The Wealthy Barber Podcast - #21 — Ben Rabidoux: The State of Canada’s Real Estate Market

Episode Date: July 15, 2025

Our guest this week is Ben Rabidoux—Founder of Edge Realty Analytics and North Cove Advisors and one of the most respected voices on Canadian housing and economics. In this episode, he joins Dave to tackle some of the biggest questions facing Canada’s real estate market today. From the condo market crash to vacancy rates for rentals to the role of HELOCs and immigration policy, Ben explains how we got here, what’s coming next and what it all means for affordability in this country. He also shares the story of catching Fortress as a fraud and offers a candid take on whether Canada is too soft on white-collar crime. If you care about housing, affordability or the future of Canada’s economy, this episode is a must-listen. Show Notes (00:00) Intro & Disclaimer (00:55) Intro to Ben Rabidoux (02:19) Catching Fortress as a Fraud (09:26) Is Canada Too Soft on White-Collar Crime? (11:56) Are Rents Going to Come Down in Canada? (15:12) How Much Do Home Prices Need to Drop to Become Affordable Again? (16:33) The Condo Market is Hyper-Cyclical (17:58) The Condo Market Crash (24:34) Who Was Buying These Pre-Sale Condos? (25:27) Where is This Condo Crisis Headed? (28:18) The Impact HELOCs Have on Canada’s Economy (32:51) Immigration and Its Impact on Canadian Real Estate (38:47) A Challenge Our Government Faces Over Immigration (41:01) The Impact of AI on Immigration Levels (44:46) How Does Canada Fix Its Affordability Challenges? (48:09) Conclusion

Hey, it's Dave Chilton, the wealthy barber and former dragon on Dragon's Den. Welcome to the Wealthy Barber Podcast, where we'll be hosting some of the top minds in the world of personal finance. Yes, that's to balance me out. The podcast is about making the subject not just easy to understand, but dare I say, even fun. Honest. Whether you're trying to fund your retirement retirement figure out how to build a down payment

Save for your kids education manage debts, whatever will be here to help you do it Before we jump in a quick but important note nothing we discuss here should be taken as investment advice We don't know you and your personal financial situation So we're not here to tell you where specifically to put your investment dollars. We're here to educate, get you thinking, and we hope entertain. But please do your own research and or consult with your financial advisor before taking any action. Hey, it's Dave Chilton, The Wealthy Barber here with The Wealthy Barber podcast, episode

21. I'm going to sound a little hypey, but this may be the most excited I've been. We've had great guests, but I'm a huge fan of Ben Rabideau's, our guest today. I followed him for years on Twitter. He's very smart. He's opinionated. He's blunt. He's not afraid to go against consensus, but he's been right a tremendous amount with his

forecasts. He knows what he follows, the real estate market in Canada. I don't think more thoroughly. He's anal very detailed All right today's invention very data driven what drew me to Ben initially and he and I contact each other years ago was He got worried about the line of credit usage in Canada quite some time ago as did I and so I was seeing his tweets And we were going back and forth a little bit. I had the pleasure of meeting his father and sorry Yeah, so it's gonna be a fun interview

We're gonna touch on a lot of subjects and I think you'll really enjoy it bit. I had the pleasure of meeting his father in Sarnia. So it's going to be a fun interview. We're going to touch on a lot of subjects and I think you'll really enjoy it. Ben, welcome to the show. Thanks, Dave. Great to see you. Yeah, you too. And again, you do a wonderful job. You know, you're two firms, you've got Edge Realty Analytics that you help to service the real estate industry, talking to them about what's happening and helping them to get a better understanding and in turn to help their client base get a better understanding of trends and all the different things happening.

And then you've got North Cove advisors as well that tends to deal more with institutional money, whether it's family offices, hedge funds, and there's a real thirst for the kind of data you're putting together. We'll talk a little bit later about how you put it all. But I wanna start with Fortress. And a lot of our listeners won't be very knowledgeable

about that space. Walk us through what happened with Fortress and a lot of our listeners won't be very knowledgeable about that space. Walk us through what happened with Fortress. I think you deserve tremendous credit for this. You spotted the fraud earlier than anybody or along with one or two others. You brought it to the public's attention. You took some personal risks doing that. You went through some lawsuits and some high hassle factor. Give our audience a feel for what it was all about.

Yeah, absolutely. Thanks for the generous introduction. It's very kind of you. So Fortress was a company, this is, you were going back over a decade where they first came on my radar, we're talking kind of 2013. So as it, as I've come to understand the wheels of justice through and very slowly in Canada, so 2013, and it was a company that was, that had started to raise a lot of money from kind of mom and pop investors across the country. And it became clear to me pretty early on that at a minimum, their advertising struck me as very aggressive. So you would see words like safe, secure, guaranteed, like a GIC, but paying 8%. I remember seeing that

one time. And this was back when we're talking in the zero rates world coming out of the financial crisis. So to see something marketed as guaranteed, but paying 8%, it kind of puts it on your radar right off the bat. And so through the process of my research, I speak to a lot of people in the mortgage and housing space. It's kind of my, my superpower is just leveraging the intellect of people who are smarter and more connected to me and kind of just talking to a lot of folks. And in that process, I started hearing people going like, yeah, these fortress guys, they're, they're in our office all the time. They're telling us that if we can get them clients to invest with them, they'll pay us 8% of whatever they raise.

