he actually represents a whole large number of like, lumber, lumber, lumber and drywall providers. And he said they just hadn’t, they’re on pace for another record year.

Speaker 1 11:02
For some builders, things are slowing down. But you’ve got to remember to build a home. You know, it takes a while, like even a single family or a townhome, you know, that could take six months to a year. But when you’re getting into the multi residential high rise, some of these projects are literally under construction, 567 years. So even though the market has slowed in terms of new home or resale, home sales, the actual construction activity is very busy based on pretty strong years and 2020 2021 2022. In you know, things slowed down on the construction side during the pandemic, but the sales were strong coming out of that. So there was a bit of a lagging effect. So the actual construction activities very strong, which is great for our economy. There’s lots and lots of people employed in the housing sector, whether it’s books like you and I, or, you know, the people actually on site swinging the hammers, bankers, lawyers, it’s, it’s, you know, it’s the largest industry in Canada, in terms of total employment, and it’s a huge diversity of opportunities.

Erwin 12:13
Now, for listener doesn’t know who you are you this is your second, just a second time round two. So only round two,

Speaker 1 12:19
I get invited for round three, we will see how the day goes. Round two was supposed to be months ago.

Erwin 12:23
But I know that a lot of things going on. Yeah. regret taking those taking the promotion. I see for listeners benefit, like, tell us about your journey, and also your journey in the real estate industry.

Speaker 1 12:37
So I was born in 1981. Oh, you’re gonna I’m a child of the 80s. Yeah. So I went to school for urban planning in late 90s, early 2000s. So my professional background, I’m an urban planner, urbanists love city building and everything that comes with it’s a big transit nerd. So I’ve worked for when I first graduated a couple builders and then worked for the Ontario Home Builders Association for 17 years doing urban planning work related to public policy around housing, land developments, a lot of I’ll call it macro planning level policy. So rather than, you know, how do you push building exercise? Why do the planning process it’s more what’s the provincial legislative framework around our entire land use planning and development system? I moved on from that role and can’t even remember now 2020 2021 and took on the role of CEO of the West End homebuilders association. So we are a nonprofit association representing the new housing and land development industry in sort of the Hamilton Grimsby, Burlington areas, sort of the west end of the Golden Horseshoe, so to speak. We have 300 member companies, about 65 of them are home builders. And when I say builders that you know ranges from the custom builder building like a high end one or two units a year to renovators sort of doing conversions, to really niche interesting stuff. And then on the large scale stuff, the folks building towers with the cranes up in downtown Hamilton or missing middle infill or subdivisions, and then the balance of our membership is sort of the rest of the construction industry, you know, trades banks, urban planning firms, sort of the, you know, firms that produce steel, lumber yards, etc. So, our organization represents the interest of the residential and land development industry and so there’s a lot of Government Relations in AD You can see a lot of education and professional development, a lot of events, you should come to one or two of them,

Erwin 15:08
I sent I sent you guys on behalf. So

Speaker 1 15:10
yeah, lots of lots of networking events in business opportunities for people working together in the industry.

Erwin 15:17
For example, I just went along and asked her permission, username, but I sent along a client of mine, a mother son combo. She joined, she blasted those other organizations. And I said, Why not join Mike’s organization, because, you know, everyone who’s got their name on a sign along with QE W, who builds something like 300 homes, a summer type thing, or towers, like they’re all at your Meetup part of your organization. So if you want to meet the big players that go there,

Speaker 1 15:50
so if you’re involved in the industry, it’s a great way to for business networking. Even if you’re not a builder, if you’re somebody that wants to do business with a builder, whether you sell, you know, we’ve got folks that do really interesting AV equipment or technology or different products, and it’s one thing to have a store and try to sell it to a couple consumers. It’s another thing if you can sell it times 300, right, one shot to see what builder that’s installing in their home,

Erwin 16:20
or at least bounce the idea off someone who builds 300 homes a summer, like, you know, that’s a highly qualified opinion.

Speaker 1 16:27
Yeah, and I look at housing, like, home isn’t a home, like we think of maybe what a home might have been when 1960 or 1980. Like, today, in 2023, they are complex machines for living in, whether it’s the technology that’s involved in them, whether it’s, you know, some pretty sophisticated heating, ventilation, air conditioning, you know, as we’re sort of addressing climate and energy efficiency issues like these, these are very complex builds. Now, it’s not just throwing up a bunch of sticks and bricks in a roof. So there’s, there’s a lot of different companies involved in the industry, a lot of innovation. And, yeah, it’s it’s a really interesting sector to be involved in, in 2023.

Erwin 17:18
And then my standpoint is like, I’ve read many aspiring builders and developers on listening to this, and I wish them all the best because we only get out of this housing crisis. Well, not the only way. But adding supply would be a great way. And just from my experiences, observing, like people who create housing generally get ahead in life tends to be great investments.

Speaker 1 17:39
Generally, the only caution, and I know you’ve got an eager audience, it is a tough business. Oh, yeah, absolutely. It’s a high risk business and high risk community high reward. But, you know, the road is littered with those that, you know, have tried their best and tried to be innovated in and work their way through it. So it is a tough business. It’s a highly political business, which is, you know, one of the major challenges, like if you’re building a car, or a widget or a bakery, like you don’t need to go get approval every time you want to sell a muffin, or, you know, Ford doesn’t need to go get an approval every time it sells a car. So the timelines are long. For better or for worse, you do need capital, you know, land, labor, and capital are sort of the three major inputs. And in today’s interest rate environment ain’t easy. I don’t I don’t envy the position a lot of folks are in, especially when they’re highly leveraged.

Erwin 18:42
And that seems to be the formula for exam. I’m a geek at this stuff. So just observing developers that went under back in like, Oh, 708. Generally, they went under because they couldn’t support their, their, their financial obligations, generally, because they had a lot of debt.

Speaker 1 18:55
Yeah, the the industry learned, I think a lot in 8990 91. We’re going back aways, that financial, huge. Toronto housing crash. Yeah, massive in a couple of very large companies like Olympia and York and and Bradley went under. You know, I don’t think we’re going to face that kind of situation. But you know, there are companies out there and stressful situations. But the rules around bank financing have changed a lot for projects to move forward. Especially in the high rise sector, that’s probably you know, there’s a lot of risk there. And, you know, that’s, that’s not for people that are new entrants into the market, but when you’re building a 5060 storey tower, you’ve got to get into between 60 and 7370 and 80% pre sales in advance with deposits before the banks will, will finance or move forward with the construction loan. You know, loans that size are often syndicated with multiple players, sometimes not just the schedule bank, sometimes sort of mezzanine players as well. So it gets It’s complicated. There’s a very serious underwriting process. And that doesn’t say that there’s no risk to the system. It’s just, there’s a lot more safeguards and backstops. And I think due diligence than perhaps there was 30 years ago. But you know, things happen crossford went under, in 2000 22,021. And, you know, at the time they had for massive sold out projects under construction in Toronto, and these weren’t little projects. It was 80 storey tower at young and Gerard 30 storey tower at young and college 260 storey towers in, in Yorkville, like these were sold out under construction projects. So there is risk

Erwin 20:44
the pandemic them.

