Baby, we got a bubble!?

[interested]

I am not sure if you are referring to a comment that I made but I believe it is incorrect. for clarification: what I said was:
"If it is true that almost 100% of precon is driven by "investors", what percentage of them are very extended and how many will be unable to close if on completion the value of the $700 precon condo is only $550/sq.ft. as today at resale." What has been quoted from Remaxcondosplus and Jamie Johnson is that almost all precon is driven by investors since most end users will not buy 3-5 years ahead of time whereas investors will. Of course there are end users buying as you correctly point out. I am just not sure what the percentages are but i suspect of late most of the buying is by "investors" in precon to be constructed in 4 years from now at $650 to $750/sq.ft.
The percentage ratio of investors/end users is not known. My personal guess is that it is 75 to 80% vs. 20 to 25%.
I do not know how many foreign investors there are but I can only hazard a guess and it is a pure guess. I would think 20-30%.

 

[MadMax]

^^ Yes, I disagree with you. I believe it's the other way around, about 70% end users and 30% investors. Now when I say 70% end users that would also entail some who have bought to live in with the potential of renting out or selling depending on their circumstances after the 3-4 year build period. I find a lot more people are in this position rather than strictly investor types. This is just my opinion and I don't have any hard numers, just like you don't either.

 

[daveto]

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.

Eug, I'm confused.

I've looked back over the thread, and I don't see anyone comparing TO to the Miami or Las Vegas RE market. Which post you are referring to?

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.

Eug, I'm confused. Which post you are referring to?

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.

The issue was not buying vs rental or homelessness. The issue was whether primary users are influenced by considerations of profits (as per investors)

If their action was not influenced by any consideration of price increases or decreases, then that is relevant albeit anecdotal evidence. Have you put that question to them? Specifically, "Would you have changed your purchase if you knew with certainty that prices were going up 20% in the next 5 years? How about going down 20%?" Perhaps you could ask them and report back to us? thx

 

[daveto]

The percentage ratio of investors/end users is not known. My personal guess is that it is 75 to 80% vs. 20 to 25%.
I do not know how many foreign investors there are but I can only hazard a guess and it is a pure guess. I would think 20-30%.

^^ Yes, I disagree with you. I believe it's the other way around, about 70% end users and 30% investors. Now when I say 70% end users that would also entail some who have bought to live in with the potential of renting out or selling depending on their circumstances after the 3-4 year build period. I find a lot more people are in this position rather than strictly investor types. This is just my opinion and I don't have any hard numers, just like you don't either.

MM, what are you disagreeing with?

 

[MadMax]

^^ The percentage of investors to end users for pre-con purchases.

 

[macookie]

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.

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.

Ever heard about black swans?... you know those events that are really rare but when they happen cause massive disruptions. I'm not saying that something may or may not occur but you have to have alot of faith to believe that you can camp in the space between extreme pessimism and optimism.

I have no desire, to invest in property, nor do I have time. I just like most other Canadians want affordable housing... and eventually Canadians are going to demand it, Torontonians that don't want to move are going to demand it.

Also while you might store your wealth in a tower at Main & Main in Toronto.... that doesn't guarantee you a return on your investment. The world isn't perfect and at times it's unfair and unlucky... and those that believe that RE prices will always go up, and that investments never lose money are wrapping themselves up in plastic bubble...

Lastly, given, what has happened to our Southern neighbour and realizing that what affordable housing is going to do for millions of Americans.... it's absolutely amazing. With millions of foreclosed homes, and wealth destruction... the recovery, will re-start in the US eventually... meaning that Americans will have more disposal income to consume more, and there housing costs will be reasonable, and lower... and that has to be good for the economy. Canadian's don't have that luxury or potential of more disposal income, because Canadians will be paying their mortgages and unaffordable interest. So digest, and think about which country's consumer in 5 years will be better off????... Then ask yourself investors are going to place their bets in the next cycle?

 

[daveto]

Ever heard about black swans?... you know those events that are really rare but when they happen cause massive disruptions. I'm not saying that something may or may not occur but you have to have alot of faith to believe that you can camp in the space between extreme pessimism and optimism.

I have no desire, to invest in property, nor do I have time. I just like most other Canadians want affordable housing... and eventually Canadians are going to demand it, Torontonians that don't want to move are going to demand it.

Also while you might store your wealth in a tower at Main & Main in Toronto.... that doesn't guarantee you a return on your investment. The world isn't perfect and at times it's unfair and unlucky... and those that believe that RE prices will always go up, and that investments never lose money are wrapping themselves up in plastic bubble...

Lastly, given, what has happened to our Southern neighbour and realizing that what affordable housing is going to do for millions of Americans.... it's absolutely amazing. With millions of foreclosed homes, and wealth destruction... the recovery, will re-start in the US eventually... meaning that Americans will have more disposal income to consume more, and there housing costs will be reasonable, and lower... and that has to be good for the economy. Canadian's don't have that luxury or potential of more disposal income, because Canadians will be paying their mortgages and unaffordable interest. So digest, and think about which country's consumer in 5 years will be better off????... Then ask yourself investors are going to place their bets in the next cycle?

Smart investors buy low and sell high.

