Welcome to Broker’s Playbook! Join us as we discuss the current Canadian real estate market with Royal LePage Services CEO, Mr. Phil Soper. Get invaluable insight and advice on how to manage this tumultuous market from one of the top business professionals in the industry. Tune in now for a fascinating look into the Canadian real estate market with Mr. Phil Soper! Don’t forget to like and subscribe!
Simeon Papailias: Welcome to Brokers Playbook. Today I have Mr. Phil Soper, CEO of Royal LePage Services, joining me to talk a little bit about what’s happening in the Canadian marketplace, as well as all his insight and advice on how to handle this market, what we need to be doing to persevere through this most difficult time in real estate that I have lived through and seen. So I’m very, very excited to have you join us. Phil, welcome to Brokers Playbook. Hey.
Phil Soper: Delighted to be here. Over the years we’ve done various. Things together through media. I always enjoy them. You’ve got great questions and we always seem to run out of time.
Simeon Papailias: Yes, we’ve.
Phil Soper: Got more on our minds. Yes, we do. Than people have the ability to absorb. But I’m really looking forward to and I wanted to start, Simeon, by congratulating you personally for a non-core business thing that you’re going to be doing this fall. You are joining the Royal LePage Challenge series for the first time, first time, and are going to be this fall. I see the fear in your eyes. Yes, You’re going to be joining a small group of people who have already raised over $1 million for our charity. And if you’d like, you can tell your listeners where that money will go in the foundation. But we will be attempting to hike the world’s largest active volcano in Ecuador. It’s going to be hard as hell. What what were you thinking?
Simeon Papailias: So first of all, I haven’t actually spoken about this outwardly at any point. And it’s it’s actually I haven’t felt any type of feels per se about it until now. I have been training. I’ve had a personal trainer now for six months. Specifically. You have.
Phil Soper: Lost weight. You look considerably fitter.
Simeon Papailias: I have definitely lost weight and I’m definitely stronger, which which I’m proud of personally. For me. You look great. Thank you. And it is this was a big push for it, knowing because I was already on a fitness journey I started about two years ago. I’ve lost almost £70 overall. Man. Yeah, it was. I mean, I turned 40 and I was almost £300 and I had to make a change.
Phil Soper: Of the people we love.
Simeon Papailias: That’s correct. So it’s almost half of me for for the love of God. So that’s kind of what triggered the change. And when we were in Winnipeg last year for the conference, we had launched some new business initiatives and we were all having fun. And the the charity came on and was speaking to, you know, what women are going through. So for everybody to know, I’m participating in the Royal LePage Shelter Foundation’s initiative, which provides shelter, counseling and resources for women who are in relationships that end badly. Yeah.
Phil Soper: We call it intimate partner violence. It has spiked 40% since the beginning of the pandemic. Too many women and kids locked in dangerous and toxic.
Simeon Papailias: Relationships and environments, too.
Phil Soper: Many, too many incredible tragedies. We have an agent, one of our colleagues in Montreal, her daughter in law who was murdered just two weeks ago. It it when it hits that close to home, you realize and here’s one of the the other challenges, cash strapped government said all three levels are are cutting back on the funding towards women’s shelters and and violence prevention programs. So private organizations and individuals like you are stepping forward. And the role of Shelter Foundation is the largest in the country, private, private foundation funder.
Simeon Papailias: So so to be honest, that’s why I like it so much because a obviously I’m a royal a pager and it doesn’t matter if you’re with any of the big brands, you know, they’re real brands with real governance. For me to feel good, to put significant dollars and mustard and effort behind it, Yes, I need to know that things are going to go the way they say they’re going to go. And obviously, I trust Royal LePage because I’ve been part of the organization for a long time.
Phil Soper: 100% of the money you raise will go to the cause.
Simeon Papailias: So and that’s just it. So in this case, I was inspired by it. I also have my my personal experience in life, my my partner, Caroline, she she she was a social worker for 15 years. She saw it all. So my home I know what she’s seeing because I’m her partner and she has to speak to someone in that line of business. Child Protection Services has a burn rate of five years. The people in it last, the average is five years. She did 15 before. She said, you know what? No more. I just can’t do this no more. And for anybody listening, whether you’ve lived through it and know somebody living through it or you’re blessed enough to know nobody through it know that it’s very real, know that it’s happening as we speak, and only by doing something about it will change happen. So for anybody that can please give, for everybody who cannot give resources, feel free to share this message because that is free. And bringing awareness brings change. I’ll leave that at that. And you know.
Phil Soper: From a business perspective, what the research shows is consumers, particularly younger consumers, want to work with someone they see has a social philanthropic thrust in their in their business practice. They want to work with a realtor who they feel is giving back to the community. It doesn’t make sense. These communities were so local in what we do and they provide us with such wonderful livings. Everybody, I don’t care what the what the the thrust of your giving is should have as part of their business plan, not just driving, driving higher revenue, more sales, but also how do I what what’s my personal social philanthropic strategy.