Speaker 1 20:47
No, they they ran into some financial trouble. Just they were over leveraged and construction costs went up significantly during the pandemic construction costs have continued to go up. Stats Canada came up with a data point earlier this summer that from 2019, beginning of the pandemic till now or I guess earlier this summer, hard construction costs are up 54%. So that’s running higher than the rate of inflation. And you know, I mentioned earlier some of these projects, you’ve got 567 year timelines. So the challenge is, if you sell a condo unit in, I don’t know, 2019 2020, it’s a huge project, you got to get here 70 80% pre sales, so it might take two years, three years to hit that, then you finally get under construction. And if you’re building a 50 6070 storey tower, it’s going to take 567 years of construction. So you’ve got to have a pro forma when you go to sales, recognizing that you’ve got a five, six or seven year runway, and costs go up, like you can lock some things into contracts, but the cost of concrete, windows, labor, etc. You’ve got to build in contingencies. And for some of these projects, that there are projects right now, I know we’re sort of more Hamilton Oakville focused here, but there are projects, be it downtown Toronto or downtown Vancouver that are very large towers that if they haven’t started construction, and they were in sales years ago, they’re not starting, they don’t they could be 100% sold out and the revenue is not enough to to build the actual tower.

Erwin 22:33
My mutual friend who introduced us to using even telling me like there are builders who are just building at a loss just to maintain their brand and to keep their people busy.

Speaker 1 22:41
Yeah, you got to some companies, you got to keep the machine rolling, so to speak. For most reputable companies you know, if they’re in real trouble, they can but for most companies they want to deliver their brand is important. The handshake the contracts important they they want to deliver for their customers, their customers are putting a lot on the line when you go into new home sales office and you want to invest in that community in that future. That That means a lot, right? So it’s, it’s a tough market right now, with the sheer volume of cost escalation, it has really put a lot of projects into a difficult place. And, you know, we’ll probably get into it more detail. But, you know, with the Bank of Canada rates. When you listen to the news, or hear people chatting about it, it’s all about mortgage rates, which which it is for the end user, whether you’re buying something new and you’re going into the bank, and you know, you want to put down a deposit and or buy a home or buy a resale home and you’re looking at you know, five point something percent or more five year mortgage rate or whatever the variable rate is now, like that’s one thing when you’re buying a million dollar home, but when you’re building a two or $300 million project, and the timelines are stretched very long, and you don’t get your revenue until you close a few years ago, you get a construction loans in the three 4% range now, eight 9% Here in the secondary markets you’re over 10% with long timelines with political uncertainty around approvals. It’s a risky business.

Erwin 24:38
So where are we at now? So actually, one thing I want to add to them is that from the consumer side, like this seems like there’s good deals available as long as you can finance it as long as you have enough cash for a down payment. Preferably more cash like 50% down but like like, like like the condo market, for example, I decal and stats and, for example, condos, the I think the September number was I think there was like five months of inventory of condo listings, which is like, well into buyers market. So there’s opportunity for people

Speaker 1 25:05
100% I think we, you know, when the market slows, right, there’s always opportunity. There are builders out there, that’s, you know, might not quite be at that 70 or 80% pre construction financing. And there, there may be deals to be had to try to, you know, they want to sell they want to get to that financing, Mark. You know, there’s some existing buildings that are I’m talking sort of the new construction rather than the resale side, you know, there’s some existing buildings that are up or under construction that have some inventory. And, you know, we’re talking about interest rates, unfortunately, there are some individuals, some folks out there that maybe over leveraged themselves that maybe bought a couple years ago, and you know, I don’t know they, they bought a six or $700,000 place, they need to pull out a $500,000 mortgage, and it’s come time to close and they can’t close. You know, they they purchased in a different environment where they thought that they’d have a 3% mortgage, not something more, and they just can’t meet the monthly carrying cost or the bank simply won’t close. So there are some individuals that perhaps are in some distress that maybe there are deals to scoop up. The assignment market, as I understand is a little hotter than normal. I know builders don’t love the assignments, but like they got to close. So I think 2024 will be interesting, because there’s a lot of condo projects that are going to be wrapping up. And the question is, is everybody gonna be able to sell I think a lot of people will close, but they’ll probably be more the probably more opportunities. And I don’t love when there’s an opportunity when somebody is in distress, but there’s probably more opportunities in the next year with some folks that can’t close is

Erwin 27:02
the unfortunate reality reality of speculators, if you didn’t have solid plans to close because someone, someone can close and they, if they put it up for rent, we will probably ever rent have a rental right away. Because the rental market is just on fire.

Speaker 1 27:16
I mean, I closed on an investment unit in July. I bought in 2019. So despite some market instability, you know, around $1,000 a square foot

Erwin 27:28
Oh my God, where is it?

Speaker 1 27:31
It’s a loft conversion. The Westin bakery Lofts at Logan in eastern awesome conversion project, shout out to Rob Cooper with the Altera they do amazing work 1000 square foot. Wow. This is the reconstruction it’s long timelines. Right. So yeah, I was actually just looking at some of the stuff last night and we basically closed almost five years to the date that we bought, like it’s a couple of months short. And you know, it’s a couple year sales program, things were slow down during the pandemic, in terms of the builder moving forward, and loft conversions are complicated. So it’s not a simple build. But yeah, we’re renting close to $5 a square foot, which is insane. But that’s, that’s the market out there. Like I say there’s pressure on the price per square foot on the new side. But on on the rental side. If you’re in Toronto, you know, Hamilton, wherever you are, like if you’re close to transit, it’s, you know, it’s just Location, location, location. And in the hot market, the last number of years, a lot of people made bets on DNC locations. And I’m sure the entry price point was different. But when the market turns, the locations hold up.

Erwin 28:58
It’s less risk. This is less record risk in general, but it may not look as good on a spreadsheet. So how so before we were recording, for example, I was asking you, I was just telling you how I was or I was on the news that landbridge mall and Hamilton there’s two towers being built 300 units like Oh, fantastic. This is the two towers, and they’re only 12 stories each. And I thought, wow, that’s like the center of Hamilton mountain. It’s like basically the commercial shopping hub. Tesla’s building, building out the service center, they’re like, that’s all great news. But like 12 stories like I thought I thought that Eric could support a lot more. Because who wouldn’t like for the malls benefit you’ve built in customers, I’d want as many as possible. And for the people who are gonna live there, there’s a mall.

