109: Looking Through the Crystal Ball of Canadian Real Estate with Avesdo Technologies' Ben Smith

00:00:00 Taylor Atkinson

All right, welcome back to the Kelowna Real Estate Podcast. I'm your mortgage broker host, Taylor Atkinson.

00:00:07 Taylor Atkinson

Yeah, hot topic kind of back around Kelowna, short -term rentals. The city had their council meeting November 3rd. They're advocating for option two, which would be allowing the previous designated properties like Discovery Bay and the ones that are zoned. for short -term rentals. They're advocating to the province that they should be allowed to continue to operate as short -term rentals as long as our vacancy rate is up above that threshold, which we don't have that data yet from CMHC, but I think they're projecting that it's going to be like five to 6 % vacancy, which is well above.

00:00:54 Taylor Atkinson

I know I feel like there should be a mechanism for them to like continue to allow these to operate even if that vacancy drops below that you know with those specific buildings because yeah you're right you can't just have it going back and forth every other year yeah so they now have to go back to the province

00:01:13 Taylor Atkinson

they now have to go back to the province advocate for Kelowna, tell them, you know, we would like option two. In addition to that, I think, you know, the legislation doesn't have it coming to pass until I think it's March, 2026. So we want them to implement this immediately. Basically like, Hey, it's November. Here are the vacancy rates. You know, we want these properties back to what they were in 2023. So yeah, we'll keep you posted on that.

00:01:42 Taylor Atkinson

It is. Yeah. Good for Kelowna. Appreciate what council's doing there.

00:01:46 Matt Glen

Trying to get it back on track.

00:01:51 Taylor Atkinson

Yeah. What are your thoughts on that? I was kind of thinking like, you know, over the next two rate announcements, we'd probably see one cut. I was a little bit surprised to see it come in so early just with where inflation is going. Inflation is kind of still up there in terms of that data. So I was surprised to see them make this cut. It's obviously positive. from a mindset point of view where people are at and helps with budgeting. I think we are at that lower end of the rate cycle for sure though. There's not much more they can do to cut it. This is now getting below their neutral point. So this is now getting into a stimulus style of approach.

00:02:37 Taylor Atkinson

It's a tough one. They can't really stimulate the economy when inflation's on the rise, right? That's their one lever to pull to control inflation. So, you know, they're back at that point where they were a few years ago that if they keep cutting, inflation's going to come back in and then they're going to have to rise rates. Like you don't want that volatility. A lot of things we cannot predict.

00:03:08 Matt Glen

Yeah, yeah, absolutely.

00:03:31 Matt Glen

Mm -hmm.

00:03:37 Taylor Atkinson

Well... yeah i mean to talk about it getting transactions back up you know like today's guest ben smith awesome guy really enjoyed speaking with him he's kind of got like the magic eight ball in the industry on the pre -sale side yeah so he has implemented technology into real estate seamlessly and basically does you know the majority of pre -sales across canada and tapping into you know north american and global markets so really really switched on guy but he's basically got the data in front of him that says like pre -sales are dead right now you know profitability is really tough for developers like all the stuff we know has been happening over the last couple years but he's like interest rate cuts will not be the catalyst to get this going it was super interesting talking to him i mean the one real big takeaway i got from that is like the wealth transition with baby boomers and not just you know generational wealth being passed down but just opening up housing stock that you know is latent

00:04:43 Taylor Atkinson

Yeah. And it feels weird to talk about, but as you know, people pass on like that baby boomer generation, which is kind of like over the next say 10 years, it's weird to talk about, but there is going to be like a, a large transition of estate planning. So he thinks that could be, you know, a real mechanism to maybe balance out real estate or get things going again from a transaction point of view. Yeah. But super fascinating show and really, really cool guy.

00:05:43 Taylor Atkinson

Yeah. All right. Ben Smith. Welcome to the show, my man. Coming from Tofino. How's it going over there?

00:05:48 Ben Smith

Yeah, it's going great. Thanks for having me, guys. You know what? It's sunny. It's not too bad. I mean, it's West Coast for sure. Got a bit of moisture, but it's okay.

00:05:57 Taylor Atkinson

Can you kind of give us an elevator pitch, who you are, what you're doing in the real estate industry, or maybe I should say the tech industry? Would that be more accurate for you?