Simeon Papailias: Well, I think that’s it’s a it’s a huge component. So I believe in like the way we’ve built our business. I’m speaking to myself in jazz Tacker, who is my business partner at REC Canada. The way we built our business is based on community. So we built a community first, which resulted into a stable, multi transactional business because they knew what we were about before. So, so it’s a natural fit for somebody who knows and is a fan of what you do to transact with you. So the business became the result of the relationship, right? Not transaction first relationship after stay in touch. We stayed in touch 15 times before we ever did a deal. Value first. So now putting philanthropic or putting community driving into the front seat. That’s if the reason people advertise at the community arena is to get in front of the community. Absolutely. Absolutely. So the reason people put pumpkin drives and turkey drives and yes, you want it to result into business, but like if your heart’s in the right place, if you’re if you’re putting a couple hundred turkeys out on Thanksgiving. There’s a reason somebody is going to call you because it’s a nice thing to do. You’re right.
Phil Soper: Your heart is not. And I think. So in a advisory services business like ours, where you’re advising, you’re offering advice and counsel, you are the business. Say this before we we don’t sell houses. We sell advisory services. We advise people on the brokerage process and and we’re financial advisors. We’re community advisors were deal advisors. We offer advice and counsel for fee. We’re the people business. And if you’re going to be good in this business, you feel good when you work with people to make their lives better. That’s right. And that sometimes you charge a fee for it and sometimes you spend your money, your cash to give back. And both of it should make you feel good if you’re going to be an honest, successful practitioner.
Simeon Papailias: And that’s just it, the honest, successful practitioner. So in many cases, I’ve said this a few times before, even if you’re not genuinely a nice person and some people are just not genuinely nice, even if we.
Phil Soper: All know those.
Simeon Papailias: We all do pretend to be nice because pretending to be nice will eventually make you nice. I agree. But by just by doing those nice things and you might win at the end of it if that’s kind of where your heart is. But to to leave that at that, Phil, because I want to I have some ground to cover with you. Get on to business. We will. I am going to if since we brought it up, cat’s out of the bag. Um, there’s an email going out in the next couple of days on October 5th. Yours truly is throwing a massive fundraiser in the city of Toronto in the West End. Please look at my personal socials at Papalia’s across all the platforms. Check your inboxes, but if you want to help, you can attend the event by buying tickets. You can give directly to the foundation via link in my bio and of course to sponsor the event should you be in the position to do so, There is going to be a massive Ecuadorian and a massive flag for the event itself that we’re all going to be signing and the Ecuadorian flag is going to be given to the base base of the Kalapaki Mountain, which is the highest base camp for an active volcano on the planet. So I’m getting a little intimidated, but it’s going down so awesome. It’s going down.
Phil Soper: To taking those.
Simeon Papailias: Steps. So anybody who reach out, if you have any questions, on to the business of real estate. Lots of changes. Lots of speculation, lots of volatility. All the big hot words. Yep. Nothing’s changed for the better in the last year and a half. It has changed for more. I’m not going say for the worse because it’s confusion. Any market status is good or bad. It’s just the market. So I don’t care to characterize good market, bad market because good is bad for some. Bad market is good for some. Depends what lenses you’re wearing the day on the day because I know investors right now cashing in on other people’s anxiety so bad market for the guy selling great market for the guy buying so good and bad is subjective. So let’s be objective. We have seen a series of over a dozen interest rate increases based on the printing of money that took place, the three years continuous, trying to have a country go on welfare, basically, because that’s what happened. It was a social assistance. Project, I suppose that lasted two and a half years. So everybody in the country is getting a check. Billions of dollars. It’s insanity.
Phil Soper: Certainly part of it.
Simeon Papailias: Part of it. It results in an inflationary time of 8% plus.
Phil Soper: The peak a year.
Simeon Papailias: Ago, at the peak a year ago. They take all the measures. They do all the things. We have seen a change in real estate, myself obviously included. I have a large team that typically does between 6 and 800 transactions a year.
Phil Soper: A machine.
Simeon Papailias: A machine. We are sitting at a cool. 40%. 35% down year over year. The market’s down 50%. We’re out performing the market. There’s a small win for our egos. But in business, in black and white, when we’re looking at ledgers, the truth is the truth. And for our organization and I’ll speak to again myself a little bit. I’m used to going up every year by 5 or 10% or 15%.
Phil Soper: It kind of sucks when you when you go back. I’m hurt backwards.
Simeon Papailias: I’m. I’m hurt in every way. Well, maybe I can.
Phil Soper: I can ease the hurt.
Simeon Papailias: A little and let me finish. Okay. My brothers and sisters in the business, 85 to 90% of them share this feeling that of hurt. Like how so? Your volunteers are ready to tell us. My question to you is this. Where do we start when we wake up in the morning? What is our thought? Where do we go? Okay.
Phil Soper: Okay. So. One of the things. That is just inherent in my job is I’ve got to be taking a longer view. Then. Then people on the front lines like your team. Yes. I’ve got to understand what are sometimes called megatrends. What are the big things moving our industry? And I can tell you sort of a little a little foreshadowing that they’re they’re very positive for the industry. The the short term, the fall of 2023. Isn’t where we would like it to be. The medium to longer term, call it the rest of the decade looks very bright indeed for the Canadian and the North American.