Speaker 1 29:46
We’re seeing a lot more of this, this trend and I’ll get to the height in a minute. But just like in general, the planner sort of our term for this is this is gray fields, not brownfields gray fields were throat North America, you’ve got lots of either dead malls, dying malls or malls that are doing all right. But there’s a lot of parking and you know, perhaps it might be, you know, higher and best use of land to reinvest and bring in some residential, like

Erwin 30:16
our mall right here across the street. Like there’s lots of vacancy inside the mall and the parking lots humongous

Speaker 1 30:22
and you build in customers by having people living there permanently. Mostly, you know, a lot of these malls are well located either on highways on transit. So we’ve started I think, in the last 10 years, right across North American if I zero in on sort of the greater Golden Horseshoe or GTA in Hamilton area, you know, some of the first malls to do it like you you look at Yorkville on the subway in Toronto, and in the parking lots there, there’s all kinds of towers going up. So sort of the call it the locations on subway started going up first. Sure, Waze got a whole bunch of towers, Fairview mall, and the shepherd lines got a bunch of towers at Bayview mall

Erwin 31:03
surrounded by towers, right? So

Speaker 1 31:05
for the for the pension funds or real estate investment trusts and whatnot that own these, or you’ve had new kind of REITs emerge. So you know, smartcentres used to just be a mall, they, they they own malls and where the Walmarts are got a REIT. And they’re starting to look at all of their assets and looking not to sell off with condos, but to have an income stream in terms of interest terms of rental, Canadian Tire is looking into it. So you’ve got, like Loblaws is looking into it. So you’ve got I think it’s choice three. So you’ve got North American or Canadian wide companies that are looking at their land assets, especially as we’re shifting, the population is growing like crazy. And we’re shifting more and more towards intensification. And you know, I like to say a lot of the easy sites are gone

Erwin 32:02
because old fill places lots of space.

Speaker 1 32:05
I’m a Toronto transplant so the easiest Oh go now when you come out to the 905 like huge opportunity in the malls are where a lot of the opportunity is I said Hang on one

Erwin 32:16
second. So my family my dad’s practice we used to be in Market Village and we’re Mark we’re gonna be like, I know it’s not Toronto, but since the other side of steals give me grace me but

Unknown Speaker 32:27
I don’t go north of steals

Erwin 32:30
the world ends Edge of the World Go

Unknown Speaker 32:33
north of bluer but

Erwin 32:36
but they tore down that mall. And they’re building a tower in before recording us talking about the you know how in Asia for example, like every mall is generally in a tower. Right? They have like several floors, including below the grade several floors, and that’s the mall

Unknown Speaker 32:51
and the heights there are taller and what we’ll come back to Hamilton but

Erwin 32:54
but the point though, is that, would you say the easy steps taken but will we ever see that happen? Like if Sherway gardens like torn down and then replaced with a tower with Sherway gardens built within?

Speaker 1 33:05
At some point there I’m gonna get the name wrong but it’s at Richmond in John there was like the Scotiabank movie theater there that yeah, like a mall. But it’s a movie theater with a bunch of different stuff like that was only built in the late 90s. Like they’re knocking that down to build towers and build a new movie theater in the base. So cool. You got to the land values have to hit a certain point to sort of, you know, when you’ve got a parking lot, there’s a certain amount of construction costs that go in like you’re demolishing a parking lot. That’s not a large existing structure. And it’s not just the cost of bringing down the structure. It’s like what’s the what’s the current value when you look at the rents, the leases all of that so you know, one of those I don’t know, maybe not quite dead malls but malls that weren’t doing super well. If you go a couple you know we’re recording from key VW in Trafalgar you go a few exits down towards Erin Mills Parkway, there’s their Sheridan mall, massive parking lot, not a super successful mall like they’re looking at intensification, opportunities there Mississauga actually have a great location for an amplification. So Mississauga has kind of got within their urban planning structure in the long term. They’ve got five or six malls that they’re looking at, like whether it’s Sheridan mall, whether it’s I think it’s North common. And then Oh, my God, Erin Mills Town Center. They’re looking at these assets as areas to sort of intensify over the next 10 or 20 years. So we’ll come go further out, you know, talked about lime ridge and Hamilton. I mean, 12 storeys doesn’t seem like all that much. But I guess sort of the demand land value there. It’s a bit of a different equation than if you were looking at your way. Now. Maybe if they looked at it, years later, it would be different. There’s the east gate mall in Hamilton, which is going to be the last stop on the new LRT Line. They’re looking at a lot more than 12 storeys there. Great. So there’s multi Well towers being considered, but again, that’s on a future that’s going to be the anchor of a future, you know, rapid transit lines. So there’s there’s lots of puzzle pieces.

Erwin 35:10
More than 12 stories but poor libraries, Malden,

Speaker 1 35:13
small doesn’t have the LRT. Okay, I’d go taller, I want to see 50 stories 60 stories Saturday, I don’t know.

Erwin 35:23
Because that’s the only way we can really get squeezed prices down. In terms of like your skills, the scale of economy, you

Speaker 1 35:30
get obviously efficiencies when the when the land value is x and you can squeeze more units out of it, then you you bring down the land value per unit. You know, there are construction cost efficiencies when you’re stacking and you’re going taller up to a certain point, once you get to 50 or 60 stories, there’s issues around elevators, mass damper systems in terms of building sway, etc. So you start losing some of those efficiencies at a certain height. And then you’ve got to jump to a next much bigger height or, you know, eat a lot of costs.

Erwin 36:03
I was reading an article a couple of months ago, you probably saw it as well, but like, like a certain there’s a certain height until if you don’t get above it, then it doesn’t make any sense. And there’s, I believe, you know better than I would, there’s some condos where you have to take an elevator and need to get out to take another elevator even further higher. Yeah,

Speaker 1 36:22
I on a personal level, I wouldn’t love that I used to live in a 40 Something storey tower, and it was we had three elevators, it was great. But you know, once one or two elevators are down on service, or it’s moving dates, obviously complicated. So I encourage buyers out there, don’t just look at the suite, don’t just look at the location, how many elevators are there that that makes a difference in your day to day quality of life. But yeah, or in Toronto is 75 stories, I think there’s like a second elevator lobby. And there’s some buildings, you mentioned, the idea of putting a building on top of a mall, you’re seeing some buildings where, you know, you might go in at the ground level. And then you got to take an elevator to the 10th, Florida like the sky lobby, and then you change to the elevator to your unit. Or, you know, different elevators for for parking. So when you get into we’ll call it hyper intensification, which to me is sort of like the Manhattan ideation. And there’s a lot of really cool projects going up in downtown Toronto or Vancouver. But you get into some really complicated architectural and design issues when you’re on a postage size, lot. And you’ve got to have, you know, the garbage, the entrance to the parking the lobby of the mail room. All of your internal services. Yeah, development is fun.

