A Silver Lining

 

Small Dead Animals reports that mortgage defaults are rising quickly on commercial properties.

It stands to reason: the rise in interest rates hurts commercial property owners just as it hurts residential owners. But with the growth in telecommuting, and the boost it got from the Covid lockdowns, commercial vacancy rates are 20-23%. People are working from home. We have too much commercial space.

The problem is almost its own solution. Too much office space; too little residential space. We need to convert office buildings to apartments. 

These buildings will generally be high and near the centre of the city, reducing commuting costs and fuel use, creating livable mixed urban neighbourhoods, and supporting more efficient public transport.

Of course, working from home, there will be less reason for living in the city. But an apartment anywhere will be desirable.

Don't Buy that Toronto Condo

Toronto real estate prices have apparently been taking a hit this summer. The housing bubble in Canada’s big cities may be over.

I expect it is. The rapidly spiralling house prices to my mind have not made sense in terms of the real demographics. I suspect they were fuelled by speculation.

In the first place, the population has been aging: fewer new home buyers, and more older people looking to downsize for retirement. It ought, on this basis, to be a buyer’s market.

Retirees do not need to live in the city for work. It ought to follow that city real estate should lose value in comparison to town real estate, not vice versa.

Moreover, technological advances have rapidly been erasing the advantages of city life. Thanks to Amazon and online shopping, the advantages in terms of consumer choice of living in a big city have pretty much gone. As for entertainment or socializing options, these have been equalized to a great extent by the Internet. Now you can hang out with anyone from anywhere, always see the latest movies, or the art house flicks, if you prefer, and so on.

Since the advantages of city life have been declining, the extra money people are ready to pay in order to be there ought to be declining too.

And, of course, there is the growing practicality of telecommuting.

With self-driving cars, the transportation options should also become much cheaper. Soon, any small town can economically run its own public transportation network simply by using self-driving vehicles. Making said small towns a that much more attractive option for the retired and elderly.

Sooner or later, these factors should kick in. The wonder is that they have not been felt yet.