Simeon Papailias: I am very much in agreement, very much in.
Phil Soper: So I see. I see three mega trends, if you want to call that that that have changed the world of the housing industry and the world of real estate brokerage. There’s more. But I thought in anticipation of our chat today, I boil it down to three. So one you’ve already touched on, which is a move from an ultra low interest rate environment to a medium interest rate environment. And I can give you a little bit of color on that if if you want to go there. The second one would be. The demographically immigration and household size driven increase in the number of households we need in this country far outpacing our ability to to build. So so we have and that’s a good news when you’re in the business of advising clients on something that is that is exploding, you know, a market that’s exploding. I mean, we could be in tobacco or even oil and gas looks pretty good for oil and gas right now.
Simeon Papailias: We could be in tobacco. Yeah, your stocks going down.
Phil Soper: You know, there there are these are not industries that have a real bright future. They’re good right now. And for my I grew up in Alberta, Calgary. My very first career brief, though it was, was in the oil industry. I wouldn’t advise my my kids to get into the oil industry. Right. Right. I think it’s it’s peaked. There’s some profits to be made. But they’re they’re sort of skim profits.
Simeon Papailias: The big day has peaked.
Phil Soper: And, you know, so that’s one, two. And the third megatrend that’s impacting our industry was was a sharp movement up during the pandemic, but it was already underway. It’s a technological and socially driven change in where people are are living or where they might living. And I would I would I would throw out a hypothesis that say. Our careers are no longer the driving force behind the homes we buy. Right. It’s things like affordability and lifestyle because the digital.
Simeon Papailias: The digital nomad and the ability to work outside the office.
Phil Soper: So we’re so which is fascinating, right? As a as a mega trend we’ve we’ve for. For as long as the since the industrial Revolution. We work, we live where our work is. And that’s no longer the number one driver. It now it is where we want to live. Housing, I think, is a bigger driver of where we live than what we do for a living. Kind of fascinating. But back to that inflation one. If you want me to give just a little, I do. Okay. So I think the first thing we have to understand is why the hell was inflation so low? You know, why was inflation 1.5%? If you look over the last century or particularly over the last half century. Inflation is typically it’s been tough to keep under 3% and now we’re bouncing between 3 and 4. If you look at the post pandemic world and it’s going to be tough to get it down to two and a half. So a couple of things that drove it there. One was globalization. So you threw a product out on the market. Someone in Vietnam or China or it might have been Israel somewhere in the world. Someone would say, I can produce that for less. And because of globalization, the sort of these the ability to buy and sell on a global basis, well.
Simeon Papailias: Logistics made that possible.
Phil Soper: Yeah. And the Amazons of the world and this sort of thing, it kept the price of of products from rising over time. So we had the things we bought and we used every day were almost artificially cheap. And of course there’s, there’s a cost to globalization. And the pendulum swing swung and. Global tensions between mega powers like China, Russia, Europe, North America, the United States, Canada have created more of an insular look. I don’t think it’s a good thing for consumers or the world in general, but it’s a reality. So there’s going to be less cheap stuff to buy in the world than there was. The the second thing that kept inflation so low was demographics. You know, you’ve heard of boom, bust, echo, the baby boomers, the Bust, which was the Gen Xers, which I think you are, and the the maybe your your.
Simeon Papailias: I’m at the cusp. I’m a 1980s baby. So 1980 is some people count it, some people don’t count. I’m on the cusp.
Phil Soper: So the. That created a world in which most workers were in the the baby boom because there was a lot of them and there was many fewer Gen Xers. So why why would that keep inflation low? Well, as as workers got older, they weren’t bugging their bosses for raises. They were they were keeping their heads down and saying, maybe if he doesn’t notice me, I won’t get laid off. And so there was less inflationary pressure on the wage side because we had an aging workforce who who’d already paid for their house. They already got their kids through school. They didn’t need the kind of raises and inflation was low from all that good stuff. Well, so that era is ending because of the millennials. So millennials are roaring in. They are actually bigger spenders than the boomers. And they’re young and they want and they want and they want. And they’re greedy like people are. And they want raises. And it’s putting upward inflationary.
Simeon Papailias: Pressure, consumerism through the last two decades being the rise of social media and the digital revolution on the planet, the Internet revolution on the planet. I remember being 17, 19, sorry, 16, 1996. We had just moved to Canada. Yep. And I knew the internet existed. It had launched two, three, four, five years before, but we’re still talking clunky, clunky Macs in the schools. And I would go to there was a site called Skate Talk. It was like a blog. I can’t even remember what they’re named now. Blogs, Chat rooms. Yep. This is no cell phones. This is like.
Phil Soper: Msn.
Simeon Papailias: Msn, you.
Phil Soper: Know, the first social.
Simeon Papailias: Yeah, the MSN chat. Like a WhatsApp. Yes.
Phil Soper: Of course. You had to be sitting in front of a big CRT.
Simeon Papailias: Or there was IQ. Anyways, there’s a few, but like you, you slowly started developing this class of comparing yourself to others syndrome, which led consumerism, which led inflation. So the spending and the demand for product over those years is where we see that curve go spiking up.