Erwin 37:45
So then to know your question, I’m sure that listeners probably pissed at me for not asking you earlier. So where are the opportunities? So for example, I get I get new developer builders always asking like, I’m interested in buying land lots of land and sit on it or build something on it, is that something once you get into these days, I

Speaker 1 38:03
wouldn’t recommend buying and sitting on land with the political dynamic. You know, the provincial government reversed a bunch of Boundary Expansion things recently, and we’ll see what happens with that. But that’s, that’s an extremely, extremely risky and politically fraught, exercise that can literally take decades, I’m not joking, like decades, so So to move forward to new piles of cash, then you have to be very, very well capitalized and be prepared to lose it all or, you know, I, I know, people in the industry where individual projects aren’t like a decade, it’s like their career spans, you know, a 25 or 30 year project to bring a raw piece of land and actually deliver keys to, to that buyer. But to go back to your original question on sort of, where are the opportunities and you know, if you’re not super well capitalized, and building a tower, or buying land, to me, it’s all missing middle housing, sort of that niche infill products, which, you know, on a personal level, I just find more exciting, like it’s cool kind of neighborhood level, trying to find opportunities, be it buy something existing that can be either renovated, retrofitted, come down and split up and put in a multi small multiplex in whether it’s in the 905 and in more suburban context, or whether it’s somewhere, you know, in an urbanizing corridor, like the LRT or the future LRT corridor in Hamilton, there’s so much you know, I find it cool infilled design like there’s there’s a lot of opportunity there. And I think that’s what people are hungry for right like most people are renters all that stuff. Yeah, buildings are first time buyers like In the so called American or Canadian dream that you’re going to go to school, work hard, get a good job and get that house with the white picket fence, like, most people don’t have the ability to buy a $2 million dollar place. And most people also don’t want to drive to Sarnia or own sound to be able to afford something that’s maybe not at that, you know, million and a half, 2 million price point. So what I find interesting about the missing middle is you’re not necessarily in a tiny condo unit shoebox in the sky, you can have an interesting design, you can still be in touch with the community because you’re on the first second or third or fourth level. You know, even if you’re higher up you’re still at the treetops, you’re still looking at the window with the squirrels running around and can see people on the street you know, opportunities to have mixed use and beds and retailing it I think that’s that’s the future we were chatting before the show about like other jurisdictions like our our future in this region in areas probably going to look a lot more like Europe and you know, maybe on the Manhattan as Asian component a little more like Asia, but you know, I don’t think all of Hamilton or Oakville is going to be skyscrapers, it’s going to be more of this infill kind of stuff.

Erwin 41:16
Well, I support like, like cities wanting to maintain character, because then you kind of lose, you kind of lose everything if you if you get rid of a character and like historic buildings, and lots of parts of Ontario and Canada have, you know, houses that were built in the 1920s and earlier, so I don’t think anyone wants to see that go away. Now, so say you’re a beginner investor, what kind of missing middle infill project would you like to sink your teeth into?

Speaker 1 41:43
I think there’s two distinct routes. You can go with sort of the renovation conversion, buy in, you know, so there’s been some legislative zoning regulatory changes in Ontario that we used to have something called exclusionary zoning where this was North America wide were basically wide swaths of, you know, everywhere from San Francisco to Vancouver to Toronto to Hamilton, Oakville, Mississauga. wide swaths of land were only single family homes were allowed. You couldn’t, you couldn’t even put a secondary suite in, you couldn’t make it a semi detached. You couldn’t buy and split a lot and put in a semi or a townhome. It was it was singles only. And it sort of excluded all other highs and typologies. I think as the housing crisis has gotten worse and worse and worse, and young people simply can’t aspire to ever afford to live in the neighborhoods that you know, a lot of them grew up in. There’s been a lot of pressure politically to sort of, I’ll call it open up zoning to be a little more permissive. And we’re not talking about putting up towers or mid rise in existing communities, it’s maintaining the character with something, you know, planners, often called gentle density or invisible density, like, if you’re walking down the street, you’re not really going to notice the difference between a three story infill little apartment with six units and a two story single family home next to a semi like a lot of our historic neighborhoods in Hamilton or Toronto, or Vancouver, or Montreal or a whole mix of stuff, it’s it only became like, after the advent of the automobile in sort of the post war suburbs that we got into this weird pattern of like only single family homes, and massive expansion suburbs. So that’s where I think the opportunity is either on the conversion side of buying an existing single and got it or renovate it and put in you know, split it up into two or three units, or put in a secondary suite in the basement or or sort of a laneway house in the back or above the garage. So then you’ve got the opportunity there to to have a couple units in terms of an income stream, and most importantly, rather than one family living there, now you’ve got two or three families living there. They’re utilizing the existing infrastructure. And you think about neighborhoods, like how do you have a cool neighborhood with a independent coffee shop on the corner, a cool bar down the road or, you know, an independent grocery, you need customers, you need people. So I think there’s an opportunity across a lot of the suburbs for some intensification, where you’re increasing the population and existing areas, which increases opportunities for all kinds of other businesses. And I guess the other path instead of conversion is, you know, you buy a property, you knock it down and you either sever to build a couple small properties or yet, you know, you take that single family home and put in a tiny townhouse or a little multiplex where there are four units.

Erwin 44:57
So I get this like a friend of mine just came on the show And he didn’t know his name is Mackenzie he lives in Calgary. Yeah, she bought a house a single family home on a 60 by 100 lot. It’s gonna tear down this Calgary, he’s gonna tear down build a town sorry for townhouses on it. All of them were basement suites. So they can have eight units on what was a single family home lot.

Speaker 1 45:20
And that’s what we got to do. Like our population is growing like crazy. And we need opportunities everywhere. So we say we need to build up in and out and up means a hell of a lot taller towers than we’ve had before. And we’re, you know, the GTA has got more cranes in the skyline than any other jurisdiction in North America, which is healthy, but our population is growing so fast, it’s not enough. It’s not really affordable, you need to grow out with some strategically located urban boundary expansions for new communities that are built differently than the kinds of communities that we built in the past. You and I were chatting before the show, like if you go to Trafalgar, and Dundas in North Oakville like, those are new communities. And they’re being built densities, far higher than any of the suburbs that were built in the 70s 80s, or 90s. And then the last is we need to grow in so that’s in our existing communities. And that’s the opportunity for the missing middle or your example of the single family lot that became four townhomes and in the basement suites, so you go from one unit, eight units, not incredible. If we could repeat that. And it doesn’t always have to be one, eight, it could be one to two, one to three, one to four. But from coast to coast across Canada, there are massive opportunities. And these are, you know, strategically located and existing communities that have services have character have a vibe, places people want to live,

Erwin 46:42
when the aid gets really tasty for an investor, though, you’re getting more people to step up, when the returns are there, then more people will do it. Right. And like free, like I know how difficult it is to get things done. Like I used to live in Burlington, Burlington, and we won’t get into how tough it is getting things built there. But like, for example, I was looking to East Austin, where prices are incredibly affordable. And those neighborhoods have reputations for being extremely developer friendly. So would you consider investing further away, out of home, out of your home city,

Speaker 1 47:13
I’m not super familiar with the US market. So I’m not the right person to ask. But, you know, obviously having a diverse portfolios useful i On a personal level, I like to be able to see feel touch. My real like real estate, to me is it’s real estate, it’s real. Like I like it as an investment vehicle in terms of it being a tangible asset, and I manage my own assets and know our tenants and, you know, there’s a different kind of comfort level there. But you know, when you mentioned it being so much easier in Austin versus here, I think a lot of the reason we’re in this housing crisis is the level of bureaucracy the level of control I mentioned earlier, everything’s a political approval like, but

Erwin 48:01
isn’t it by design, because it is a democracy, it is the the voters generally do not want density in their backyards.

