As per tradition around here, I like to bookend the new year with two posts: a post that revisits my random predictions for the year and a post that talks about what might happen in the year to follow. Today's post is the former. So let's see how I did:
I thought the interest rate hikes would come to an end in Q1-2023. But that didn't happen until the summer. I also thought this would lead to a mild recession in Canada. Technically, we are not actually in one, but according to some, we kind of are.
I thought the real estate sector would start seeing some distress in the first half of the year, and that a new equilibrium would be found in the second half. This proved to be overly optimistic in terms of timing. A lot ended up being on pause for the entire year, and I now think that my forecast was at least a year too early. The sea change is still underway.
Given the overall slowdown in real estate, I felt that construction costs had to see some softening. This did, in fact, happen with some of the "earlier trades", such as shoring and excavation, and we did see some specific trade pricing, such as concrete formwork, come down by as much as 30%. The smart cost consultants we work with now expect to see overall hard costs come down by a further 5-6% next year in Toronto. This makes sense given construction starts are way down.
With me expecting the interest rate increases to stop in Q1, I thought that pre-construction condominium sales would return in a meaningful way by the spring. While we did see some buoyancy around that time, it was short lived. Sales remained nearly shutoff for the entire year, but for maybe a handful of projects. The more successful projects tended to be outside of the Toronto core and at lower price points.
With respect to home prices in more tertiary/fringe markets, my sense then, as it is now, was that these prices would remain below the peaks for many years. In addition to the upward momentum created by low rates, my view was/is that some of this pricing was the result of a bet on urban decentralization. I don't think that has played out as many expected it to, so that's why I think it will be many years before the pricing we saw in early 2022 returns.
The momentum around "expanding housing options" in our low-rise neighborhoods is many years in the making. And a lot of progress was made in 2023. Here in Toronto, we adopted new multiplex policies that now allow fourplexes plus an accessory dwelling (so 5 homes in total) on an as-of-right basis. I continue to believe that this momentum is only going to grow. I also think we will see the arrival of more mixed-use opportunities.
I believed that, broadly speaking, urban transit ridership would remain below pre-pandemic levels for all of 2023. This proved to be the case for most US and Canadian cities. But things are improving. For Canada as a whole, it looks like we'll see full recovery sometime in 2024 based on this trend line.
I thought 2023 was going to be the year I took my inaugural ride in an autonomous vehicle. Sadly, this didn't happen. The sector as a whole also saw some setbacks. Hopefully I'll get a chance next year.
I assumed that Apple would finally release its augmented reality device. And though they didn't technically release Vision Pro, they did announce it. So I guess that counts for something. I also thought that 2023 would be a big year for "phygital" goods. Maybe it was. Or maybe it was more of a building year. A lot of people are curious to see how Vision Pro does in 2024. It's not set up for the mass market, just yet, but I think it will do exactly what it is supposed to once it's out in the wild.
Finally, crypto. I know that a lot of you like to skip over these posts, but it is something that I feel strongly about. A year ago, though, I was pretty bearish on Solana. Boy was I wrong. Solana ended the year as the best performing major crypto asset -- up 933% at the time of writing this. Oops! However, Ether is also +91%, and I continued to dollar-cost average in all throughout the year.
Next up: What will, or more accurately, what might happen in 2024.
If you have an iPhone 15 Pro (and iOS 17.2), you can go into Settings -> Camera -> Formats and turn on a setting called "spatial video." It will then enable this (excerpt from Om Malik):
Spatial video is a mixed-reality video format that allows videos to record the depth and spatial information of the scene, and when you play it back, you get a more immersive, three-dimensional (3D) experience. The iPhone 15 Pro utilizes its main lens and the ultra-wide lens to capture the depth and spatial information of the videos. The spatial videos are captured at 1080p, 30 frames per second, and use the HEIC format.
What you can then do is watch your videos on something like an Apple Vision Pro. It's not going to be exactly perfect right now -- given that the Vision Pro display is over 8k and the above is 1080p -- but it will give you an indication of what's to come for photography, video, and many other use cases.
Some examples.
As a regular consumer, this might allow you to capture videos from a trip and then more fully relive the moments once you're at home. And as Om argues in his post, this will inevitably change photography/video. Because how we consume media, impacts how and what we capture.
If you're in the business of selling real estate to people, you can also imagine this set up having a profound impact on virtual tours. Because now you have something that's pretty damn close to reality, if not eventually indistinguishable. Why even go in person until you have to?
Of course, all of this will depend on whether Vision Pro actually sees widespread adoption. But if the technology is as good as everyone who has tested it seems to think, then surely there will be at least some initial users who find immediate value.
And if that is the case, it opens the door for the masses. To once again quote Om: "It is not hard to be excited about the possibilities."
Okay, so I haven't tried it yet. But Apple Vision looks pretty awesome and the people who have tried it seem to be very impressed by it. The best article that I have read, so far, is this one here by Ben Thompson (of Stratechery). He gets into some of the tech details and explains why Apple is probably the only company in the world that could have created a device like this.
For those of you who are interested, Apple Vision is still technically a VR device, even though it is being marketed as an augmented reality (AR) device that allows you to stay engaged with the world around you. This last part is true, but it is all done digitally through 12 cameras that capture the world around you and then display it back to you.
So experientially, yes, it is an AR device; however, the tech behind it is actually just exceptional VR.
But this is not the point of today's post. The point I would like to make is one that Ben raises at the end of his article. After praising Apple Vision's achievements, he goes on to argue that the arc of technology is one that is leading toward "ever more personal experiences." In other words, it is increasingly about individual, rather than group, use cases.
And this is one of the first things that I thought of when I watched the Vision Pro keynote. "Wow, this looks like a really cool way to watch and experience a movie. But how do I do that with my partner? I guess we both now need Vision Pros. And what about families with a bunch of kids? That is a lot of Vision Pros."
But maybe this doesn't matter. Ben's point is that it's probably not an accident that this technology arc is happening at the same time as a larger societal shift away from family formation and toward more feelings of loneliness. Indeed, the number of single-person households has been steadily increasing in the US since the 1960s. The current figure sits at more than 1 in 4 households.
So there is an obviously dystopian narrative that we could all tell ourselves here. It is one where everyone works from home, plugs into virtual workplaces, and then flips over to other, more exciting, virtual worlds when it's time to unwind from the stresses of the former. And if you think about it, this isn't that much of a stretch compared to what many of us do today.
Whatever the case, in my mind, none of this is any reason to become bearish on cities. Humans will still be humans. And none of this tech is going to replace the feeling of enjoying a perfect pesto gnocchi in an impossibly narrow laneway in Milan, or drinking a caipirinha on the beaches of Rio de Janeiro while being surrounded by shockingly beautiful people.
Or at least let's hope so.