We've never heard of it. And these are mortgage really seasoned professional mortgage folks. So imagine that if someone comes to you to renew their mortgage, let's say, and you're going to get the money for the mortgage, but maybe you can then also convince them to put a home equity line of credit against it because you got all this equity sitting there. It's not doing anything for you. Rates have fallen. We can tap that equity.

Your mortgage payments won't really go up. And by the way, we'll put it with these Fortress guys and it's guaranteed. So you can see the... And they get 8% off of that. So it became this really compelling kind of proposition for some less kind of scrupulous people in the mortgage industry. And so started digging and through the course of time came to understand that the firm was being run by a couple of individuals who are serially being sanctioned by multiple regulators for serious violations around the handling of investor money.

So sanctioned by the OSCE, banned for life from the mutual fund deal association, like red flags everywhere. And so started to kind of post a few fairly innocuous things on Twitter, just be like, hey, can you help me understand? How are you using the word guaranteed? This doesn't seem right. He's seeing Fisco, which was the mortgage regulator at the time, and very quickly started getting these cease and desist letters and they just started coming hot

and heavy. And so, um, you know, which was odd to, for, for people to protest that much about some fairly innocuous comments. It struck me as being overkill and kind of in line with someone who maybe had something to hide. And so did more digging, did more digging, ended up getting sued by them. They alleged defamation against me. We kind of brought a motion against them to have it dismissed as a gag proceeding.

Right. And the court sided with me. That was dismissed, but unfortunately not before burning considerable amount of money on some legal fees. And so that was dismissed. But through that process, I ended up just kind of being angry enough that I finally sat down, put all of my thoughts on paper. And by this time, because I had put some stuff out on Twitter, I actually had some of the investors reaching out to me via Twitter being like, hey, here's what I signed. Look this over. What do you think? So they were sharing some of the marketing materials with me. So I had a lot. And so finally took the time to compile it all

into a big, big report, submitted it to the RCMP, their IMET, their Integrated Market Enforcement Division. And that report, by the way, is linked on my Twitter bio. So if anyone ever wants to see just how clear the fraud was from even a cursory look. And then that was kind of 2015, 2016, and then they were eventually raided, I believe kind of 2018. Finally, the regulator shut them down.

And then the wheels of justice turned slowly, and it was only last month that we heard that they were found guilty of fraud. And so they, you know, barring a successful appeal, they will go to prison for a minimum of two years, maximum 14 years. But the kind of the summary is that they before the regulators were able to shut them down, they raised over 900 million dollars from Canadians and of which there have been over 400 million dollars of crystallized losses and some of those projects are still working their way through the system and I should I should have said at the outset the funds were being used ostensibly

to develop these real estate, you estate, condo buildings, etc. Were they both the borrower and their developer? In some cases, in most cases, they actually were the lender to the developer. So let's say you wanted to build a condo. You had a parcel of land. You had purchased that land or maybe you just tied it up through some sort of a contract You then had to go and get it rezoned You had to hire a sales staff and architect all this and kind of mock up the building You had to pre-sell typically 75% and then you would get your financing

So but in between the period where you've got the land and you get the bank financing you incur all of these what they call Soft costs you got to pay millions of dollars to have it rezoned all this stuff period where you've got the land and you get the bank financing, you incur all of these what they call soft costs. You got to pay millions of dollars to have it rezoned, all this stuff. That's where Fortress came in, and they would lend to help developers get those soft costs. Now, where part of the fraud came in, and what was obvious to me early on was they were representing to their investors that, listen, this is a really safe loan because if something goes sideways, you're secured against the value of the land, and we'll just take that land and we'll sell it, and we'll get your money back.

But in going through some of the land registry documents, we would see examples where they would buy a parcel of land for, let's say, $10 million, and literally the next day, we're registering $40 million of investor funds against that $10 million property. So here, there's no collateral. And, but they were representing that this is a 70% loan to value. Like as in there, there's still lots of collateral.

Yeah. What's the buildings up maybe? Well, they had sort of assumed that once they get the rezoning, once they hit their maximum sales targets, once they get the maximum density allowable, like XYZ, then it would be worth that. And maybe that was true, but, but they get the maximum density allowable, like XYZ, then it would be worth that. And maybe that was true, but they were representing that's how much it was worth today. So they were found guilty of a couple different things.

That was one of them. You know, it also turned out through some court documents that we found that they were taking a third of the funds upfront as a fee. So imagine that, like, and not disclosing that to investors. Just day. You're talking hundreds of millions of dollars taking an upfront fees to your knowledge. Do they still have some of that money? I have no doubt that they still have that money and this is what's I mean I've railed about this. What's so frustrating to me and what I

I think really needs to be an issue that's front and center for Canadians is how soft we are in white collar crime. Because the reality is that so it's a minimum two year sentence. I am expecting that they'll probably we'll get the sentencing this month. So they'll probably end up with something like five years in prison. We know that because it's a non violent crime, they'll be out after a year and a half. Right. So they're both the two main founders, I believe, are both going to walk away with nine figures.

So they'll have a hundred million bucks each, and for that they're going to spend a year and a half in prison. So in the US, you know, we fault the US for a lot of things, and they're not perfect by any means, but those guys will be going away for decades, and the regulators would just start going around and seizing everything that was tangentially related to their business. So like for example, Dave, because I have a judgment against these guys from that lawsuit. You can't collect because they don't want paper. They own nothing.