Speaker 1 48:08
100% agree, but that’s why we need to change, we need to come at things from a perspective of housing abundance. Maybe not every investor would like to hear that because I think one of the reasons why housing has been so lucrative isn’t an investment is it’s the opposite of housing, abundance, we have a system of deliberately constrained supply, and our democratic institutions have led to that. So we have a bizarre system where existing residents and neighbors seem to get a veto over who comes to their neighborhood. And to me that’s fundamentally wrong. Especially in a growing society, and it’s, you know, the local interest is different than the public interest, and the greater good and our greater good and a lot of that local interest. And, and I’ll get slammed for saying this, but a lot of it’s like, a particular demographic, you go to any public meeting, where there’s, you know, I don’t know, a six storey mid rise being proposed in an existing neighborhood like go to that public meeting and the demographics pretty similar, right.

Erwin 49:14
What’s the local homeowners?

Speaker 1 49:15
Yeah, a lot of old white people who have money

Erwin 49:19
that’s just who lives there though. Yeah, versus like in a in a more fair and more fair argument would be the future tense should be there as well but they don’t know they’re the future home occupants.

Speaker 1 49:31
Nobody speaks for the future residents nobody speaks for the young folks or the new immigrants or the those that are international students and permanent you know, non permanent residents

Erwin 49:44
they’re not giving up voting booths they’re not at the at these meetings they’re not the not mostly as charged at the locals are.

Speaker 1 49:52
And you know, I’m still gonna vote to the locals in that, you know, people fear change, and for better or for worse development, housing, our industry is all about change. But if a candidate is going to be successful in the future, this might be one of the biggest issues, if not the biggest issue that we’re facing as a country, that young people are screwed. Like, you can go to school, you can get a good job like good luck.

Erwin 50:22
You’re screwed. Unless you average parents. Yeah, yeah,

Speaker 1 50:25
if you can’t afford a house, if you tried richer parents, that’s, that’s not really what we should be be building as a as a country. And, you know, we’ve had some, we’ve got some very successful post secondary institutions where we’ve got like, the best and the brightest from all around the world are coming here. And they’re coming here to learn, and they can’t afford, afford to stay or find suitable accommodation. So we’re educating them, and then they’re, they’re gonna leave or young people are gonna leave. And, you know, our growth, growth is a good thing to have. But we have so much growth, that we’re not keeping up on housing and infrastructure. And we need to fundamentally change how we approach housing, and it’s, it’s politically uncomfortable politicians. You know, they’re listening to the existing residents, and those existing residents typically are well housed and the plight of the 26 year old doesn’t matter to them.

Erwin 51:23
I’ll never forget help a neighbor association was fighting these new student residents next to McMaster University, saying they thought it was too tall, six storeys, or whatever. height this is exactly what you should want densification of students in one area, so they stayed out of your neighborhoods, otherwise,

Speaker 1 51:40
but they fought back to build throughout the neighborhood. I mean,

Erwin 51:44
yeah, like, what was in their best interest? You

Speaker 1 51:47
move right next to a university and don’t like students like, okay, but

Erwin 51:52
didn’t you fight the building that’s going to house all the students? Right, you should be encouraged No, build up to 20 stories, build up the 50 stories, I want all the students in the neighborhood, they can all live in that building. This

Speaker 1 52:01
is why in my view, the provincial and federal governments need to be a lot more assertive, because the municipal governments, you know, councillors are beholden in, you know, MPs and MPs are elected to but they’re a little more distant from the day to day cut and thrust of neighborhood politics. You know, your average local councillor, the stuff they’re hearing about is development and housing issues, or I don’t know, the snowplow didn’t come this morning, or people don’t like people parking on the street, like it’s very neighborhood driven constituents and issues, and they’re extremely responsive to the development issues. And we need to find more ways of getting to a yes. And the easy answer is often no. Or it’s Yes, after a whole series of compromises. And you know, the number of buildings that have been built in this area, all through the GTA and Golden Horseshoe where, you know, I don’t know what’s proposed at 20. storeys, it goes through two years of planning process and negotiation with the neighborhood and counselor, and oh, you know, they chop off three or four stories, and somehow that’s the success. Oh, we got it down to 16 stories success, everybody’s happy. It’s sort of like, well, the developer, a builder was willing to go for 20, we just lost four stories, maybe that’s 40 units of housing that we could have had. Now, we don’t have? Well, you multiply that over hundreds and hundreds of projects over the course of a decade, like we flushed 10s of 1000s of units down the toilet over negotiations in church basements, because somebody doesn’t want to shadow on their tomato plant for a few hours a day. Like what what’s our priority here? And

Erwin 53:42
then we forego all those property taxes as well, the city collected? Yeah, and

Speaker 1 53:46
everybody that owns property right now knows, like, there’s so much pressure on our municipal budgets with inflation and property taxes, like the best solution is as assessment growth, and that’s new housing. And yeah, all of those, all of those, I guess, invisible or ghost floors that never got built, those would have been a lot of property taxes.

Erwin 54:11
And now we’re now I don’t know where it’s going to end up. But in the news, the proposed tax increase for Hamilton was 14% for next year. So here’s your here’s the tax bills come to be paid now. And also as Bill 23 is also basically we have to subsidize developers to build Oh, I’m gonna push back

Speaker 1 54:29
on you on that. One is Bill 23. In the municipalities had been very good at blaming. They don’t want to take responsibility for their own problems. So they want to find a boogeyman so they blame the province and blame developers Bill 23 did make some changes to the development charges act. It does not make any changes to the development charges that private sector for profit Builders pay for anything they build beyond a couple $100 taken off on on community housing. Everything else is full freight. They have removed Oops development charges from affordable housing projects. So if Habitat for Humanity, the YWCA or another nonprofit builder shows up to build below market, nonprofit housing. There are no development charges. Now philosophically, I wonder like, Why the hell were they playing development charges to begin with? Like, should we be full freight and taxing housing for the most vulnerable like that that should be where the government’s trying

Erwin 55:27
to help out because they stopped building houses. So you need to subsidize someone instead? Yeah. So

Speaker 1 55:31
that the changes in Bill 23 are entirely focused on nonprofit affordable housing. There are some reductions on purpose built rental, which we’re hardly building any of any way. And it’s things like, I think it’s like a 25% reduction on three bedroom units will like that’s the stuff that we, you know, we should be designing our tax system in a way that tries to encourage certain things. But in the current environment, like we tax housing, like cigarettes and booze, it’s like a syntax. If you buy a new house 25% of that straight up taxes, straight up taxes. So you wonder why we’re in this mess, like at the average costs, you know, I’m just gonna use round numbers. If the average cost of a new house or new townhome somewhere is a million bucks 250 of that taxes. That is insane. And that’s

Erwin 56:22
all the taxes combined all the taxes together. Yeah.