00:06:06 Ben Smith

Yeah, maybe now. So yeah, Ben Smith, President and CEO of Avesto Technologies. Spent the last 20 plus years in real estate development, mostly in the lower mainland, but in the last five years internationally, actually. So kind of grew up on the developer side in the sales and marketing role, moved around. I worked for Polygon, who's a major developer in Vancouver, and then moved to Rennie and then kind of learned the agency side. Then went out on my own and had a consulting company. And then in that process, I was... Pretty big client of Avesdo, which is a software company. I'll get to that in a second. They bought my consulting company and I joined them to go on the software side. And so Avesdo, we are a contract management software strictly for new home developers. Our clients are developers or sales and marketing firms and any other industry you would think of us as a point of sale software. So we're really the cash register for new home sales. Awesome.

00:06:59 Taylor Atkinson

And you piqued my interest there. Where internationally have you been? So Avesda would be the largest of what we do across Canada.

00:07:04 Ben Smith

Avesda would be the largest of what we do across Canada. But right now we've got products in Denver, California, Miami, Bahamas, Texas as well. You know, not every market is the same as how we do it in Canada. I think that's maybe a misnomer. In fact, between Vancouver and Toronto and the in -betweens, we're probably one of the leaders in the world for selling pre -sales. I'd say maybe Florida is next. Texas is up there as well, just because there's a lot. lot of guys from up here that have gone down there. That's kind of how it works.

00:07:37 Taylor Atkinson

What solution are you guys presenting? Like, how are you kind of bridging the gap and evolution here for real estate?

00:07:42 Ben Smith

I'll give a throwback to our founder, who is Richard Bell. For those that are in Vancouver and know Bell Alliance, Richard Bell started the company years ago. It was originally called Yongle. To my understanding, his first intent was he was trying to become a paperless law firm. And he was doing a lot of closings and realized, you know, in the new dev space, the amount of paper is enormous between disclosure statements and long. contracts and all that kind of stuff so he set out to build an app that was going to get rid of paper and doing that basically turned us into a point of sale software and so over the years we moved from essentially what i would call docusign for contracts for new home now we have inventory in the system so we can start doing other things we can start to do things with that inventory we can do stuff with the contract itself and move forward and backwards so we can start to understand demand by taking in selection requests we can start to manage you know that post sale so from what happens after the contract signs through to closing and then last couple of years, we've even added payments. So you can pay your deposits with credit cards and everything's synced. So kind of where we've gone to. So call us a cash register, but essentially that's what we are. And in every other industry, you'd have a POS software that's managing the transaction itself. And it's so different for new homes. It just happens that we have this really long contract and a bunch of disclosure statements and all these different things that have to happen in certain timeframes. But we're essentially doing the same thing. We're a software to manage the transaction process for this specific niche.

00:09:16 Taylor Atkinson

Something really cool is the fact that like you guys have a massive amount of data and Intel. you know, kind of where the market's going. And we talked a little bit, super briefly off air that Shane Stiles said, you kind of have the crystal ball to real estate. So I guess that said, can we dive into that a little bit? Like, what are you seeing on new developments in the past few years currently? And, you know, we can kind of wrap up the show with like what's happening in the future, but what's launching for successful developments now? And like, what are the struggles that our developers see?

00:09:45 Ben Smith

Yeah, great question. I mean, the answer is nothing. Nothing is launching.

00:09:49 Matt Glen

In the other markets, where you get into it, like what about in the... states are is it slow there too like here yeah i mean i would talk about canada first it's slow across the country and it has been declining for probably four years so it hasn't just started we're in the trough and so just quick stats we're seeing that the market's probably down 50 versus last year which was already down of what happened at the peak we're at about 20 of that today it's worse in toronto than in vancouver and i think that's just a function of product types and what happened So Kelowna would be closer to the Vancouver market,

00:09:53 Ben Smith

i mean i would talk about canada first it's slow across the country and it has been declining for probably four years so it hasn't just started we're in the trough and so just quick stats we're seeing that the market's probably down 50 versus last year which was already down of what happened at the peak we're at about 20 of that today it's worse in toronto than in vancouver and i think that's just a function of product types and what happened So Kelowna would be closer to the Vancouver market, but maybe pushing a little closer to Toronto. You know, we don't really have single family home on the far west coast anymore. So everything's multi. And so even though it's slowed down, if anything is going to get built, it's still going to be multi. So we're still going to see it through our system. Whereas in the east coast, in Toronto especially, it was very split. So you had like single family, which was, you know, for owner occupiers and everybody. And then you had, you know, urban high rise. And when urban high rise stopped, it was just over. So just turn on the news and you'll see what's going on in Toronto condo. But it's a bad scene. And so in between markets, Calgary, Kelowna, Calgary is an interesting one where similar to Toronto, it's more like they have a big single family market. So their multifamily is really, really small. And so when it does really well, the numbers are so small, it doesn't really swing much. It could be measured in like a few thousand. It's not a lot. Kelowna, we saw a real boom in 2020, if my memory serves, where there was a bunch of towers that all went. I think there was 12 in the one summer alone, which is really abnormal. i would say a lot of those are still trying to sell so there's not really much happening or launching within your market you know and then looking into the us again like really low numbers high numbers would be like miami you know you hear about the miami market was really booming i think there was 400 cranes in the sky with projects under construction so we've seen a huge slowdown in that market for sure i think you're seeing a slowdown across the board is how i'd project it but the ones where it's really visible as well there was a lot of units that were happening so this contraction is sizable is someone doing something that's making them successful in today's market or is it just kind of like you know what we're just going to wait until things get sorted out like we just have this thing in place for the foreseeable future