They've got a $20 million house that's in there. Their parents' name who are new immigrants who don't work. It's like, really? That's their house? Right? In the US, the regulators would be like, no, no, that's part of it. They'll just start taking everything. And in Canada, we need to seriously address that. You know, it's funny, I don't meet anybody who disagrees with that. Everybody you talk to, left, right, liberal, conservative, any party says, you're right,

we are too soft on white collar crime. Recognizing people all think that way, why are we seeing no changes? You know, that's a great question for someone that's more plugged in with kind of the legal landscape. I don't know. I don't know. What I can tell you is, you know, it's frustrating to me, and I know it's frustrating to the investors who have lost all this money, that we can sit there and watch these two individuals still sitting today, front row at the Raptors game. They got court side seats, season tickets, right? Jeez. You can see them still today because they're not in jail yet,

living in their 10, 20 million dollar homes, right? Frustrating. But knowing that the courts will never uphold a judgment against their spouse, who has never worked, but is living in a 20 million dollar house, it is clearly paid for with proceeds of crime. And we can't, there's no judge that will uphold that. You know what I'm saying? So I don't know what the process would be to overturn that,

but that's the roadblock we run into. Okay, second subject, you've been drawing attention lately to falling rents, making the very good point that population growth has not only slowed, but maybe even stalled right out. Well, at the same point, we have this huge amount of supply coming on. Is it true that we have 7% of the country's overall rental units are in production right now? Is that a figure you've heard? I mean, that's nutty.

No, that's my figure. I've done the work on that. So I can tell you. Yeah, no, I'm the one that's put that out there. So then we look at, like, people can verify this. So CMHC, which is the Canada Mortgage Housing Corporation, they're kind of the crown corporation that is our housing agency in Canada. And they've got great data on all this. So you can go on their website, there's something called

the Housing Market Information Portal. You can verify this data. They have information on the primary rental market, the universe of suites in the primary rental market. So that's purpose-built rentals. You can compare that stock against the amount that's currently under construction. And it is almost 7% nationally, but where it gets a little concerning is you've got a couple of pockets where it's more like 12 or 13 or 14%, which is a lot of inventory coming in the next couple of years. That's an amazing number. I've never heard of a number that high. It's never

been anywhere close to that high. No, and at the same time, it's a slowing population matches up with that. I mean, this isn't very deep. Does this not have to mean significantly falling rents over the next three to five years? My intuition is yes. You'll see that in certain pockets.

And at a minimum, I think you're gonna see the vacancy rate double or more than that. And you gotta remember, we're very critical of the government for housing policies and for screwing a lot of things up and they deserve a lot of it. But we do have to give credit here because the reason there's so much rental supply in the pipeline is because of an exceptionally successful program through CMHC, which is incentivizing developers to bring rental supply. So in one sense, they are addressing what was a crisis from kind of 2021-2022 where we had such incredible and I would argue

irresponsible levels of population growth that the rental market was just obliterated. It was so tight. It was a crazy tight rental market and you're seeing the response to that through these policies. And it's been tremendously successful, right? Too successful, maybe. I would suggest it has been too successful. We will go through a couple of years where the vacancy rate's going to go up. My point in that is that nationally we hit a 1% vacancy rate in 2022, which is just so absurdly low.

It's getting amazing. Yeah. And so at a minimum, I think at last check we're up to kind of off the top of my head 2.5%. It'll double from here, which is not an alarming... No, a five's not alarming. In fact, it's fairly normal in a lot of the North American marketplaces. Five's about what you've seen. That's right. And I think what's going to happen is you'll get in a situation where

as rents start to come down, you'll actually have an expansion in household formation. So for example, you get a lot of kids that are still living in basements because they can't afford rent, right? You got roommates that are living together that maybe want to each have their own place. As rents get a little more affordable, you'll see that accelerate. So that's why like when you look at it at the surface, if you assume, you know, 7% increase in the rental stock into a flat market for demand, you're probably going to have vacancies go up 7%. But they're not going to go up that much because I think there's a lot of people that have just been kind of priced out of their own market that will re-engage as it gets a little more affordable. Yeah I completely agree. You go back to the CMHC

they're in an interesting spot they talked last week I think it was in the report about they've given up on getting affordability down to levels as a percentage of income that they were 15-20 years ago they're shooting for a different target now but the interesting fact there is that if they ever got them back down their initial target, they'd be in a lot of trouble. You know, they've got so much money lent out there against much higher valuations. They'd be exposed to the nth degree. Yeah. No, it's a great point and I think what gets missed in that

because you know, there's you see this number bandied about constantly of oh, we need half a million new homes every year for the next X number of years. And everyone refers to affordability. But what CMHC's numbers are suggesting, if you do the math of what they're saying, is they're suggesting a house price decline of an additional roughly 40% from here. That's right. So like, yeah, if you want to get house prices down another 40%, that would do it. I don't think that's really what people think when they hear these

headlines about affordability. So we don't, I'm sorry, we do not need half a million homes every year for the next 10 years. That's absolutely nonsense. We're seeing resale inventory building everywhere. You're seeing vacancy rates rising, rents falling. There's not a massive under supply at this moment nationally. You could argue that in the single family market,

maybe there, you know, we could see a little bit of tightness starting in 2026, but I don't buy those numbers. I just simply, I think they're absurd numbers. Interesting point there, when you broke out the single family market, I think in real estate in general, we'd be better off to talk that way about detached homes and not group them with condos and everything else. It gives a clearer picture of what's actually happening out there.