US RE is close to an alltime low, and Canada RE is at an alltime high. I can't imagine why a RE investor would prefer to buy in Canada rather than the US in the current market

 

[interested]

^^ Yes, I disagree with you. I believe it's the other way around, about 70% end users and 30% investors. Now when I say 70% end users that would also entail some who have bought to live in with the potential of renting out or selling depending on their circumstances after the 3-4 year build period. I find a lot more people are in this position rather than strictly investor types. This is just my opinion and I don't have any hard numers, just like you don't either.

Madmax: You could well be right. I however include investors who rent out as non end users. Hence maybe the difference in our numbers.

 

[interested]

Interested says 20-30% investors.
You say 30% investors.

I'm not sure I see what you are disagreeing with. Perhaps you misread his post?

Dave, i believe the confusion was that I did say 70% investors. I thought perhaps 30% were foreign investors with 70% local of the total. However, Madmax includes people who buy to rent as end users and I personally do not. I believe this latter group makes up a significant amount of the Precon market in the core of TO

 

[MadMax]

Yes, I pretty much agree...a lot of the initial end users end up investors per say by the time the building is completed.

 

[daveto]

Dave, i believe the confusion was that I did say 70% investors. I thought perhaps 30% were foreign investors with 70% local of the total. However, Madmax includes people who buy to rent as end users and I personally do not. I believe this latter group makes up a significant amount of the Precon market in the core of TO

Ah, my mistake, apologies for the confusion

 

[Hushy]

Hahahaha and where did you get the bubble? I want a bubble too. I'm Hushy and I want to be honest with you that I came here just to ask you if you have any idea when talks about los angeles ca realtors, that;s the only purpose why I'm here.

 

[daveto]

Hahahaha and where did you get the bubble? I want a bubble too. I'm Hushy and I want to be honest with you that I came here just to ask you if you have any idea when talks about los angeles ca realtors, that;s the only purpose why I'm here.

Cityplaceguy, is that you?

 

[jeff316]

Eug, I'm confused.

I've looked back over the thread, and I don't see anyone comparing TO to the Miami or Las Vegas RE market. Which post you are referring to?

...

The issue was not buying vs rental or homelessness. The issue was whether primary users are influenced by considerations of profits (as per investors)

If their action was not influenced by any consideration of price increases or decreases, then that is relevant albeit anecdotal evidence. Have you put that question to them? Specifically, "Would you have changed your purchase if you knew with certainty that prices were going up 20% in the next 5 years? How about going down 20%?" Perhaps you could ask them and report back to us? thx

Obviously, by not actually replying to his point directly you've conceded it, but if you go back through the thread there are multiple discussions and comparisons re: Toronto's condo situation to Miami's going back as far as 2009.

As for action not being influenced by price increases, I can't speak for Eug obviously but of those that I know having bought homes since 2007 few expect to gain money on basic shelter. Some expect to lose money on them given they're buying near peak pricing. Anecdotal and small sample size, of course, oh and few are condos.

 

[Eug]

If their action was not influenced by any consideration of price increases or decreases, then that is relevant albeit anecdotal evidence. Have you put that question to them? Specifically, "Would you have changed your purchase if you knew with certainty that prices were going up 20% in the next 5 years? How about going down 20%?" Perhaps you could ask them and report back to us? thx

1) Me: I bought a detached house in 2007 thinking the market could pull back 15%. I was already a townhouse condo owner downtown, but felt my place was too small for the two of us. Refused to get involved in a bidding war, and got the place for well under asking (motivated seller).

2) Friend: Bought in 2007. Wondered what the market was going to do, and considered the possibility of a downturn. But, they had moved from Calgary, and were sick of rentals so they bought a semi-detached. I don't think they were in a bidding war, but I don't know if they would have entertained the idea of one if it had come to that. I don't know if it was under asking or not, but I seem to recall it was reasonably priced.

3) Sis: Bought in 2011. Not sure what the market was going to do, but wondered if the market was on the high side. Still, she was moving to Toronto for work, so she needed a place to live, so she bought a place to live. Refused to get involved in a bidding war, and got the place for well under asking (motivated seller).

4) Mom: Bought in 2 weeks ago. Worries about money because she's a worrywart, but wanted to be in Toronto with her kids so she bought a condo in Toronto. Her kids refused to allow her to get into a bidding war (not that she likely would anyway), and she got the place for well under asking (motivated seller).

Now that question about knowing with certainty about a 20% climb or a 20% pullback? To be honest, I think that's a meaningless question, because nobody knows with certainty what's going to happen.

So, back to me: I predicted a 5% - 15% pullback from 2007 pricing. The reality is that prices have gone up well over 20% since then. Oh and when I bought that pre-construction townhouse unit in 1999, I already felt the market was high, but realized in retrospect this was not the case in 1999 when I finally moved in two years later. And again, the reason I bought the place in 1999 was because I was sick of renting.

Any regrets? Yes. I don't like shoveling snow off a big driveway, but I'm too cheap to hire a snow removal service. I'm glad I cheaped out this year, because probably I've spent about 2 hours this entire winter doing that. In future years I may succumb though and hire a snow shoveling service.