00:12:00 Taylor Atkinson

someone doing something that's making them successful in today's market or is it just kind of like you know what we're just going to wait until things get sorted out like we just have this thing in place for the foreseeable future

00:12:12 Ben Smith

Pretty much. And I mean, I would say that we have to remember, we talk about housing and the housing market. And this makes me really frustrated with the government, especially like housing is a continuum. There is a lot of different segments within that continuum. So to say that housing is over or housing is stopped, it's not entirely true. There's still pockets that work. So like low density, either a townhouse or a wood farm apartment in a suburban area where they can make the numbers work, that can still go. I think what's... unanimous cross country is like no one's doing a concrete high rise because it's almost impossible to hit your presale. So if you can really chunk out and you can, especially with townhomes, let's say you could do blocks of eight at a time, you could sell and just pace yourself, you know, those still work, those are still happening. We do have significant pressures on the cost side of things to build these things. So that's even slowing down that suburban product as well. But if you can make the cost work, that suburban kind of low density thing can. still work but yeah anything of higher density or that's going to cost you some money it just doesn't make sense it's in pencil it's way too expensive to build anything these days and there's just a real ceiling on what prices can get to so i'd say that's the other thing we're seeing across the country is let's say you had like 800 bucks a square foot in the burbs for some product and then the spectrum was you know 2500 downtown urban market so say like vancouver out to the burbs that was your spectrum and then chunk out like $100 increments as you go. Now it's like, I don't know like $900 to maybe $1 ,400 if you're lucky. It's just so compressed because there's such a ceiling on what that purchaser is willing to spend or can even afford to spend. On the bottom, the bottoms come up because the cost is raised so much that they can't deliver that thing for $800 a foot. They just can't do it. So you've got this real compression making housing pretty similar in price wherever you go. So that's another factor that we're seeing playing out in the numbers. So you mentioned Prescale. targets so on the show we've had a few people complaining about government intervention and forcing like the pre -sale targets like is that a canadian thing or does the u .s have the same targets they need to get the financing for these projects

00:14:17 SPEAKER_01

had a few people complaining about government intervention and forcing like the pre -sale targets like is that a canadian thing or does the u .s have the same targets they need to get the financing

00:14:27 Ben Smith

Yeah, I mean, definitely, I'm no expert on how you finance a project in the US by any means. But just really simply, you think of, depending on the size of the project, especially a large high rise, let's say you got $250 million in costs you got to cover. The only way you're going to do that is by reducing some risk. And the only way to do that is either to put up some kind of deposit or guarantee, or you're going to have to put up equity. And so I think the capital coming into the market is really a problem everywhere. And the more governments intervene and make it less likely that you're going to get a return on that capital just. And whether that money's coming in through kind of a financing investor or more likely in pre -sales, it's coming in through investors by way of deposits, which is the big conversation, it stopped. So we have this huge cost of delivery issue where it's so expensive to go. You need huge amounts of monies to do projects. Like, you know, when I started in this business, like early 2000s, you could do a project for 20 million bucks. It'd be a small project, but that doesn't exist anymore. Like projects are huge and expensive. And so when you've got that much debt against something, like you need some kind of mechanism to fund it. And, you know, in Canada, it's laughable, like 13 billion, we're going to spend to get 4000 homes or something. I mean, that's By my math, like $3 .25 million a home, like that doesn't make any sense. You know, you see articles of social housing getting built for a million dollars a door. Like, how are you financing that? Where's this money coming from? So it's certainly a problem. It's a massive part of the equation. Quite frankly, I don't think it's going to get solved because fundamentally there's a problem right now and it's a PR problem and no government is going to be seen to bail out. a rich developer. In the US, it's a bit different. You've got some public companies that are developers. We don't have that in Canada. So most of the developers carry a family name. No politician is going to be seen to give that family a leg up or a rebate or some kind of thing to make it go. So they have to create scenarios where somebody faceless can be the one that wins. I could go on and on. You started me. I'm sorry. It resonates with us for sure.