You're so right. So the problem with the condo market is I always make the point that it's hyper cyclical, right? So the problem with condos is that it's a minimum five year construction timeline. Right. By the time you get started on a big development. And so the problem is you go back to, let's say 2023 is we realize, oh, geez, we have way too many of these as Ron Ron Butler would say, dog crate condos, with

too many small units. And we realized that in 2023. Unfortunately, you've still got a tidal wave of supply that's in the construction pipeline that's coming. And so by the time you realize you've got too many, you've got two or three more years of a lot of supply. But the opposite's also true. By the time you realize you don't have enough, you've got two or three more years of a lot of supply. But the opposite is also true. By the time you realize you don't have enough, you've got a shortage for four or five years. That's going to be the situation come kind of like 2029, 2030, where we're going to be dramatically undersupplied condos. But because of that cyclicality, the single family market's much quicker to respond to

the current economic situation. Developers will pull back building single-van storm that's made the condo market crash. I mean, obviously, have interest rates going up. We talked about the population growth leveling out a little bit. What other contributing factors have come into play? The biggest one, and one that I've been putting the table on this for almost a decade, and it's that we saw a trend where new condos, so when I say new, I mean pre-construction. So not newly built, I mean you're buying off a floor plan. You're going to get possession five years down the road. Those pre-construction condos were being sold at a progressively larger premium

to comparable sales in the resale market. So when I first started getting alarmed by this, and you're talking, it was like 10% premium to resale. And it was never an issue, because let's say, just to use round numbers, let's say that you paid $1,000 a square foot, but resale was $900 and $950. Five years later, by the time that unit completed, the resale market had caught up. You assume kind of 4% or 5% growth, you were fine. In fact, you probably made quite a bit of money and you wouldn't have to close if you didn't want to. You could assign that contract and flip it to somebody else to close. And so It became this thing where people were making a lot of money,

everyone started jumping into the pre-construction market, and we saw that premium start to really widen. Where it got the craziest was that period after COVID from late 2020 to early 2022. In that timeframe, you were seeing those pre-construction condos priced 20% to 30% above resale. And so now, in order to just break even five years down the road, you had to assume the

resale market would rise that 20% to 30%. And if it didn't, well, now you're in all sorts of trouble because now how are you going to get a bank to finance that? Or how could now there's no equity there, so you can't assign it. Now you have to close on it and a lot of people weren't prepared. So, as we've learned, there was a lot of speculation, a lot of people that never intended to close that bought these incredibly expensive units, 2020, 2020,

2022. Those are the units that are completing today and in many cases, you're seeing situations where they paid fourteen, fifteen, sixteen hundred a square foot depending on the location. That's what they're contractually obligated to deliver to the developer, but the resale value is like 11, 1200 a foot. So they've dramatically overpaid. Their deposit is gone.

Is it? It's just incinerated in negative equity. And in many cases, not only is the deposit gone, they're still deficient. So they can't even walk away from that contract. They still owe the developer. So it's created this kind of perfect storm. To me, that's the big thing. But against that backdrop, you also have this situation where, as we discussed, rents are falling. So it's harder now if you're forced to close on that condo and rent it out, you're going to find the rents are dramatically lower than they were a year or two ago. And there's just not a lot of resale demand and a lot of resale supply. So it's just, it's a really tough market. And unfortunately, I think it's going to get worse

than 26. It's not really going to find a bottom probably till 2027. But as we discussed, you roll that forward to 2030, you're going to have the opposite dynamic because there are so few new condos being sold today that there will be a dramatic shortage come kind of 2030. Everything is cyclical, Dave. Everything's cyclical and people always forget that. Now you learn that as you get older. You really do. And all the investment themes

and all the different asset classes, cyclicality is there. That being said, your 2030 projection's interesting because do you not think there's been a bit of a cultural shift away from those ultra-small units and that the demand may not go back to previous levels? And for example, Airbnb is not as popular with those units. You've had a lot of municipalities change laws. So I think you're right. It'll rebound. It will have a shortage. I'm just not sure it's going to go back to where it was. I don't think it has to go back to where it was. And by the way, I would say that our experiment with 400 square foot condos is probably done in Toronto. I agree. I'm

not suggesting that we're going back to that. But if you use some simple math here, so remember, before a developer can build a condo, they have to pre-sale typically 70% to get bank financing. Right. So those pre-sales are a really good leading indicator of where housing starts will be 18 months down the road leading indicator where housing starts will be 18 months down the road and then where completions will be five or six years down the road. So keep that in mind because right now, over the last 12 months, we've only seen about 2,800 pre-construction condos sold in last year. And so 2,800, so now how does that compare?

Well, in 2021, it was 38,000. So we're talking like a 90% plus decline. So that will be roughly the level of completions out in 29, 2030. Yeah, that's a problem. And listen, I'm telling you, even in the worst market, I mean, right now, we're in a pretty soft market for condos in Toronto.

We've still sold almost 20,000 resale condos in Toronto in the last year. So even in a deep recessionary level of demand, you're gonna be dramatically above 3,000. So it will tighten, it will. I wanna give you a little credit here. I'm gonna break in and give you a commercial. When you think about what we've discussed so far,

you should be very proud of the fact you nailed two big stories in the last several years. You really should be. I mean, that that sincerely. Fortress, you were the leading voice out there drawing attention to it, played a role with the RCMP, but you're also the biggest voice I think calling the crash in the condo market. Ron did a very good job. You mentioned him earlier. There were others too, but your data about the discrepancy in the price between the pre-construction and the resale market was what first drew my attention to it because it had such built-in optimism that it was almost wacky.