Phil Soper: So where do we find ourselves today? We find ourselves. If you look at the last 50 years and you look at the bank rate, it’s. Yeah. What is it? 575 in the US. Five in Canada. Which will impact the dollar. But that’s another, another, another story. The we’re right kind of on the the last 50 year average. We’re just way higher than we’re used to since the Great Recession of 2008. Yes. So for a lot of people who are relatively. You know, younger in their real estate careers. They’ve never they they, they don’t remember the the 90s and the 80s and things when when interest rates were were at this level. I tell a story well before my time I got into real estate in 2002. If you go back to 1981, the CEO of the time, Gordon Gray, stood up in front of the role of page conference, national conference that September, and said, if we can just get mortgage rates down to 17 or 18%, we can get this market going again. And they peaked in September of 1981 at 21.4%. 21.4. And guess what? The colleagues, our colleagues, our predecessors back in the day still sold houses. People still want to own their homes. 21% mortgage rates. So so, you know, we’re a long way from that. Yes. It feels insanely expensive. When you had a number of years at at 1.5 or 2.2 and a quarter, now you’re paying 5 or 6.
Simeon Papailias: Well, there’s a couple of big items in there, I think, even when. Interest rates were 21% or 12% because because a lot of maybe not us, but our parents lived through those 12 and 14 seconds and. With that being said, homes are a million bucks now. It’s true. That’s that’s true. And I’m speaking to the major urban markets. House being house is being more affordable in some of the smaller cities such as Calgary, Edmonton, Winnipeg, Saskatchewan, even Montreal, but Vancouver and Toronto, that holds, I don’t know, 50% of the country’s population is sitting at over a million average home price. And when interest rates go from two and 3 to 6 and seven, it’s it’s a bag of nickels to the face is what it is. It hurts.
Phil Soper: And there’s a there’s a lot of math in here. Um, it is true that home prices have outpaced wages and salaries over the last 20 years because of that number two mega trend on, on the supply of homes, which I know we’ll get to. But if I look at a real estate manager, they make somewhere, depending on whether you’re a small city, big city, expensive city, cheap or city, somewhere between call it 70 and $140,000 a year now. And back when interest rates were high in the 80s and things they were making, you know, 40 to $50,000 a year. So so we we’ve got to talk in quote unquote, real dollars, compare incomes to expenses. But I, I accept your premise that relative to incomes, homes are more expensive. Now, I will say you’ve got a national audience, right? Yes. Yeah. Um, when I started back, I mentioned the 2002 number, the, the ranking of the most expensive homes in the country. It went Vancouver. Calgary. Toronto. And now I’ve. Calgary is about the same price as Saint John’s, Newfoundland. Right. So we do have affordable places in this country. Montreal is affordable. Calgary is affordable. Halifax is affordable. You know the and people city of champions.
Simeon Papailias: Edmonton is affordable, not.
Phil Soper: Affordable. Well I can tell you relative to incomes, Vancouver and Toronto are way more expensive, but Vancouver and Toronto are are no worse than New York or Boston or or San Diego or or San Francisco.
Simeon Papailias: The minute you get to that global city demographic where anybody from anywhere, no matter what they’re used to, can thrive in your city. That’s to me is the standard of a global city. You want to be a world class city. Somebody coming from Vienna can find language, can find culture, can find work, can provide work at any level in this city. Somebody coming from Shanghai, same New Delhi, same. You’re right. So so the minute you reach that status and good food in the minute you reach that status, it is an inequity in the in the.
Phil Soper: Living becomes tough. I’ve got a squatter who’s got a summer job next year in New York City. It’s all range. She’s in law school and we’re looking at the cost of living. It’s it’s nutty, right? We’re going. Okay. Didn’t expect this.
Simeon Papailias: I really love you do Well.
Phil Soper: But you know she’ll be good for you.
Simeon Papailias: So here’s my question. We’ve talked about the problem. I think all of us know and feel and understand this more or less. What do we do about it? As real estate advisors, as counsel to our clients, where do we take the conversation? How do we ease the anxiety?
Phil Soper: I have a good point. So in each of these megatrends that I was hoping we could get through today, the first one being the move from the ultra low interest rate environment to something more moderate. I think the message that a real estate advisor has to take to their clients is, is don’t expect a return to where we were anytime soon. So I know a lot of a lot of. My people are hoping like this fall interest rates are going to drop or maybe in January it’s not going to work that way. Think of it. Here’s a metaphor for you. You’ve got a you’ve got an infection like pneumonia or something. The doctor gives you medicine, antibiotics call. You’re feeling better. You still have half a bottle of pills to take, and you go, I’m cured. The doc goes, Oh, no, you finished that bottle. That’s a that. Central banks around the world, they are the doctor applying some sometimes nasty medicine to to help the economy get better. They don’t want it to creep back again. So we’re going to see the medicine. Call it higher interest rates. Around for longer than a lot of people expect. We’re going to see inflation, quote unquote, tamed. We had a little tick up that was caused by gas prices just now. Just now. But it’s not an even road. But we’re going to get it. We have the tools. It’s those higher interest rates are going to stay around for longer because they don’t want the disease to creep back in. Inflation is a nasty disease for an economy. So what what people if you’ve got clients that are sitting, waiting. On the sidelines for interest rates to get lower. Get over it. They’re not going to get lower in the timeframe that makes sense for your clients. So they they what do our folks have to do? They have to get better educated on call it financial trends. You know, they can go to someplace whether they’re rollup.