00:16:42 Taylor Atkinson

You've obviously like had a finger on the pulse here in the last say five years. Like when was the writing on the wall for you guys? Like when did, you know, you start seeing the data that's like, there's some major issues here.

00:16:54 Ben Smith

Oh, right away after like the boom of 21, it sort of wrapped a year, right? So it kind of ended in the spring of 21. Is that right? The boom in February, 22, 22. That's so after that, it was done. And it never came back. And so we saw it then. It was clear. That was on the pre -sales?

00:17:14 Taylor Atkinson

was on the pre -sales? Like pre -sales, just nothing was moving anymore?

00:17:17 Ben Smith

Yeah. The whole country, our transaction volume just went off a cliff and you could just see it. And if I looked at like transaction volumes quarter to quarter, they fell then and they never came back. At that point, we kept, oh, we need rates. We need rates and we need this and that. But then it was just this onslaught of a death by a thousand cuts. you know the rates got worse and worse and worse government intervention was like worse and worse and worse on the capital side so what did they do they're like well they created a bunch of boogeymen and then they went and attacked them so they said okay nightly rentals no more and they hit that then they said okay long -term rental well we're gonna have to protect the tenant and so then they hurt that so they basically one by one started taking away any benefit for an investor to have money in a deal and so that's how they killed it and then at the same time developers just said well then we're not going to launch anything so it was really interesting i think one of the most surprising things people don't realize that i get to see is i get to see supply and i get to see demand so on the demand side we see the transactions because we see the contracts so we can see across the country what contracts are happening and where but we also know supply because nobody's signing up for us if they don't have a project and so we had this huge backlog of projects that were all slated to launch in you know the spring of 2022 and immediately it was held back and then what happened is those things just started like a tidal wave to keep delaying keep delaying and then they grew so in spring of 2022 the projects that should have launched didn't so then summer comes along well those projects didn't launch so you add those fall and then it keeps going so we're four years now of this rolling thunder of supply that hasn't gone and it is uncanny like for an industry that's essentially mom pause and we're not public companies so it's literally just guys talking to each other their ability to control supply is unbelievable like it is crazy when the taps shut off so fast when the sales stop and so we don't have this huge glut of supply. You know, people are like, oh, there's 2000 units downtown wherever that we have. Okay, like, that's nothing. Like, it's nothing. There is a problem specifically within Toronto, specifically within a certain unit type, specifically in the segment right now. That's the only part. And that's a more complicated problem. But we don't have huge supply overruns because that is the one thing i can see is developers ability to control it is unbelievable they just know if they can't sell it they won't start so then you know think of the math on that let's use easy math because i'm not that smart you got 100 units you need a 60 pre -sale well now you're dealing with 40 units but you're not putting another 100 on top of it so those 40 units four years ago have whittled down to maybe they're 10 units now And maybe they're getting close to completing construction, but we just don't have a huge problem in that area. So what's the solution then? I mean, very tough question, but like if the problem came out three years ago and, you know,

00:20:27 Taylor Atkinson

question, but like if the problem came out three years ago and, you know, kind of maybe it started with interest rates and then, yeah, like you said, we have spec tax, vacancy tax, Airbnb legislation, anti -flipping, like just death by a thousand cuts. What do we do now? Like what's a lever that, you know, either the government not that we want them more intervention but like from you seeing it as to support developers like how do we get them back in the game yeah and i'll say this two ways we knew the answer four years ago i wrote about it in my column but i don't think it's going to happen i mean that's the difference now is i was making a lot of noise then but based on what i just told you about how governments see the development community they're not going to make these changes so i'll tell you what i think they should be even though i don't believe they're going to happen so it's really simple we have a cost problem so