In fact, when you get to that point, you know you're almost going to turn. And so I give you a lot of credit. I mean, I think you've been just doing a fantastic job covering all of this way to go. Well, I appreciate that. And that's very kind of you. I would be remiss to just not point out that I was, just to go back to what I said earlier, I was ringing that bell in like 2015. So I was like, it was so early, Dave, that it's all it's hard to take a victory. You're like, years too early. But but you could see that it's a good reminder that being unsustainable,

a dynamic that's unsustainable and a dynamic that is imminently about to end is not the same thing. You know what I mean? It's always- No, I say, we've all made that mistake. In fact, it's funny, but people like you and me who are geeky people who are data-driven, we're often early because we get into the weeds and we see all of this stuff. But you're right, these trends can go to extremes much longer and much further than we often think they can.

And there's a lot of vested interest in there pushing those themes along. And it's tough to break the back. And so I think you're right. But still, I give you a lot of credit for that. Two more quick points on that. It's often said 70% of these smaller condos were bought by investors. But my experience when people are phoning here looking for help is it's 90%. We get almost no calls from people who are buying them for their own use. Is that not accurate? It would round to 100%. Yeah, that's what I think too.

It's really simple here. There's no rational person. Just put yourself in the shoes of an end user, someone who actually wants to live in a condo. I'm gonna give you two options. Dave, you can either put your money down on this very expensive unit that you're not gonna get for five years, right? Or you can walk across the street and buy one that's already built for 30% less.

Yeah, exactly. Which one are you going to take? Like, there's just no way that these were, it is, I'll tell you, it rounds to 100%. Okay, so I completely agree and I've said that on stage, but why do you always hear the figure 70%? Because that can't be right. Well, where are they getting it from? They're really getting it from the industry. Yeah, because I agree with you, no rational person is going to make that decision. The other thing is that this is sad stuff. I mean, obviously, Fortress, tremendous numbers of really nice Canadians, people who've saved all their lives,

lost a lot of money. We got calls from a lot of them. It really does break your heart, in fact, brings you to tears. And I was brought to tears literally with the call we had a few months ago from a family that got in trouble with pre-construction condos and a lot of people just throw their arms up and say ah they deserved it they were getting greedy hey there was some greed there it's still sad you know it is still sad when people get in this far and can't get out of it there's

bankruptcy is being claimed I think in the next six months this could turn even uglier than a lot of the naysayers are saying it's going to I think there's a lot of people are just going to claim bankruptcy and walk away from all of this. What happens then? Like what happens to all these condo buildings if you aren't getting closings? Well, I'll give you my pet theory on this because I thought a lot about this. I think that this is a crisis in Toronto's condo.

Specifically in Toronto, this is not across the country. You have pockets of issues in other big metros. Vancouver has some issues. We saw there's some developments in Kitchener that look like they're going to be problematic. But by and large, this is a GTA-specific issue. But it's significant enough that it will impact the banks if left completely unchecked. Because you are right, we are getting close to the point where there are so many people who cannot close and who walk away that these new buildings cannot form a condo corporation

and therefore will not be able to repay the development loans to the banks. And we're talking chunky, like half billion dollar loans. And the moment that you get a couple of big banks have to stand up in front of their investors and say, hey, listen, we've got to take an impairment on this giant loan. The alarm bells are going to go off in Ottawa. So what is the solution? And I'm not, I want to be really clear, I'm not saying this is the right idea, but if you put yourself in the headspace of a politician that is here to help, what will they do? So I think what we will see is some form of inventory management loans for these developers, something like a CMHC-backed zero-rate

loan for developers. And what it will allow them to do is to repay their development loans to the banks and then trickle that inventory out into the market over the course of a couple of years and repay CMHC. And I think that's... I don't want to get too cute with my forecasting, but I do, I kind of have this theory that when we get that program, it's probably going to be the bottom of the Canadian credit cycle, because we are in a credit cycle. Things are deteriorating.

We're seeing mounting losses. It's going to get worse before it gets better, I believe. And probably something like that will be a good indication that we're getting to the lows. And I think that's ultimately what we'll need to solve this. I agree with you. In fact, I think there's ultimately what we'll need to solve this. I agree with you In fact, I think there's no other way out to be perfectly honest I mean you could let the banks just take a series of impairment charges

That is another way to go But I think there's a good chance that the government does get involved through the kind of a system you described there All right moving on to the next subject what brought us together all those years ago You and I were two of the first people to be looking at this line of credit situation in Canada and just shaking our head. It's interesting how differently we got there. You were doing it through hard debt and looking at all the numbers. I'm doing it through all the anecdotal evidence and all the phone calls and all the spending summaries and all the personal financial plans we see.

And I'm going, this is crazy. Like normal income people taking out lines of credit for hundreds of thousands of dollars, making interest only payments, in some of dollars, making interest only payments. In some cases, not even make interest only payments, just figuring out ways to add the interest to the outstanding debt. We'll worry about it later. Maybe we inherit money, maybe we sell our house.

That's our quasi basically self-made reverse mortgages to some extent at this time, but all based on interest rates being incredibly low. And maybe you had a line of credit, one and a half, 2% of making up the number. Now all of a sudden it sets huge, huge numbers. This doesn't get much attention. So the mortgage renewals get talked about all the time but you never see people talking about the line of credits getting hit by these high interest rate charges. I think it's one of the major reasons the savings rates are under so much pressure is people are now having

to service these lines of credit with a big chunk of their discretionary income. Yeah, you're right. It was a dramatically underappreciated story. I often make the case that what really saved Canada from the financial crisis in 0809 was not the prudent lending of our banks, but it was in fact the reality that when the Bank of Canada cut rates down to zero, we saw an explosion of HELOC spending that, get this, was running at over four percentage points of GDP just in terms of the amount of money people were drawing off the HELOCs to spend. Imagine a stimulus where you blast four percentage points of GDP directly into consumer spending off HELOCs. Crazy.