Simeon Papailias: Maybe. I think I may have identified something in what you just said. If we’re advisors, it’s our intake that has to be improved. So if somebody can wait a couple of years, they should. But most call us not. When they’re two years out. They call us 3 to 6 months out, two months out. We cannot tell that seller that anything is going to change in a term that’s actually going to affect their decision and their life today. Right. And it’s really.
Phil Soper: Rare in a marketplace. That the waiting actually works. And you know this so well. Right. So if I’m a seller. I’m almost all the time. I’m also a buyer. Of course, if I’m a buyer. If you’re a first time home buyer and you’re in this market and you’re waiting for interest rates to get lower, you know. Maybe you’ll luck out. But that second megatrend that I talked about, which is the growth in in through immigration, through demographics, this huge millennial cohort coming into home ownership, and the third one being smaller households is creating an imbalance that won’t be solved for for at least a decade. And it’s going to drive home prices higher even in the face of high interest rates. So. So you’re going to be this this. Okay. I’m waiting for interest rates to go down, but home prices are going to rise.
Simeon Papailias: I think we have discovered some very good advice. So for anybody out there representing buyers, this is something that I that I just covered with my team in our in our last team training. Is for the buyers waiting to the buyers waiting. This is the environment that is best to buy in. The purchase price. So there’s a there’s an old adage to real estate investors. You make money when you buy, not when you sell, because we’re referring to the purchase price that can never be changed. The purchase price, what you buy something at can never change. It’s the fixed of the investment. The mortgage being only a tool. Of making home ownership possible or an investment possible. Not only can change, the only thing it does is change. You can negotiate the terms. You can negotiate the terms, you can negotiate the amortization, period. The the rates are going to change as often as you arrange them to change. If the buyer, the first time home buyer can get through the qualification process to buy. This is by far the best time to buy because they’re going to buy for any depending on the market, of course.
Simeon Papailias: But let’s call it there is a 20% variance, 25% variance in some markets that can be leveraged by the savvy negotiator being us. If we do our jobs, represent them well, we can get our buyers from 5% in some markets to 15% in other markets below prices that just a year ago when the rates were low, the prices were much higher. Yep, you’re right. So that 150 K that will take you 510 years to pay off of your life at these types of prices we’re talking about. They’re not something that you can just throw 20 grand at and the mortgages down. If your mortgage is 800,000, you’re in for a life like this is life now. So you buying at 675 as opposed to 800. Yeah. Is a huge deal today because in only 2 or 3 years, if you do a three year term, for example, you can renegotiate that at 1 or 1 and one half points lower. So. I think we found a really good piece of advice on what to do now to create deals and wins for your clients. I agree. Do you agree with that strategy?
Phil Soper: I agree. I agree. And I think. What you need to that the reason that today’s real estate professional needs to know more about. Call it the economy and financing than they typically do is because the media, understandably, is full of dire news about the economy and financing and about interest. I mean, the average guy in the street now pays attention to what the Bank of Canada is doing, and that is not normal. So you need, as a real estate professional, to be one step ahead of your of your client. And the information is out there. It’s not complicated. You don’t need to you know, your eyes don’t need to gloss over basic stuff. You know, we’re in an in an era where interest rates are going to be higher than they have been. Will they come down? Probably. Will they come down in the medium term when you want to focus your, you know, your 2024 business plan? No. So. Explain that to your clients and explain, just as you said, Simeon, why that doesn’t mean you need to put your investment dreams, your your personal home needs aside because of this environment and that second one that that that that continuous upward pressure on home prices. I think it’s really important that people be able to explain it really quickly, Natalie, to their clients. So we are adding people to the Canadian population. Why are we doing that? You know, you say why? Why don’t we just cut off inflation, immigration? And you hear this, you know, the the typical Trumper in the United States will say stuff like, well, it’s because the number of people retiring from the workforce is about double the number of people coming into the workforce.
Simeon Papailias: And nobody ever says that, do they? Oh, it’s.
Phil Soper: It’s it’s that’s.
Simeon Papailias: A huge point. It is a huge point.
Phil Soper: And it is a terrifying point for policymakers.
Simeon Papailias: Same as birth and death rates on a bigger picture. Yeah, they are not they are not 1 to 1. No people dying far away. The people being born.
Phil Soper: Absolutely. Absolutely. So we need we’re very lucky in Canada that we’re not like Japan or Italy or Greece or Greece in that have birth rates of about one. Right. So if you look at South Korea, one of the lowest birth rates in the world in one generation, one generation, you know, parents to kids, they’ll be half as many people. If you’re only having one child for every couple half as many. Well, who’s going to pay the bills? Who’s going to pave the roads? Who’s going to keep your favorite restaurant open in your neighborhood? Who’s going to keep the school open? So what you end up with these these devastating forward looking consequences if you don’t solve it some way? Well, we’re solving it through immigration. And so in a temporary basis, it looks like, oh, God, we need more housing than we can afford. We should cut off the the the. You know, the stream of of highly skilled workers that were inviting from around the world to come to the world’s best country. But guess what? They’re paying the bills. They’re working. They land. They’re all the things.