00:20:52 Ben Smith

and i'll say this two ways we knew the answer four years ago i wrote about it in my column but i don't think it's going to happen i mean that's the difference now is i was making a lot of noise then but based on what i just told you about how governments see the development community they're not going to make these changes so i'll tell you what i think they should be even though i don't believe they're going to happen so it's really simple we have a cost problem so let's look at where the costs come from. Well, we have two building codes in this country, you have a federal one and provincial ones, they got to go look at the codes. And if you look at all the fluff that's in there, we're trying to solve every problem under the sun with the building code, right? So, you know, we've got these things that can have 100 -year events, and they'll be left standing. And, you know, some of that's great. We need that for safety. Some of it's fluff. And that's how we went from, like, you know, I remember working at Polygon in the late 2000s, and we did a concrete tower. I think we built it for $150 a foot. That same thing today is $500 a foot. How does that happen? And it's all these extra costs. I mean, the funniest one, I think, is, you know, you think of in BC, you have to have flushable toilets on a construction site now. flushable toilets like what's the cost of that really oh there's ridiculous ridiculous things that you add and then i mean just go talk to a trade and ask them all these extra costs that they have that they never used to have you know the wcb costs like all the safety costs they have to do like it's insane so i would say we got to go and attack those and say let's get rid of the fluff And let's get rid of it's not just the fluff within it, but it's all the regulation associated has to get paid for. So WCB is a great example. Like how big is that organization? It has to pay its bills. How is it going to do it? It has to charge trades to do things, has to charge developers. And that's how that happens. You know, go to the cost. There's a ton of costs that could be stripped out of there for one. Associated with costs, I don't have to say it. Everybody knows the development cost charges. Like, it's just insane what that costs. That's not changing because that's a structural change where how do municipalities make their money? Well, of housing. And they're going to do it from your property tax. So they don't have a lot of levers. And they kind of fell in love with the DCC because they were making so much money off of it, right? Like all of a sudden development's booming, their budgets are ballooning on the back of developers, so they can't actually get rid of it. And so they need the Fed to come in and replace that somehow or to create a new structure to be able to offset that money. I don't think visitor parking downtown is going to do it. So that's a big challenge. And I think why we've seen them, they just haven't touched it, right? They just can't do it. So that would be a huge one that would release some pressure. Rates, rates for sure is going to help. Rates coming down is helping. We're seeing a little bit of help on that level. But again, it's a thousand cuts. So they needed to do it all. And now that they haven't, these little gestures here and there just aren't enough. Like we need to cut way more out of it. So how do we get there then is the question if they're not willing to do any of those things. I think it's going to have something to do with the baby boomers. I think the baby boomers are a huge player in this movie. And I think they were a huge player in the pre -sale movie previously. We just didn't know it. And the government talks about the booby man investor and they blamed what they called the foreigner and the spec. calculator and we had all these names for them right and then we shut them down right the reality is like i mean i worked a lot of floors as you guys have and you know the investor is like You know, Joey and Susie, who have, you know, maybe a $3 million house that they've got a $500 ,000 mortgage on that they're levering the heck out of. They're giving their kids some money to get into their first home or to buy an investment. That was what pre -sale looked like. And there was a few people that were professionals that had a lot of homes. By and large, there was a lot of people that had one or two extras. And that was the game, right? But they were like regular citizens. The baby boomers stopped making sense when they took away all. the avenues for them to get their money back or to minimize the risk. And so now that baby boomer is sitting on call it three million dollars in clear title real estate they're just not doing anything with it right they're not levering it to help their kids they're just sitting and waiting but that baby boomer the oldest baby boomer is now reaching the age of death in canada and it sounds really morbid but the reality is over the next 10 years they're gonna be an enormous part of our population that's going to pass on and they're going to transfer that wealth and they're also going to leave these homes so the other thing that we have to watch is They didn't downsize, you know, a very small number downsize. Most of them are still in that home. You know, they've got four bedrooms that are empty and, you know, they're still in that home sitting on all that equity. So once that starts to move and they're just such a huge population, like it's going to shift a lot. The other thing I talk about that is you think of their kids. So who are the two biggest populations? Well, baby boomers and then their kids, which is the millennials, right? Those millennials are all sitting in homes waiting for mom and dad's money or for mom and dad's home. So they're leaving that home stuck as well. Because if you know you're going to inherit like 10 grand, it doesn't matter. It doesn't change your life. But if you might inherit. 100 ,000 or 300 ,000 or a million or whatever that number is coming out of that house, you're going to wait. And so you might be sitting in a home that you're waiting for that money before you go do something and act. So I don't think we know the impact of that whole scenario, that domino effect when that goes, you know, you're going to have mom and dad's have come free. You're going to have, you know, baby boomer kids house come free, or you're going to have a lot of movement. And so my belief is that's probably when we're going to see a big shift. You know, we'll see. Do you think it's going to shift one of two ways?

00:26:49 Taylor Atkinson

Like, is it going to open up some real estate and release some of that pent up supply and demand because some of those houses are freeing up? Or is it going to like, you know, fuel spending because now. You know, those kids have an inheritance and now they can go out and buy their house. Like what's it going to do to that supply and demand issue?

