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Who is Buying All These Condos? 70% owners 30% investors
- Thread starter GovernorARNOLD
- Start date
H
Hydrogen
Guest
And there can be little doubt that the investor/owner mix will differ with every building. This may be generating some of the beliefs concerning the over-representation of "investor syndicates" and the like.
I
investor
Guest
That's a fair comment. However, prices are set at the margin- so if the tulip-crowd are paying $800 per foot in an A- location then other specuvestors may be inclined to pay $700 per foot for B+ location and so on down the line.
When the assets actually get into the hands of the end users who are only willing to pay $400 per foot the game is up and the whole house of cards tumbles.
Look at Miami, Las Vegas, San Diego, Phoenix, etc. for evidence of the bust. Sadly, Calgary may also be headed that way by the looks of it with the massive inventory of unsold and vacant housing. The issue to consider is not that a $700,000 condo becomes worth $500,000. While that could be devastating to most, it's not the worst part. What happens at the other end of this circus is NOTHING SELLS. While the odd unit may trade at $500k, most of the product sits empty for months/years before trading hands eventually not at $500,000 but probably at $300,000-$350,000 as these assets return to their true economic value. As an investor I wouldn't be able to profit from the bust for several years at it would take that long for prices to adjust to a level that resembles anything approaching fair value. The time to buy after the last condo crash was not 1990-1. It was 1993-4. It typically takes that long for the holdouts to cave or the lenders to take control and power of sale the units.
It will take more than a few toothy real estate agents to convince me that the 60,000 new immigrants storming into the GTA every year (yes 60,000, not 100,000 as commonly reported) are buying the 20,000 new condos sold in 2007.
urbandreamer
recession proof
New immigrants buying condos? A joke I hope? I know plenty of new immigrants...and with degrees they're making $10-$15/hour, living with their "established" (yeah right) relatives in rental apt's, townhouses etc barely getting by and saving bit by bit--usually for 5-10 years--to buy a house: In the suburbs! I'd say it's the second generation immigrants that are buying condos--or 1st generation immigrants with kids in their 20's helping with downpayments. These people come from Russia, Romania, Serbia, India, Iran (usually Iranians are better off than most), Sudan, Russia via Israel, Latin American's (who work the hardest and seem to buy houses in cheap innercity nabes within 3 years of arriving here.)
Edward
Senior Member
I've noticed a lot of non-English speaking Asians living in new condos in NYCC. Surely they bought them somehow.
I
investor
Guest
If not the through the increased population then how would one explain the proliferation of new condo sales in the GTA then?
Hmmm......I wonder.
urbandreamer
recession proof
Maybe they're renters? That is quite common amongst the folks I know: more established relative buys townhouse, condo etc and rents out to new arrivals.
I
investor
Guest
You got it friend. The overwhelming amount of new condos are sold to investors who rent them out. Too bad their returns are less than 2% when all costs are factored in.
urbandreamer
recession proof
Oh well I'm glad that fools and their money are soon parted
Let the smart folks make their money buying cheap $20,000 condos in Hamilton, flipping TSX venture stocks for 60% daily gains, etc. I want the average "investor" to lose money
Let the smart folks make their money buying cheap $20,000 condos in Hamilton, flipping TSX venture stocks for 60% daily gains, etc. I want the average "investor" to lose money
H
Hydrogen
Guest
With returns like that, the best one can say is that it beats the typical bank account interest rates as a form of earning.
I
investor
Guest
Not really. You can get over 4% today in money markets without lifting a finger.
turdrockfromthesun
Banned
Could be a bubble - no wait, it is a bubble...
Observer Walt
Senior Member
When returns get down to 2%, you can bet the investors will bail. Hasn't happened yet.
I
investor
Guest
Rent- $2.25 per square foot per month x 12 = $27 GROSS, $17.50 NET
$17.50 PSF / $800 PSF = 2.1875%
Kindly show me the error of my ways.
GovernorARNOLD
New Member
Does this calculation include Equity, inflation and property value gains?