That doesn't get discussed. That was really what helped us to weather that storm. And there was a period of time there where after the financial crisis, we were seeing those HELOC balances, they were growing 20% a year, like overall, right? Huge numbers. We've seen in the last few years that the regulator, OSFEE, has done a number of kind of policy measures to make it a little more challenging to borrow extremely high amounts off of HELOCs.

I agree. And OSFIE deserves some credit, man. Look, they don't get everything right. And I've been critical of them about some other things, including I was tweeting something out this yesterday, or maybe it was this morning, CCing OSFIE and like, hey, guys, you're missing this. So they're not perfect. But they saw the issue in the HELOCs.

They've tried to address it. It would be much worse today had they not done that. And had they not brought in some of the stress tests that really saved a lot of the high indebted borrowers. So they deserve a lot of credit, but there's going to be a lot of pain from these helox. The one good thing is that they're floating rate, I mean, good and bad, but at least they're down off of those crazy high. There was a period of time there were were paying, you know, eight, nine

percent on HELOCs and we're down today to, I don't know, six, seven. So I agree with you. It's going to be a drive on consumer spending going forward, I believe. And the other thing that people need to remember is those HELOCs, they're very pro-cyclical in the sense that people draw off of them when the real estate market is rising and they stop drawing on them when the real estate market gets soft. So in other words, when housing gets soft, it's an indirect headwind to consumer spending. It is.

We're just starting to see that now in some of the data. Yeah, it's a real problem. A simple way to think about it is when people borrow off a HELOC, they pull spending from the future into the present. And then when that eventually has to be repaid, they have to go through a period of time where they're not spending as much. And we're at that point now where, and it's just one more thing that unfortunately is going to weigh on Canada's economy. It's interesting to me how many people I cross paths with who I really don't think

are going to repay them. Again, they're going to let it play out and they're going to repay them maybe way down the road on home sale or even at death through taking a state value and so on and so forth and just make the interest only payments but as I mentioned earlier those have gone up to your point they've gone down from their peak but they've still gone up enough to make a big difference. I said this somewhat jokingly in the wealthy barber returns but I shouldn't have wrapped it in humor because it was true. So many people ended up thinking of HELOCs as second incomes. It's not your money and people were doing things,

whether you're going, what the heck, you can't afford that. But there's a way that they bring people in and make them think they can afford it. So, but you know, you did a very good job of shining a light there. I agree with you, but OSPI doing a better job there. I think some of the banks on their own passed the formal regulations have also tightened up

and hit a little more attention, which is good. And then you've got a lot of educators out there saying, hey, they can be a useful tool. There are positives to them, but within reason, you've got to use some common sense. All right. Next thing is immigration. How did we get to where we got? I mean, I'm very pro-immigration. I know you are. It's interesting because some people have lashed out at you because you've been critical of this and said, he's not pro-immigration. I said, you're not reading his stuff. He's very pro immigration. But to bring that many people in in such a short period of time, how could the government not see that it was going to overwhelm our infrastructure, our systems, etc.?

I would say to anyone that is critical of my public statements around immigration, I would just suggest you can Google my statements to the Standing Committee of Finance. I testified twice as far back as I think the first one was 2021 maybe. And at that time, the level of immigration was dramatically lower than it ultimately peaked at. And the point that I was making is what we were risking was this amazing, beautiful consensus that we'd built in Canada around immigration being a net positive.'s that's not an easy thing to cultivate anywhere in the world and What was so distressing to me is you could see in real time that these policies would undermine this consensus because You know Canadians are not going to make the distinction between the various programs that run amok and there was a couple in particular

That really ran amok and there was a couple in particular that really ran amok. To Canadians, it was just it was all immigration and it was just too much and they weren't wrong. And so what we've seen in the polling is just this kind of dramatic reversal in public sentiment towards immigration, which I would argue is really detrimental to our long-term health. And you know, you know, I won't answer your question, the specific question more, but I just I want to make this point really quickly. What's frustrating to me is I believe right now, had Canada not sort of burned that goodwill around immigration on bringing in a lot of temporary workers, international students, which was really the programs that ran amok, and had we kind of kept that dry powder,

that goodwill from Canadians, I think there is so much incredible talent that's just wanting to kind of get out of the US and look at more stability. And we could be in a position to bring some of the best and the brightest here, but we don't have the political capital to do it because we burned it under these ridiculous programs. So what really ran amok to direct me to your question is, I always make the point, there's three components of population growth. One is natural increase. That's like births minus deaths. So without any immigration, how much would our population grow? And right now it's

zero. For sure. A decade ago, it was 200,000 annually. So we need immigration to keep our population growing. So let's just get that out there. We need immigration at some level. The second is permanent residency. And that's what we generally think of when we talk about immigration immigration that the federal government has a target of roughly, it used to be 500,000, they lowered it to 400,000. So 400,000 permanent residents. And there they do a very good job of attracting the best in the race. It's a scoring system. The points system, yeah. The points, it's globally considered the best immigration system. And so I have no issues with that. What ran crazy for a couple of years is what is called collectively non-permanent system. And so I have no issues with that. What ran crazy for a couple of years is what is called collectively non-permanent residence.