00:27:05 Ben Smith

and demand issue? It's quite a complex problem. So I haven't seen anything to know which way it's going to go. I think part of it might be like, is that money real? Like, let's say you have this huge flood of these huge homes come on. I mean, you know what's going to happen, right? Those things are worthless now. So is that money real is a real question we need to know. It's like, is there going to be anyone to buy it? A big part of that's going to be what happens with immigration. So we've decided right now that immigration is bad and we don't want it. But like once this starts happening. if we had somebody to buy that home i .e think back you know mainland chinese large number of south asians that used to come in this country and buy these homes if that's allowed then now you have a buyer for these homes so i think that still needs to be worked out and seen but I think what is going to be true is either way, you're going to have an influx of capital. And, you know, one of the big problems I shared earlier within our business is we have a capital problem. Like we can't do new projects because there's no capital to fund it and we don't have a mechanism. So I think we have to see how that plays out. The other thing we're seeing right now, which is interesting, I think it's going to be a same problem later, is I spoke earlier about the Toronto condo problem. And why that one's unique is really what it is, is you've got an enormous number of studios. with no one to tend to use them. So, you know, who used to use those things? Well, two people, students and people new to the country because, you know, as a condo is ready to go, they'd move into a tiny studio and then they'd figure themselves out. Oh, the other person, sorry, the third one would be like the downtown Strader University doing the Bay Street shuffle. I'm going to go get my first studio. But that person's not working downtown, may not even have a job. So you've kind of cut off. all of the people who would use that unit type. So now it's like, oh, we have too many of these things. We have the wrong unit. Well, that could happen again. I think we have to see what gets freed up from these boomers and if there's a buyer for that thing, if anybody wants it. So there's a few bunch of factors that have to play out. But either way, you're going to have like a whole bunch of people leave the market and leave behind a bunch of money. So that's going to do something.

00:29:15 Taylor Atkinson

Yeah, that's fascinating. I haven't really thought of of that. before and I guess do you think when that happens like will our short -term memory be so bad that the confidence just comes back in people have capital to spend these projects start going like will everything just go back to normal and we'll go tough what happened in 2020 to 25 I don't know we're back to normal that's tends to be what happens in our business right and I think part of it is because

00:29:34 Ben Smith

tends to be what happens in our business right and I think part of it is because you know we get old and then it'll be somebody new it'll be that young guy who's a young girl who's in freshly new in the industry and they're like oh this is the greatest and they have no memory of what happened because they weren't alive or they don't you know they were children you know that was us right like i remember when i started in this business and the old dogs were like oh well i remember in you know 80s that this happened and i'm like oh i heard about that but i was 13. So I think that'll happen for sure. But let me ask you this, like all of a sudden, you know, God forbid your parents die and they hand you half a million dollars. Like, what are you doing with that money? You're probably going to buy a house or spend it on something. So we'll see it'll be part of the equation for sure. I'd probably take my through school to become an estate settling lawyer.

00:30:22 Matt Glen

settling lawyer. So I was like,

00:30:25 Ben Smith

yeah, there you go. Don't be fooled. The government is going to take their pound of flex. They're going to find a way. They're looking for ways to take that equity. They want it themselves. It's trapped in the homes. Yeah. Yeah. Yeah.

00:30:37 Taylor Atkinson

You touched on something with the Toronto market. Yeah. I mean, it sounds like obviously they have a pretty major issue there. Optimistically, like what are you seeing in projects? Like what's selling right now for pre -sales? What's working? What size of unit? Like what are buyers looking for? I mean, you can talk nationally or Western Canada, but yeah. what's working right now yeah i mean first i'll say it's a tricky question because what are buyers buying well they're buying what's available and remember i said that developers control supply so it's a tough thing because what's available is what's left over so there's very few projects launching so there's not really anyone going okay this is what the market wants right now let's go build that

00:30:54 Ben Smith

i mean first i'll say it's a tricky question because what are buyers buying well they're buying what's available and remember i said that developers control supply so it's a tough thing because what's available is what's left over so there's very few projects launching so there's not really anyone going okay this is what the market wants right now let's go build that If anything, it's like I got to get rid of these things. So most of the sales happening now are existing inventory that guys are trying to unload other than like I said, like the kind of low density towns, which You know, it's the same products it's always been. And townhouses are usually small families or people who want to have families. You need a few bedrooms, like it's the same kind of product. So that stuff just moves and it's whether you can hit the right price point. But other than that, it's really hard to say because, you know, you're dealing with whatever's left over. And so when I look at the system at what the sales are, predominantly it's skewed two bedroom because that's what's left. And I mean, that's interesting topic as well is there's lots of discussion around like, oh, we've got way too many one bedrooms. These, you know, matchbox in the sky, we shouldn't. And I think that's what people sound like, right? When they get all weird like that. I sound like that. Yeah, exactly. But the reality is like the majority of the unsold stuff is not that. Like that was the stuff they could sell. So the stuff that couldn't and, you know, never mind on resale what happens once they have to try to resell that thing. But from a new home standpoint, that's inventory is all gone. The inventory that's left is all the big stuff. And it's not flying off the shelf because everybody wants a two bedroom or a three bedroom. No, they don't. They just don't. We know that, right? There's a small number of people that want to live in a two or three bedroom condo, right? Most people in Canada are still chasing that single family dream. And so they'll go townhouse or, you know, further out into the burps to try to get it. And so There is that misnomer is that like most of what's available is bigger stuff. It's still hard to sell because not a ton of people are dying to live downtown in a condo or live in the burbs in a condo for that matter. So that's kind of the deal. To piggyback on that before we jump into some other stuff,