Speaker 1 56:25
So you’ve got the federal government’s got the GST, so that’s 5% right there that there were rebates structured for homes between 350 and 450. But good luck finding a house for under 350,000. You’ve got the provincial share of the HST, which is 8%. You subtract a $24,000. HST new home tax credit, but that’s, you know, nothing in the grand scheme of things. So you got the 5% plus 8%. So you’re at 13%. Right there. You got about 2% land transfer tax there, you’ve got a you’ve hit 15%. There’s all kinds of other smaller fees and charges that go to the province. So you’re already at 15 16%. And then you’ve got development charges, which are massive, they can be over 100,000 a door in some jurisdictions. You get to the smaller units like apartments, cottony a one bedroom, two bedroom condos, like depending on which municipality you’re in, you’re still over 5060 $70,000 for those. And then beyond the development charges, there are community benefits charges. In low rise, you have Parkland dedication, we need parks, so I don’t have a problem with that, per se, they take 5% of the land on a low rise project. But on a high rise projects, they take cash in lieu. So there’s some municipalities that that’s 20,000 $30,000 right there. So yeah, things we need, like parks, but like it adds up. And then all of the permit fees, planning fees. So that’s the straight up taxes, they easily hit the 25% there. And then in terms of the total tax envelope, like all of the workers and trades on site, they’re all paying WSIB they’re all paying income taxes. And of course, the company itself is paying corporate taxes. So yeah, you have about 25% Straight up taxes on the purchase price, and then there’s other layers of tax embedded in so you’re probably easily over 30% Evil builders. Yes, the evil builders that are generating massive amounts of tax revenue for our provincial and federal governments, building new communities, putting a lot of risk on the line to build a product we desperately need, and it’s taxed as if it’s booze or cigarettes.

Erwin 58:49
I still think the municipalities have screwed up and not. Because because they’ve blocked develop so much development made it so difficult that the bills come to do. That’s just how I look physically look at it from an outsider’s point of view. And also don’t understand why it felt like the new bill never came due for the pandemic. Like for example, let’s take Toronto, for example, that the TTC was still operating well, while no revenue was coming in. I’m not surprised don’t blame things like that, you know, bills 23 under the bus.

Speaker 1 59:17
I mean that the whole transit system is a whole other conversation like we need transit for cities to run.

Erwin 59:21
We do but let’s just be honest about where the expenses are coming from. Yeah, but Bill can do well, they’ll

Speaker 1 59:26
defend central province help there but I think you’ve raised it right like the bills come due for the pandemic and part of the increases in the lack of development is a lack of development. So

Erwin 59:37
there’s a lack of property taxes and when it comes to development

Speaker 1 59:40
in municipalities don’t have enough different revenue tools. And it’s either you know, it’s basically property taxes or like the the thrusts so much on the backs of development and one of the reasons why you mentioned Austin earlier like most jurisdictions, the United States don’t have development charges in any way shape or form like we do they they got it Some different kinds of impact fees. But Ontario is pretty unique in it being around 25% is tax, you don’t get that American jurisdictions, you don’t get that across much of the rest of the Canada except for sort of the the Lower Mainland in Vancouver is also a very, very high tax environment. But you go to Alberta or the Maritimes yeah, there’s development charges, but they they don’t have the scale of taxation that we do. So we’ve dug ourselves a pretty deep hole that we’re in this housing crisis, we need to build more, are planning systems broken? And we tax the hell out of new development? But I don’t have any there’s no silver bullet, there’s no easy answer, because, frankly, municipalities do need a lot of this revenue. Back in the day, the Feds in the province put more money into growth related infrastructure than they do now. Everything has been downloaded to municipalities and effectively municipalities have then downloaded it onto the private sector. And then the private sector, like our builders aren’t paying the development charges, it gets embedded in the cost of the housing. So you’re young first time homebuyer or the investor who’s listening, you’re paying for all of that infrastructure, not upfront, you’re then embedding it into your 25 year mortgage, and you’re paying the amortization on that infrastructure, growth related infrastructure. So it’s, it’s the homebuyers and the investors that are paying for all of this embedded in their mortgages, it’s pretty painful.

Erwin 1:01:33
Because the CANS been kicked down the road, and someone’s gonna have to pay for it, somebody’s got to pay for it. And now the next generation is really gonna pay for it. Yeah,

Speaker 1 1:01:42
and we talked earlier about like the escalating cost of construction, that it’s running higher than inflation. Well, let’s not just build a house or build a tower or like for municipalities, building a bridge, building a road, building a sewer, building a library. Construction costs are up across the board in terms of the material hard construction costs. And sorry,

Erwin 1:02:06
can you break that down, like how is labor materials compared to pre pandemic, for example,

Speaker 1 1:02:11
there was a study I mentioned earlier of the, I think, the top 11 municipalities in Canada, and they said that the hard construction costs were up to 34%, since the beginning of 2019, just before the pandemic, you know, I can tell people that costs are starting to use a little bit. sales activity has slowed, there’s still a lot of stuff under construction, but there’s not a lot of new stuffs, starting construction. So demand is starting to ease off. So there there is a light at the end of the tunnel in terms of some of those costs, starting to ease up and talking to some builders, when they’re looking at go forward contracts. It’s not quite as bad as it was before. There’s a little more competition. But you know, we still have labor shortages. It’s it’s not all bad things are getting better. But we need to build a hell of a lot more with the population coming. So this if things are easing, that’s great. But like the long term arc, we we’ve got, we’ve got issues.

Erwin 1:03:18
Where do you see prices going? It’s November 2023. Right now,

Speaker 1 1:03:23
I don’t know I don’t have a crystal ball. I mean, I I think as long as interest rates remain elevated, probably pretty sideways. If we actually have another 25 basis point increase, like I could see them dropping a little bit. It’s funny. So there are two different markets, the resale and new. On the resale side, there’s more room for stuff to drop, because if somebody needs to sell their house, they’re going to sell their house. And there’s lots of people that don’t need to sell. But you know, there are divorces, deaths, people moving jobs, like there’s always people that need to sell, and if they need to sell they’ll drop the price. Whereas on the new construction side, the cost of land is the cost of land. Labor may be easing a little bit, but not significantly. And they still need contingencies in we just talked about the cost of materials. And then of course, we just finished the conversation on taxes like I don’t think the City of Hamilton or Toronto or Oakville and Mississauga are going to massively cut development charges. The province and the Feds don’t sound like they’re going to massively cut GST or HST or land transfer tax, although the beds and provinces have reduced or eliminated GST on purpose built rental, which is an absolute game changer in terms of making those performance work, so that there are positive things happening, but it makes it more difficult on the new site to actually cut prices. So they just they just won’t watch. So that there are projects sitting on the sidelines that are probably ready to go but if they can’t If the revenue can’t cover the expenses and costs, they just won’t

Erwin 1:05:04
launch. So they’re ready to go in terms of they have their approvals, they just haven’t started selling them yet. It’s that

Speaker 1 1:05:09
or where they’ve started selling them and sales aren’t really going anywhere, and they’re not going to cut their