And it's really three buckets. It's international students, temporary workers, and asylum claimants. So coming out of the pandemic, there was a shortage of labor. Unclear to me how much there actually was a shortage of labor, but that's a secondary discussion, how much was just a shortage of labor

that businesses wanted to pay for. Wanted to pay at a low level. So how much of it was just we want subsidized labor versus we can't find any at all to do the job, but that's a separate discussion. And so the government said, well, that's fine. We can bring people in. And kind of concurrent with that, we

had this incredible explosion of these kind of quasi-legal career colleges explode everywhere, as well as an explosion in the actual accredited big institutional colleges that just brought in an enormous amount of international students. And so at one point in 2022, I believe it was, we were adding 800,000 temporary residents in a single year.

And that, of course, they're all renters. They're all renters. And so when we talk about that crazy tight rental market, that's directly what impacted it. And so the government was sleeping on that. I was warning about that for years, chirping them about it, testifying in front of the state of community finance on it. And finally, once it was clear that they had broken just

about everything related to these programs, they finally started making some very sensible changes. And that was really last year. And when they started rolling those out, it became very clear to me that these changes had real teeth. And that if you just simply did the math of going from 800,000 in one year to zero, which I knew was where we would be going within a couple of quarters, your population growth was going to decelerate dramatically. So at peak it was 1.3 million overall, of which 800,000 were temporary. And today it's already down to half a million. And we're seeing outflows of that temporary resident cohort.

That's going to continue for probably the next two years. We will have effectively zero growth in the Canadian population for two years. So what's the ripple impact of that on real estate? This is where it gets really interesting. I think you mentioned earlier about trying to really bucket the various components of real estate, and this is a great example. So population growth is going to go to zero. But of that, you're still going to have a run rate of about 400,000 permanent residents coming

into the country offset by an outflow of roughly 400,000 temporary residents. So what does that mean? Well, if you think about your permanent residence as being home buyers, you will continue to see housing demand for kind of home ownership will continue. I mean, not as strong as it was previously, but a good clip, but you're going to see a decline in rental demand. So I would argue that you're actually gonna see the rental market soften further.

And I actually kind of have a view that the resale market might start to maybe inflect in 2026 and you'll start seeing it stabilize a little. Yeah, that all makes sense. But you're right, again, you break it into buckets and they're very different things. Those two marketplaces, first aid detached homes and rental units, we always put them together but they're so so different. Where are we

headed long term on immigration? We must have learned from this obviously not so good experience. What's our goal? What do we want to get back to? I mean that's a great question. I think we're certainly course correcting. Getting back to this concept of everything being cyclical, if it's a pendulum, we were too far on one side for too long, we're probably gonna swing back the other way and be too tight for a couple of years before we kind of find a natural equilibrium. My concern, and this is going to be maybe controversial statement, but what I worry about is there's a couple issues that because of this boom in temporary residents, it raises a couple issues that I'm not sure how the

government is going to stick handle this. The first is that today in that 20 to 29 year old cohort, we have a quarter of a million more men than women in that cohort. Interesting. Wow. And that is because so many of the temporary residents that came to Canada skewed overwhelmingly towards men. So, I don't know how the government addresses that and sort of more to that point, we're now to the point where over 7% of people in Canada today are temporary residents, which is an unprecedented

number that we've never seen. A lot of them came here with the expectation of getting permanent residency. In many cases, they were misled. So some of them are very much victims too. For sure. And they sacrifice much back at home to come here. I don't know what the fair way is to resolve all of that because you're going to have a couple million very angry, mostly young men that are not happy with our government over these policies. You can connect the dots and see how this is going to be a political hot potato. I don't know how that gets resolved. Ultimately, where it's going to go is we need a snap back the other way for a period of time. We're getting that. But we need to get back to the core principles that made our immigration so

great, which was that we want a meritocracy. We want a merit-based system where we are getting the best, the brightest, the youngest, the hardest working, the people. And importantly, the people who are willing to bring their values, bring their culture, but integrate into Canada and recognize it for the beautiful country that it is. That I think is what we need to get back to. I'm optimistic that that's where we're going to end up, but we just need to go through this period of adjustment in between here and there. When governments look at all of this and they're talking about, you know, natural birth, death

rates, etc., and they're looking at the job needs going forward with an aging population, do you think they're putting much weight on the potential for AI and robotics to come into our lives and replace a lot of what we do now and therefore offset some of the need for future immigration? I don't know how you pattern that out, how you model it, but I think it's inevitable. It's going to play a big role in all this. Yeah. I'm getting more and more just concerned about what AI, how AI impacts all aspects of the

labor market and immigration. I'm not the person that probably could answer that with the most clarity. It's not my bailiwick, but I certainly share your concerns. I don't know how this is going to play out, but it's one of those things where you look at it and you know it's going to be transformation. You know the world 10 years from now is going to look dramatically different than it is today. You know there's going to be disruption in the labor market.

I just don't know how all those pieces come together. I don't think anybody does in your defense. I think we're all guessing, the experts are guessing. I think even the optimistic people will admit they don't know how we're going to get there How are we going to get to that great land of abundance where this is adding way more value to our lives because the displacement In the short term whether the short term is one in two years or five to ten is going to be significant and certain types Of jobs are going to be impacted to the nth degree I mean I'm involved in semi AI firms in the legal business for example and what they're able to do now is absolutely semi-AI firms in the legal business, for example, and what they're able to do now is absolutely mind-blowing. You've got to think lawyers are going to be a little concerned the next two to five years,

and that's just one of many professions including financial educators. I mean, I can be replaced for sure. So, I mean, it's going to be fascinating and a little intimidating to watch it all play out. There'll be lots of positives too, but wow, it is a little bit disconcerting. Yeah, it's funny you mentioned that, I was just talking about this with my wife. We've got one kid who's approaching kind of post-secondary age and another that's kind of working their way through. And yeah, like how do you give your kids for career advice right now? Like, what do you even know? Like, it's just so much in flux that you're like, we have no idea.