00:33:10 Taylor Atkinson

other stuff, what are your predictions for like 2026, 2027? Like when do you think the market's going to start to gain some momentum again?

00:33:18 Ben Smith

Sadly, I wish I had better news. I think we're going to be more of the same for a while. You know, I do think with that last rate cut, I don't know if you guys saw on the floor, but I feel like that helped for sure. That did change some things for some people. I think we're also going to see a whole bunch of people who were sitting on mortgages that are coming up for renewal and that's going to change their whole game plan over the next year. That's going to be a big shift. So we might see some people like, well. Might as well like get out of what I have because I'm going to have to start fresh anyhow. And so you might see some movement there with some upsizing. It's actually a really good time to upsize because that thing you're moving into is going to be suppressed more than likely the thing that you're already in just by the law of numbers of percentages. So I think we might see some of that. So I think we'll see a little bit of health. But on the presale side, I don't see anything changing enough that a developer can start a project. in the next 12 months any easier than they can now. Let's say there's some crystal ball that somebody's going to make this maneuver and it's going to have an impact. You know, we're still going to take a bunch of time to work through the cycles. And so many of these projects have been shelled for so long. Like, let's say tomorrow I can make it happen. Well, I'm probably going to go and review those floor plans and be like, OK. what works today? Is this really what we should be doing? And then you're gonna have changes. So I don't think over the next 12 months, we're going to see much change at all. To be honest, I think what will happen is we'll create a better place for maybe 2027. And a lot of that inventory is going to get cleaned up. And we'll be out of the way. So if the numbers did start to make sense to launch something and there was a market to sell it in, then people might be willing to launch in 2027.

00:35:01 Matt Glen

That's interesting. Do you think 2026 will be a time to sell all the buildings that I just can't sell?

00:35:10 Ben Smith

Totally. I haven't looked at a stat recently to know exactly when all these rental buildings are all finishing. That's the next problem we're going to see is, you know, anyone who's got a rental right now, they know how hard it is to rent it up. and so we didn't scratch the surface of what's coming right because over the last four years when everything died the only stuff that was going was stuff that was subsidized and was going to be rental and you know most of those buildings the rent roll was way higher than what's real And so now we're seeing how hard it is to rent those up. So if you pour a bunch of supply on top of that, like we're going to have a rental supply issue over the next couple of years before we get back to a condo scenario again.

00:35:53 Taylor Atkinson

Yeah, I think we're seeing that in Kelowna right now for sure. And it's just going to keep going that direction. Way a bit more company in Kelowna too. Yeah. Asking for a friend, what would you... buy right now like it sounds like the market's flat it's going to be flat for the next year and a half but you're you know potentially optimistic of you know midterm future especially with baby boomer kind of transitioning some wealth. Yeah. Where do you see any opportunities like for either a homeowner? Like, yeah, you said looking to upsize or investor geographically and product.

00:36:22 Ben Smith

Great question. I'd say, again, given the continuum, there's a bunch of scenarios that are playing out. I think right now I'm personally looking to upsize. I'm like, this might be a really good time for most of us. You know, the value of our home is maybe down, but it's not too bad. And versus that thing that we might step up into, that thing has come down more than. of thing we're in. So with rates as well coming down, like, you know, you can get a decent mortgage nowadays. And I don't think anyone needs it to get back to, you know, two and a half or sub 2%. Like, I think we're getting pretty close to, you know, a point that's really nice. It's like, you know, not a bad number. So I think, you know, that kind of stuff's really great for an owner -occupier. I can tell you investors are circling. They've been circling for the last year, you know, and what are they looking for? They're looking for really... distressed assets for sure. There's a lot of still looking for blood in the streets and those things exist. Again, like I say, Toronto is one of those. There's a lot of people like trying to do bulk sales and bulk buys in those markets for sure to try to own a bunch of that and just rent it out. So, you know, those are opportunities. The other opportunities are developers getting to the end of their road. Some of them might really need to sell something and really need to give it away for a really good deal. So I believe there are some pre -sale deals out there for sure. Anyone who's interested in something new that's either finished or close to completion, I think those are go for sure. Just based on developers want to get out and they want those things gone. So if you can stomach a bigger unit, which is probably what it'll be, then you could do really well. One thing I should tell you data -wise, it's surprising how little prices have fallen. I don't want to say prices have fallen across the board because there's lots of markets where prices are way up. And again, it's just a function of that cost side. Like the replacement value of a home is humongous. So that raised the floor to what it's going to drop to. And so I think the places where things where people are like, oh, it's way off. Well, it's way off from some stupid number that somebody got during COVID for sure. But anything like any real number, prices are really not that far off for the most part. And in fact, in a lot of cases, they're up.