Simeon Papailias: The whole the whole cycle.
Phil Soper: Yeah, they’re working. So that’s number one. Number two, the demographic thing. There are just so many millennials and they’re rolling. They’re into their early 40s now and they’re rolling into home ownership. One of the consequences you mentioned earlier, higher home prices is some research we recently did showed people the number of people who are waiting till they’re over 35 to buy a home is up five points versus pre-pandemic. So people are buying homes later in life. Surprise, surprise. No, no, they’re staying in school longer and homes are more expensive. And the number they’re.
Simeon Papailias: Getting married later, They’re exactly all the things. And they’re living.
Phil Soper: Longer. Yeah. So it’s not that it’s not that big a deal. It just means this big millennial cohort is impacting the housing market a little later than, say, their parents did. Yeah, And and the third one is the household size thing. It is fascinating to me. If you go back to my grandparents age average home size six, my parents, for now, it’s gone under two. So think about that just from the my parents to now the number of homes we need to house exactly the same population for X. Yeah, it’s well, it’s doubled if you go from 4 to 2. Right. So we need twice as many homes and we haven’t changed. That’s without the population changing and.
Simeon Papailias: That’s why the density is so important. It’s right, it’s so important.
Phil Soper: And it’s why, you know, for a little Segway, we are in exactly the right industry. If you’re a young person and you’re looking for an industry to hook your cart to, you know, the old adage, you know, a rising tide raises all ships. I when I talk to I’m on the on the board of Toronto Metropolitan University, the old Ryerson. And when I talk to people in the real estate program, they’re one of the few schools in the country. You can get a degree in real estate through the business school. I say, you know, when you’re looking to start your career, you know, it sure helps. You can be a star in any industry. You could be a star in tobacco. Sure. And start your career right now. But, you know, wouldn’t it be nice if the industry itself was expanding? You know, if you were an AI and, you.
Simeon Papailias: Know, policy supports its expansion, it almost guarantees its survivorship in a biggest, most robust way. Exactly.
Phil Soper: So you look at housing, you look at real estate in general, CMHC predicts we need. Let’s see. I got to do the math here. 6 million homes by the end of the decade. At the current rate, we’ll be lucky to build half that many. So what does that mean? Well, it means, number one, we’re going to be building a lot of homes and those homes need to be brokered. And so brokerage is a growth industry. Millions and millions of new homes that need to be brokered, plus all the existing housing stock that needs to be brokered. Great industry to be in. This is an expanding industry. It’s sort of the like I but you know a lot more fun because I is isn’t fun having a nice house you know sitting out on the back deck and have a having a cocktail That’s fun.
Simeon Papailias: Yes, it is.
Phil Soper: So this is a great, fun industry. Everybody wants it. Young people want it. Old people want housing and and as it as this industry. Grows. There’s the shortage. We’re not you know, we are not going to catch up. There’s a lot of focus every election now, whether it’s municipal, provincial or federal. Either number one or number two issue. Platform issue is going to be politicians arguing about who’s going to solve our housing crisis.
Simeon Papailias: So that’s that’s the conversation at every level of government from I’m talking from town hall in your neighborhood right now to the the city level, to the provincial level, to the federal level. You got it. It’s prime ministers.
Phil Soper: Premiers, mayors, everyone. They’re all to keep their job. They’re going to have to come up with a viable you know, it might be health care. But it’s probably going to be housing that’s going to be the number one issue that they have.
Simeon Papailias: The conservative the opposition right now in our country just issued a statement last week that made so much noise that it might actually move him up in the rankings for whatever upcoming election. It’s that big of a deal where the liberal, the current the reigning government right now just implemented a policy to take effect ASAP on rental stock.
Phil Soper: Which is going to change the it’s going to change the game.
Simeon Papailias: So I got off the phone with a developer that I’m seeing at 4:00 pm today that had a lot right at the entrance. And I’ll speak to I won’t say the company, but I’ll speak to it because a lot of us know Mimico go train station. Sure. It’s one of the biggest stations in the city and right at the right at the where the new doors for for people to walk in and out of Mimico go train station is a corner on a street called the Blue Goose. Right. Okay. So the Blue Goose Tavern is an institution in the city that got redeveloped. That’s still going to be a brewery. But behind it, there was supposed to be 12 townhomes approved, gone through zoning. All of a sudden last year before they ever poured concrete or touched anything. Bill 23 comes through, so every townhome can now be three. So that goes from 12 to 36. Three X desperately.
Phil Soper: Needed.
Simeon Papailias: Desperately needed. The developer looks at his math. Okay. It makes a bit more sense to go with 36. Why don’t we actually take a look at doing a mid-rise now instead going six, seven stories? You can’t go much higher there. So they’re not looking to change the world. But all I’m trying to get at is in the last four years, not only has the world changed everything and everyone has changed what was supposed to be a 12, what was replacing three homes, three homes was going to be 12 townhouses. 12 townhouses became 36 bare minimum as of right. Yep. And now if you’re going to build 36, you might as well take a look at putting 75 to 90 apartments at the door at the door of the go train station. Absolutely. That is the opportunity. Now, if this Government says GST is no longer applicable, it almost guarantees the 75 to 90 units and that’s what it’s meant to do. Yes.