Erwin 1:05:15
prices. Right. So, so they’re willing to wait, oh, wait, I

Speaker 1 1:05:20
mean, you may see a tiny bit of easing off, but you’re not going to see big price cuts,

Erwin 1:05:25
what are the laws in the way just like strong capitalization, strong cash positions, I

Speaker 1 1:05:30
mean, if somebody’s in trouble, then then they may be willing to to cut prices. But the the other component here is like a builder or developer, like it’s not 100% capitalized themselves, like they’ve got partners and financing and the banks, right, like the banks, you know, you’ve got your term sheet, the banks aren’t going to move forward on a construction loan if the project’s not viable. And if you start slashing revenue, in an environment where the banks are getting even more conservative, because they’ve seen where prices and costs have gone up over the last number of years, they want to see a contingency. And of course, there’s the higher interest rate environment. So there’s, there’s a, there’s a profit squeeze. But then there’s also a squeeze on the financing side, because, like, money’s not as liquid as it was before, like people everybody’s tightening up. So to me, that just means on the new side, I don’t see prices coming down. But as I said, on the resale side, yeah, they could ease up a little bit. Like, I’m hopeful, and I’m sure all your listeners are hopeful that the Bank of Canada will start easing up at some point in 2024, I don’t think it’s going to happen early 2024. But whenever it does happen, I think you’ll see a lot more optimism in the market, because once once they start cutting, they’re probably not going to turn around and start going up again. So that’s sort of an indication of the long term, you know, I don’t think we’re ever going to get back to where we were at the depths of pandemic, we’re basically like it was the lowest it could possibly be. But you know, as we ease up a little bit, I think more buyers will come back into the market, there’ll be more optimism and things will start moving again.

Erwin 1:07:17
Because that’s the funny thing is we are housing crisis. But there were in a buyer’s market, though.

Speaker 1 1:07:24
But that’s the long term problem is that the population is still growing, people are still coming. So we’re in a weird spot right now. Because when you start like,

Erwin 1:07:35
well, the people coming in aren’t allowed to buy either, because we have foreign buyer taxes, but they

Speaker 1 1:07:39
need a place to live. So whether it’s investors buying and they can rent. So investors environment now. There’s still a lot of housing completions happening right now, by virtue of the stuff that started construction before. So there’s a lagging impact. So if in 2023, and 2024, and maybe 22, you know, we’re not starting a lot of new projects, that doesn’t really start showing up in sort of supply deficiencies for two or three years later, as to when they’ll be complete. So if things have slowed down this year, or next year, it’s the issue is two or three years down the road, when there’s a lack of completions, there’s a lack of stuff coming on. And that’ll be potentially, when the markets going gangbusters again, because interest rates have come down more people are buying, we still have the population growth. But in that very moment, there’s not going to be a lot of new stuff coming onto the

Erwin 1:08:29
market. And then we’re back to Hunger Games for housing. sad state of affairs. So we already mentioned that you don’t see prices really coming down for for new construction. So there’s no technological, major advances that will cause deflation. And in real estate, unlike that YouTube, I told you about, I saw with the 3d printing of houses.

Speaker 1 1:08:49
So one of the biggest, I think bolts of the industry that I’m in is we had productivity is an issue. We have a serious lack of skilled trades. We’ve got wave of retirements, like a if anybody goes to a new construction site, you’d be surprised by the average age if you walk around. It’s not a bunch of young guys.

Erwin 1:09:11
Oh, they’re near retirement, then. Yeah,

Speaker 1 1:09:12
there’s a lot of folks near retirement, we, the government’s done better. There’s there are more new entrants coming in now than there were before. There’s a lot more people in the apprentice ship system. But there’s such a gap, especially with retirements coming so one of the biggest issues our industry faces is we’ve got to improve productivity. We need fewer people to do more. And one of the biggest ways that we can do that is more technology shifting more towards modular pre production. If you look at other jurisdictions in Asia, in Europe, there’s a lot more modular factory built housing and I don’t necessarily mean the whole house is built in the factory. I mean, you know, you’re building a mid rise or a high rise there may be like wall assembly components that come in on the back of a flatbed. Truck and then there are assembled so I was in a plant in Sweden back in 2017. And it was amazing, it was looking at these these wall assemblies where, you know, they could tell me there’s exactly 36 nails and the precision is within like, a couple millimeters. And you know, there’s seven layers to the wall in terms of all of the insulation vapor barrier or whatever. And rather than being assembled outdoors, like we do here in the winter, while the winds howling, right, like, it’s, it’s built in a factory environment, just like we build cars, and then it shows up on site. And it’s kind of like, I don’t know assembled like Lego or mechanical, versus each piece by itself. Any

Erwin 1:10:39
idea how much cost savings are in such a model,

Speaker 1 1:10:42
you probably pick up costs somewhere, you probably lose costs somewhere. So I don’t have an exact figure for you, I think that the main eye opening component is the productivity and less manpower required. Let’s go towards the automation. So there’s, there’s cost savings there in two ways. It’s the productivity in the labor power, but there’s also speed these these projects are able to be built faster. You know, one thing that’s has you know, it hasn’t taken off in Canada yet but there are some mid rises being built out of like mass timber wood versus concrete and because the time it takes concrete to cure and all of that you can build a mid rise wood building faster than you can build a mid rise concrete building, but there’s, you know, other credit and logical issues there. Right, but

Erwin 1:11:37
it’s also fire retardant. YouTube, that

Speaker 1 1:11:39
one as well. Yeah, the mass timber like people sort of think, oh, it’s wood, it’s gonna burn for like a match. It doesn’t it’s like these, these mass timber is sort of cross laminated timber, you know, their burn rates. Some of them when in tests lasts longer than steel, like the steel will melt before. Like, these wood columns are thick, like they will char and harden.

Erwin 1:12:03
I think I saw it on your Twitter, either you are you or someone else. We’re conversing about it on Twitter. And that’s where I learned about mass timber.

Speaker 1 1:12:10
It’s pretty like it’s taken off big time in Europe, especially in Scandinavia, we’ve got some mass timber stuff going up here, not not as much as I thought there would be when the the building code was changed in 2015 or 2016. There’s some more code changes coming. But yeah, there’s there’s a handful of projects in the Toronto waterfront, there was a demonstration project in Vancouver at UBC, that’s actually 18 floors. Couple in the waterfront and Grimsby. So they’re here in there, it hasn’t taken off in a massive way. But there are a number of companies that do build mass timber.

Erwin 1:12:42
Super cool. And I circle back to the membership like what what is a member? Because I think everyone, I’m cheap. So naturally, I would go to a nonprofit to see what I can learn who I can network with at least try it out. Right? Like, well, how much is the membership at Western homeowners, homeowners association, for

Speaker 1 1:12:59
a builder, it’s around $2,000, an associate member, which is a non builder, I’m not going to have the exact number, it’s somewhere around 14 or $1,500. And that all year, for the year, and it also, we’re a three tier association. So with that fee, you automatically become a member of the Ontario Home Builders Association, and the Canadian Home Builders Association. And there’s all kinds of benefits there networking opportunities, same as a gym membership, it’s not much. Yeah, it’s an integrated network, from coast to coast from St. John’s, Newfoundland, right out to right out to Vancouver Island.