00:38:35 Taylor Atkinson

Yeah. And I mean, I think we spoke to Brandon Hugginson. a long time ago about this but historically like canadians have so much equity built into their homes and you know especially with the appreciation it's had over the last few years like if you're to tell someone their home value is decreased they're going to really oppose that opinion and you know they're likely not going to sell So it's not like people are fire selling these things because in our minds we have this, well, this is, this is what the value is and I've got a ton of equity and I'm not willing to just throw it away.

00:39:04 Ben Smith

Who owns the most inventory? What I was saying before, the baby boomer. Baby boomers own most of it and most of its clear title are pretty darn close and they don't want to leave. Like there's some stat, I wish I had it handy. I don't, but there is a stat about the number of seniors who live in a single family home and it's way higher than you think. It's something like. 30 % of seniors actually believe their single family home. So most of them aren't leaving. They're staying there. And again, that's the other part is like when your home's appreciated and it's now, let's say it's worth 1 .5 million bucks just for easy numbers. And you paid a hundred thousand or something stupid for it. And you're like, okay, if I sell this thing, I'm going to lose a hundred grand in closing costs, just like between realtors and moving. Well, I'll just stay here forever. Like you just won't make sense of that. So I think that's a big part of it. Funny too,

00:39:55 Matt Glen

like there are buyers. I know I've experienced that. Like if you try to fire yourself right now, like there's a buyer there that's just going to stop it at some point. Yeah, totally. That's it. There's enough deal shoppers where if you get sharp on your price,

00:40:02 Ben Smith

enough deal shoppers where if you get sharp on your price, it's gone. Like there's still multiple offers happening. You guys have this, right? Yesterday, multiple offer,

00:40:12 Matt Glen

full price offer, regular offer lost. There wasn't that much buyer sale. So like there are enough buyers to make sure that doesn't happen. The bottom is definitely not falling out.

00:40:20 Taylor Atkinson

We're kind of at the sweet spot now where there's, you know, there are enough people on the sidelines waiting to buy. interest rates have come down confidence is kind of back it's just like you know a lot of the subject to sales are still kind of lingering but it's a fairly balanced you know transaction where we have like hey two week for subject removal like everyone's kind of comfortable yeah like you said the next year is going to be a bit flat but after that might be some some opportunity for growth totally well yeah thanks for coming on man i really appreciate the time and like honestly i thought it was probably going to be a little more doom and gloom just like where stats are coming from especially on the pre -sale side but I loved your take on everything. So yeah, I really appreciated your time. Yeah,

00:40:59 Ben Smith

no worries. I mean, it is not good. There's not a lot of stuff happening. We need launches. We need to get back to the pace of launches. That's the single biggest thing. And we all know we've had a lot of friends who are changing jobs because of it. So our industry really could use a leg up for sure. I don't know if we could get much worse, but I just see this kind of staying around for a while and we'll have to figure out how to. how to be successful moving forward, right? How to use innovation. We've got all the tools and we've got so many ways in our industry to cut costs and be more efficient. One thing I will say just to close off is, you know, on the technology side, somebody said to me once, I thought it was so smart. They said, you know, it took 20 years to go from a hammer to a nail gun in this business. And I see every day on the technology side, we're using so little of the technology that's out there. And, you know, with AI and all these things, like our industry has a huge opportunity. to start leveraging technology in a meaningful way. And you could save so much money and efficiency if we could just change our ways. And in the past, the risk was too great. So we just don't adopt technology like every other industry. But if we did, that's a huge opportunity for sure. Good point.

00:42:08 Matt Glen

Okay, Ben. Well, yeah, thanks for your time. And we'll look forward to having you back on soon and enjoy the storms in Tofino and surfing then. Awesome. Thanks, guys.