Phil Soper: So it’s an example of public policy changing our industry and for the better and.
Simeon Papailias: And again, supporting the future of the industry. What I was I was coming full circle. You’re saying this is what’s happening. This is why there’s a bright future. And it literally just happened yesterday on the phone call in a meeting with him today to see if this is the route we’re taking.
Phil Soper: For you, by the way, for keeping your finger on the pulse of what’s happening because your clients and your business partners. Expect that from an advisor that they pay a handsome fee to solve their their problems.
Simeon Papailias: And this is maybe let’s go into our last segment investment real estate. We spoke to the buyer the first time home buyer we spoke to the seller like if you need to sell my man, nothing’s going to change. Get your price, get your get your place up, get it done. Because the next couple of years, unless you can wait literally for something that we don’t know will be better or worse, get your business done. Let’s go to the investor.
Phil Soper: So we did a fascinating piece of real estate and I know we leaned on you as well as some of your colleagues across the country to be a spokesperson to explain the research to the to the nation it found. And this just a, you know, a few weeks old in the early summer. It.
Simeon Papailias: The investment report.
Phil Soper: Yeah. Showed 11% of Canadian adults, 18 and older were real estate investors. A huge number, 4.5 million people. It showed 25% of Canadians call it closing in on 10 million. People want to be real estate investors. They want to be call it landlords. You dive down a little deeper and you go, wow, that’s fascinating. Twin? No. Let’s see if I get the number. 15% of that four and one half million people don’t even own their principal residence. And they’re young. And I’ve got personal experience. They’re educated. This one, my future son in law, if he plays his cards right and is, you know, good to my daughter, he and his brother, he’s, I think, three years out of school. His brother is one year out of school. They just bought a property. They’re still renting. Right. But but.
Simeon Papailias: They bought a property.
Phil Soper: An investment property. And one of them lives in Calgary. He moved out there for work and one of them lives in Toronto. They bought in Saint Catharines. So what is this? What is this say? It says, People believe in what you’ve been putting, what you’ve been offering the market for many years, that being an investor in housing this industry that’s that’s that’s guaranteed need to expand over the next 10 to 20 years just based on on the mega trends I’ve been talking about. We need we need housing, therefore we need investors and we need landlords. Some of it will be will be solved by by corporations and purpose built large scale, large scale builds. But most of it will be supplied by entrepreneurs.
Simeon Papailias: Well, I got some sauce for you. I got some source for you right there. Institutional investment in housing is on the rise. I can speak to anecdotes on that, but I’m going to give you a stat about downtown Toronto. Downtown Toronto, one and two doors are owned by investors. In the next 20 years. I can tell you that that number is going to be eight out of ten. Why? Because it’s unaffordable to buy real estate in downtown Toronto. It doesn’t cash flow, but there is no more downtown Toronto. Being a global city. Any global city. The rent, although it may sound astronomical, does not typically surface. Typically when you buy it, when you first buy it, sure, 5 or 10 years later, it becomes a cash for life ticket. Yep. But there is enough patient investors that are funded enough to be able to buy when the delta is swinging in the red. And this has made the newspapers for the last five years. Condo investors bleeding $500 a month on their units. Condo investors losing $1,000 a month in their on their units. It’s easy to say that. And if that were true in the sense of losing because that too many, myself included, I’m not a speculator if I know the value is going to go up because of external influences. I have data. I’m doing my work. This is part of my due diligence. The $1,000 a month loss is part of my pro forma. Meaning as an investor focused realtor, if I’m selling you something that I know is going to be cash flow negative by 12 grand a year, but I also know as a fact that constraints in that micro market are going to push the price up by 50,000. We’re up a net 38. Yep. Phil? So so what’s happening is because I have condos that I bought in downtown Toronto in 2013 for 299. Nice. 2014, 329, 2015, 375. Those are cash flowing like little piglets. And it’s because of the purchase price. I made my money when I bought because will I ever sell those? I hope to God I never have to. Right.
Phil Soper: Right.
Simeon Papailias: Because I never will if I don’t have to. Right. But the money. So if somebody wants to tell me I’m not cash flowing in downtown Toronto, you’re wrong. It’s a matter of when you bought it. Right. But if you’re buying the same unit now at 700 and the rents 3000, for example, it is not cash flow positive because there’s maintenance fees, there’s taxes, there’s mortgage payments at 7%. But what is your investment goals? What is your strategy? What part of your life are you in? Are you looking to have just money carry? Do you need income because you’re in your older years? You can’t be investing in downtown Toronto if you’re planning on leaving your work. Right. Because who’s going to service the Delta? Right. So there is something for everyone. Royal LePage specifically put out the country’s report on investment real estate. It’s not I’m not saying it from a company perspective. We are the only ones who did it. So I would I would tell all realtors, Royal LePage is not Royal LePage. It doesn’t matter if you go to their corporate site, you can get access to the Insight Bowl, the.