It just feels like the safer bet is like anything that can't be automated. You stay like, man, anything is like. Yeah, be a plumber. Right, like you start to see value in some of those more hands-on human, that are really hard to replace, right? But man, I share those concerns, man.

I don't know what was gonna work. Think about it, three and five years ago, we're telling all of these bright young kids, get into coding, get into coding. And now some of the most famous voices in that industry say don't come into coding. That with cursor and all the things we're doing, we're not going to need you within 24 months.

Like wow, the speed of change again is a little bit overwhelming. And I'm not sure where this is all headed, but I do think we're gonna have to pay a lot of attention to it as we develop immigration policies over the years, because we've got to make sure that in an effort to cover off these demographics, we don't bring so many people in, we compound the problem of AI disrupting many fields employment. That's a great point, Dave. I hadn't given that enough thought, but I think you're right in what

concerns me just to kind of bookend that and tie the two topics together is when we look at where our immigration has skewed in the last couple of years, it used to be very much that we were bringing in the best, highly trained, very successful, very impressive people. And we've skewed far too much towards the low skill under the immigration spectrum. And that, unfortunately, is going to be the area that risks being disrupted more than the other end. No, it's true.

It's very tricky stuff. I wouldn't want to be a politician right now. There's a lot coming out of all these people. They have to be very knowledgeable about a lot of different things and wow, and they take all that criticism. It's a tough job. I'm very respectful of people who throw their hat into the public arena. It's not easy to do.

They deserve a lot of credit. All right, let's wrap up. We're going to talk about something that is discussed in every real estate podcast, the affordability challenges in Canada. I'm rewriting the original, the wealthy barber, and I've been reaching out to a lot of people age 25, 35, 40, et cetera. And of course, this is the primary theme I hear. If they didn't get in pre say 2015,16, they're scuffling now, if

they don't get parental help, they're almost in an impossible position. Even when they do get in, they're so tight, they're unable to do the wealthy barber things they argue, the saving 10%, the RSPs, the TFSAs. I don't see this problem resolving itself in the short term, although prices have come down. Even as interest rates have gone down a bit, we have taken a fairly good move on the affordability front. But it's tough out there and it's not just housing costs either by the way. That's where you focus but costs in general. Like I don't care what they say about the inflation rate. All you have to do is go to a restaurant, go to a grocery store, go to a sporting event, go

to a con, any of those things and you can see that costs are running super hot the last five years. What are your thoughts on all this affordability and if you're the king how do you get us out of it? Well I mean I make the point that there's no silver bullet so you know you'll hear people say oh this is the one thing no we need to ban speculators and that'll it's like okay that's a part of it. Right. So I think that look there's some low-hanging fruit we need just need targeted policies address a whole bunch of smaller measures and I think over time we can I'm optimistic we can move the needle so We just need targeted policies, address a whole bunch of smaller measures. And I think over time we can, I'm optimistic we can move the needle.

So first and foremost is what we just discussed, which is get our immigration system figured out. Let's not overrun housing demands and outpace the ability of developers to meet that need. And so we're addressing that. That's happening. It's going to take a while. It's going to take a couple of years, but two years from now, that's going to look very different.

The run of land staple look different. You know, developers to any area where we're dramatically under supplied and there are to take a couple years, but two years from now, that's going to look very different. The Ronda landscape will look different. Developers, any area where we're dramatically undersupplied, and there are still pockets that are undersupplied. Nationally, I would argue we're not dramatically undersupplied, but there are pockets. And to the extent that you have those areas, you have to find a way where the municipal governments in so many cases stand as these kind of gatekeepers towards bringing new supply. And it's sort of, you know, they have to listen to their own constituents who don't want to deal with some new development going in down the road,

but ultimately that's what's in the best interest of the collective and restoring affordability. And so, you know, trying to get municipalities on board, you're starting to see recognition at the federal level that that's a major hurdle to bringing the supply to the areas that really need it. So there's a lot of little things like that. I mean, I do think addressing things like mortgage fraud, which I know I think Ron maybe had discussed in your podcast, but there's some

simple things around tightening some of the income verification measures that can move the need a little bit. Like there's foreign investments to the extent that there's foreign investors that are speculating in Canadian markets, keeping properties vacant. We don't really have a good handle on how big a problem that is. We know it is some sort of a problem. There's ways that we can address that through very targeted policies. So my point is there's no silver bullet. It's going to be a lot of smaller measures. And I am optimistic that we can move the needle. And I do think that probably the direction for pricing is going to be flat. Like it would not shock me if five, six, seven years from now,

prices are flat, rates hopefully are not dramatically higher than they are now and incomes grind higher. Like affordability and time I think is gonna do most of the heavy lifting year, time and incomes will do a lot of the heavy lifting and I think it's, we are gonna move in the right direction but it's just gonna take time. Let's end on that very optimistic note. I like it, we do need incomes rising. I mean end on that very optimistic note. I like it.

We do need incomes rising. I mean, obviously that plays a huge role in all of this. Look, you've been a great guest. You're extremely well-spoken. You really are. You know your field inside out. I love following you and I think everybody should and continued success and hopefully you and I

can get together again soon. Appreciate that, Dan. My pleasure.