Last edited by CN Tower; 2012-Mar-13 at 11:27.
Interested, I have to agree with BMyers, you were way out of line in your post and he is right to be offended.
You would do well to take a more fairminded approach in your responses in this forum, such as I did in my response to UrbanNations article (see below).
Last edited by daveto; 2012-Mar-13 at 11:29.
Who says 100% of pre-construction condos are being purchased by foreign investors? I think not! I've bought 2 pre-con condos in the last 10 years and I'm home grown baby . People are forgetting that there are over 6 million people living in the GTA, and a lot of them need a place to live too! Foreign investors aren't the only savvy buyers out there...we don't give us Canadians enough credit, but I guess that's what distinguishes us from our friends to the south. I just moved in to my new place and all the people that I've met live, work, and play in the GTA. I'm sure there are investors as well, but for the most part regular people mostly young couples. On my floor I have met an engaged couple, a father who bought a condo for his son, a young guy who is living with his mother, and there is my wife and I with kids. My point being, that all of these people who I've spoken to bought to live in...not just to flip or rent out!
That being said, rent multiples are a pretty indicator of real estate bubbles. There's a really strong correlation between high multiples and crashes.
However the science of investment has generally accepted the relevance of cap rates (ie rent to price) as an appropriate metric for real estate investment. Specifically, the value from the cap rate plus the value from price appreciation represents the value of the investment.
As such, I'm not sure that your analogy is correct. Really, sabermetrics is all about trying to derive a baseball equivalent to the rent-to-price RE releationship, rather than moving away from it.
Miami you say? You want to go chase deals there? You want to hop on a plane every time your drug dealer tenant bounces a cheque? Or would you prefer to rely on the property manager or real estate agent that you just met to look after your investment? Market rebounding there? Perhaps. You want to feed your unit/condo fees for months searching for a tenant? Does the market have a 1% vacancy? Good luck. I'd rather store my wealth at the corner of Main & Main in Toronto and get 2% return or nothing knowing that my capital is safe.
Investing usually requires some work. Actually a ton of work. If you want to set up shop in Florida be my guest. I know Floridians who can't wait to get out now that things have appear to have stabilized. There's definitely money to be made there but it isn't falling from the trees and it sure-as-hell doesn't come as easily as those real estate broker sponsored seminars you read about in the paper. Give up your job in Toronto, move to Miami, get to know the market, raise some capital and go for it! If you do it half-ass you'll get half-ass results. My experience has taught me as much.
Btw, there's a pretty big space between extreme pessimism and extreme optimism. I'm comfortable in that space as are most people who are unemotional and unattached from the market.
Last edited by CN Tower; 2012-Mar-13 at 13:18.
Toronto is different than America or the rest of the world. Every city is different. Every city has unique characteristics that collective form the local real estate market. Just because prices in Toronto dipped, recovered and then increased after the credit crisis does not imply that prices in Toronto should necessarily fall.
I think BMyers point and part of mine was that the market is more complex than to just say properties here trade at a higher multiple of net income than they do in Atlanta, Georgia, another perennially fast growing metro area. There are other factors than need to be considered.
Google trades at a higher multiple than Microsoft. Is Google automatically overvalued? Does that make Microsoft a good buy? Think and analyze as you both have done so well in this thread. The answers are not black and white.
Rent-to-price is a great starting point. I think it's fair to say that there are differences between markets. A 20 to 1 ratio in Toronto may not mean quite the same thing as a 20 to 1 ratio in Tokyo or Tehran.
Yes, Toronto is different from the USA. Toronto is of course not immune from a real estate crash, but to use places like Miami or Las Vegas or whatever as a direct model for Toronto is extremely lazy, and foolish. Indeed, I almost feel sorry for those misguided souls who sold their homes in Toronto several years back to move into rentals simply because their aunts' retirement village homes in Palm Beach dropped in value.
FWIW, a family member just bought a condo this month, cuz, well, people generally don't like living on the street... and a lot of people don't like living in rentals either.Agree 100%. The majority of RE buyers are buying shelter, and do not change their behaviour due to actual or anticipated price increases/decrease. That's just crazy talk.
Last edited by Eug; 2012-Mar-13 at 16:40.