Phil Soper: Pagka media.
Simeon Papailias: Room, and you can use it. So to all my people and all the brands, it always sounds a little skewed. It’s not wherever you are, be happy. Leverage the insight into your business to do bigger and more business today. There is also a lot of insight that’s coming out right now from various news sources. The investor report that we did for downtown Toronto is also a Royal LePage contribution in there. So I will say everything we referenced today can be found online. If you have troubles finding it, please shoot an email to community at brokers playbook.com. Phil anything else? You know, I.
Phil Soper: Guess if I was to summarize our chat. The higher interest rate environment is going to be here for a while. You need to understand it. It is not a death knell for your practice. People find a way into home ownership. Our home ownership rate. Two thirds of Canadians own their own, their own. That is going to continue. So that’s number.
Simeon Papailias: One. Yes, it will.
Phil Soper: Number two, the the the demand for housing is just going to continue. And there’s more demand than we there is no way we can build the homes we need. What does that mean? Prices are going to continue to rise, sometimes uncomfortably. We’ll be back to double digit home price increases. And and, you know, people will be screaming from rooftops about it’s going to be a fact of life. It’s a vibrant economy. There’s a lot of demand. So that’s number two. We’re going to be in a rising home price environment. Not a bad place to be if you’re in the business of brokering this product and your income is related to the value of that product, it’s going to be bigger in the future. And then number three is I talked at the beginning, these people are mobile, right? And they’re going to be the country is is it’s like this stage and particularly young buyers, they’re going to be bouncing around all over the place. So you need to like you do, Simeon, you need a national network of colleagues and friends because you’ve got your clients, trusted partners. Trusted partners. Exactly. They’re here today. They’re gone tomorrow, right? They’re off. They’re off to Guelph or or Halifax or Calgary. And then they’re back. And some of them will move for lifestyle. Some of them move for affordability and some of them will move for work. But but we’re in an era of a lot of mobility. People are going to be moving around and they’re not going to be constrained by, you know, I work in Brookfield Place, so I’ve got to got to live within four blocks of there.
Phil Soper: No, it’s not going to work that way because of remote work. So these these three things are changing the way we work. What is not changing is they rely on the advice and counsel of highly skilled realtors who have local knowledge, who are excellent negotiators, who have their best interests in mind, who they can trust. And it’s it’s a great place to be, despite the fact that we’ve got a few weeks of challenging fall ahead of us, where, you know, people are uncertain because of inflation and such. Yeah, look beyond it. Grind it out in every market. You and I have talked about this in the past. Maybe a closing comment for me. Sure. In every market, even if the even if the pie gets a little smaller, smaller, there are those there are those practitioners who take a slightly larger slice of the pie because they’re they’re engaged. They’re they’re they’re working hard. They don’t go, oh, woe is me, They go, I want a slightly bigger slice of the pie. And then when that pie gets bigger again in the spring, they hang on to that. So, you know, do not despair. The future is bright. And if you keep your head down and work hard, you’re you’re going you’re in the right industry, I think.
Simeon Papailias: Keep your head down. Keep working hard. This is the time because no matter what, people are people. And in tough times, the majority of people do run. It’s just a fact of life. Those who are courageous and put in the endurance and the reps during these tougher markets.
Phil Soper: And reps.
Simeon Papailias: Are going to be the the benefactors of larger market share because they’re going to be looked at as the people that led during that time where I was lost. That person was there when I needed someone. Every boss had his face on it. So if you’re the realtor that’s spending money and marketing right now where people are running to the hills, you will recover that money tenfold. I know it because I’ve lived it and I’ve done it. And I’m not talking about 30 years ago. I’ve been in the business 16 years. 17 years. Right. I’ve done it twice through the two bad markets that I saw. The one that I was entered into. Zero eight is when I joined Royal LePage oh seven. I was with Coldwell Banker and I went, Oh, wait, my first year I went to Royal LePage and have left.
Phil Soper: Since the Great Recession.
Simeon Papailias: Correct, Very much so. I started in that. So, I mean, I.
Phil Soper: Maybe maybe one last. You triggered one last. All right. A little last piece of advice. Don’t spin the reality of today’s market. That’s right. Speak the truth to your clients. They see right through spin. Don’t lie to them. Give them the hard, the hard truth and then tell them the optimistic story that.
Simeon Papailias: Is real estate. But real estate is the story. It is anybody trying to time the market gets hurt. It’s time in the market, right? Always will be. Speak the.
Phil Soper: Truth. Even if.
Simeon Papailias: The truth. All right. I think that is speak the truth. Speak the truth. That is going to be the title of this podcast because I love it. We touched on philanthropy, reminding everyone, please support me if you can. The women and children in this country deserve your support, whether it’s monetary or if it’s just spreading awareness, please support the cause. Second, we got a huge amount of business insight. I’m going to try to get this cut up short and long to share as much of your insight, Phil, that you shared with us here today. I want to thank you for your time. I know it’s a commodity and I appreciate it. Thank you for being here. For being here. My pleasure. Cheers. Cheers.