Erwin 1:13:36
And again, like all the biggest players will be there. All of

Speaker 1 1:13:40
the biggest companies are there in terms of those building, building our cities, building our communities. And as I said, it’s not just the builders, it’s, you know, the lumber yards, the financial institutions, there’s tons of small independent businesses, because they find it’s a great way to you know, rather than spending all your money on advertising into the, you know, this the sea and hoping somebody sees you, it’s very targeted, you join an association, you know, it’s kind of like a chamber of commerce, right? You join an association, you target a potential, particular client base, and you get out there and you network, and you show your product off and get some business.

Erwin 1:14:21
So I don’t like giving advice, but shouldn’t everyone who’s considering being a builder or developer be a part of their local Builders Association?

Speaker 1 1:14:30
I wouldn’t say everyone. I think ethical, strong business practices are critical. And look, there are some people out there that have a different way of doing business and we don’t want them as part of our membership.

Erwin 1:14:42
I assume they’re good people that listen to the show, so they’re likely good people. All

Speaker 1 1:14:46
right. Well, for all your listeners. Check out just Google West End Home Builders Association. If you’re in the Hamilton area, if you’re in a different area, check out the Ontario Home Builders Association. And you know, though there’ll be a list thing there of, you know, the London Kingston wherever you are there is a local chapter.

Erwin 1:15:05
And then how if someone wants to join, What’s the process like? Do they get a free month or anything like that or everyone’s

Speaker 1 1:15:11
different. So for us in in the Hamilton area, we have full membership deal going on right now, since the beginning of November. If you join now you can become a member now, but you don’t pay your fee until 2024. And you basically you pay the 2020 for a year and you get the rest of this year for free once we got lots of events, we got our president’s gala coming up in a week, AGM where we’ve got some great guest speakers and economists coming. Couple of networking socials, we also do a lot of professional development. So those that are interested in building in the building science, like there are some pretty major building code changes coming up. And rather than reading about them or YouTubing about them, we’ve got some of the top like instructors in the country coming in for like detailed hands on course around some of the technical building science changes to the building code.

Erwin 1:16:04
You just had Dr. Mike Moffitt on as well as the past guys. Yeah,

Speaker 1 1:16:07
it does. So we did a really cool research project. I’ve done two or three now with Mike Moffett. So we had an event in the spring where he was our keynote speaker and ran through a lot of his research like he’s, he’s awesome. So, you know, it’s a networking event, but includes a lot of good information. So we’re all about information, professional development, education, a diversity of events. I mean, tonight, we literally have an under 40 pub crawl. So I don’t know how educational it’ll be. But, you know, there’ll be 5060 young entrepreneurs out and what better way of making business contacts or socializing, you know, over a beer at a pub somewhere. So we try to capture a variety of different opportunities and options. And look, if your social network is your business network, you’re probably doing pretty well.

Erwin 1:17:00
That’s awesome. That’s super awesome. Everyone should check it out. Thank you for like, 1450 a year. That’s, that’s really cheap. Compared to that, because I see like masterminds or whatnot being offered.

Unknown Speaker 1:17:13
I don’t think anybody should hike my fees. But

Erwin 1:17:16
yeah, fine. It’s still it’ll be a shadow of what like these masterminds cost, like 10,000 a year. Mike, we’re running out of time. Anything else you want to share that I haven’t asked?

Speaker 1 1:17:27
No, I mean, I hear a lot of pessimism out there about the market and where short term rates but yeah, it’s short term. I you know, the great thing about real estate is it’s real there. There are ups and downs. It is a cyclical market. You Canada is the place to be right that the population here is growing so fast that it’s causing challenges. But I think the long term arc for real estate investment for housing for land development, it’s a solid business to be in,

Erwin 1:18:01
because you don’t see anyone not. But developers are still buying land, like people are still accumulating stuff.

Speaker 1 1:18:09
It’s Mark Twain once said buy land, they don’t make any more of it. Yeah,

Erwin 1:18:12
you went I don’t know if you knew about Ontario. So fast here?

Speaker 1 1:18:18
Well, you know, sorry, the latest population estimates, I got my one stat here, Canada’s population grew by 1.1 5 million from July 22 to July 23. It’s the biggest jump and all of the g7. Our population growth rate is 2.9%. Like, I don’t think we’re going to maintain this level. But like, if we stay at that level, we will literally double in population in the next 25 years. So, you know, we’re we’re well on our way, you know, from the 40 million to 50 million to 60 million and and, you know, whole country is growing, but it’s places like the greater Golden Horseshoe Vancouver that, you know, we’re going to be superstar international cities in terms of just dynamic global cities.

Erwin 1:19:04
Any idea what our growth rates going to be going forward? Because I think there seems to be rumblings that the people in general are not happy with the with the growth rate it is and you’re seeing it with the government as well.

Speaker 1 1:19:14
I certainly support growth, we need growth, we need the labor, because we’re not having babies. Yeah, and the rest of the world to grow, you know, we got to remain competitive. That being said, I think there is fraying of the social fabric. And I think a lot of that has to do with the cost of housing. People want safe, secure housing.

Erwin 1:19:38
Affordable, affordable.

Speaker 1 1:19:41
Attainable, I use the word attainable versus affordable for your average middle class family like that sort of the nest egg and the idea of being able to buy a home and that could be a condo townhome, like whatever in and you know, that is sort of the nest egg of sort of Growing your equity and being able to retire and provide for your family and and that’s kind of been broken in the last five to 10 years. And I worry in the long run if Canada keeps growing at this pace, and if we don’t figure out this housing issue. You know, I don’t want to get too political. But I just think we’re seeing a lot more polarization in our society right now. That would, that could get worse, probably worse. If, if more and more people are left behind in housing is the key ingredient to a stable society,

Erwin 1:20:39
who’s most pissed off and who tends to protest young people? And they should be rightfully positi? They

Speaker 1 1:20:44
should, because they should be pissed off. I think I’ve said it a couple times, like you can, you can work hard, you can do all the right things, and you’re in your early 30s. And still living in mom and dad’s basement or, you know, with crappy roommates and an overcrowded plate like, that’s some Yeah, that would make me angry to

Erwin 1:21:05
Mike’s. Thanks so much for doing this. Thanks for the time. Thank you for watching. If you want to learn how to invest in real estate from scratch, my team teaches beginners how to use the number one investment strategy that I personally use in a virtual free training class every month, go to investor To register for our next class. That link is also in the description as well. I publish at least two to three videos a week here. So subscribe if you want to keep learning from seasoned investors, like myself, my guests, and if you’re just starting out, feel free to ask questions and comment below. And I do the best to answer each of those comments and questions myself. Again, if you’re ready to learn the nitty gritty about real estate investing from a professional investor r

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