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Baby, we got a bubble!?

The glory days of Toronto Real Estate are long gone. A few years ago, any fool could make money with their eyes closed.
You need to be very careful & make sure you have the right people working with you.
 
Congrats! 20 years on in Cabbagetown and we’re about done too. I just wish I’d bought some investment property with the equity.
I just got my mortgage discharge documentation last week and in the letter from my bank they said to contact the insurance company to tell them the mortgage is discharged.

So, I did, and guess what? My insurer has a huge discount for mortgage-free owners. I got almost a 20% discount! This was with my TD Meloche Monnex Primmum group plan. I was completely unaware of this discount, but apparently it's actually a common thing... that nobody advertises. That discount alone will save me hundreds of dollars a year (which BTW, is something nobody here ever factors into the calculation when doing financial projections regarding prepayments for mortgages). Definitely check that out once your mortgage is fully paid off.

https://www.moneysense.ca/save/reduce-your-home-insurance-by-20/

Paid off your home in full? You’re entitled to more than a pat on the back. A number of the country’s top home insurance providers offer steep discounts to mortgage-free customers—in some cases as high as 20% off your premiums.
 
Funny how this thread has been alive since 2009, yet every month people are 100% sure that the bubble is going to pop
It might indicate that prices *are* based on fundamentals, whether you like those fundamentals or not, they're certainly enduring.

Subscription article from Globe and Mail, so will only quote the first paragraph. (the whole article is probably available on Press Reader if you Google)
There are mountains of opinions about where Canada’s home prices are headed next. Let’s not add to the pile.

Rather, let’s examine a less-appreciated aspect of the debate – just how unusual Canada’s housing obsession is by international standards.

Whether you measure the housing boom in relation to fundamentals, or simply by our dedication to investing in bricks and mortar, Canada stands out against its global peers.


It’s easy to argue that our long national devotion to housing means home prices must take a nasty plunge at some point. That is certainly possible. On the other hand, it’s also possible there is something special about Canada, some force that keeps home prices levitating higher. But, if so, we should try to identify what it is, because much of our household wealth depends on it. [...]
https://www.theglobeandmail.com/inv...s-roaring-housing-market-is-a-global-anomaly/
 
It might indicate that prices *are* based on fundamentals, whether you like those fundamentals or not, they're certainly enduring.

Subscription article from Globe and Mail, so will only quote the first paragraph. (the whole article is probably available on Press Reader if you Google)

https://www.theglobeandmail.com/inv...s-roaring-housing-market-is-a-global-anomaly/
Perhaps, definetly a lot better to do proper research than to look at the current price and think "man this is too high, must be a bubble"
 
Perhaps, definetly a lot better to do proper research than to look at the current price and think "man this is too high, must be a bubble"
I'm loathe to post more than a paragraph of the Globe's subscriber copy, but here's one of the studies the article is based on:

Summary
Focus
The paper studies the evolution and key drivers of residential investment in 15 advanced economies since the 1970s. It also analyses how residential investment growth affects overall economic activity and the likelihood of recessions.

Contribution
Most previous research on housing markets has focused on house prices, whereas research on housing quantities - ie residential investment - has been scarce. There has also been little cross-country analysis of the determinants of residential investment. This paper partly fills this gap. It studies the key drivers of residential investment across countries and the impact of residential investment on the broader economy. We provide novel evidence on the effects of monetary policy on the residential investment cycle, highlighting the asymmetric effects of rising and falling interest rates.

Findings
We find that the key drivers of residential investment in advanced economies are house price growth, net migration, the size of the housing stock and nominal interest rates. Importantly, rising interest rates have stronger effects on residential investment than falling ones. This could result from downward rigidity in house prices, which forces housing construction rather than prices to fall as interest rates rise. We also show that declines in residential investment are a good predictor of economic recessions.
https://www.bis.org/publ/work726.htm

The pdf is here free of charge:
https://www.bis.org/publ/work726.pdf
 
Oh ya for sure, I wasn't saying it wasn't real research. Just referring to people I've talked to in the past while in general who say "man prices are so high, must be a bubble"
Indeed, and a lot of research supports your intuition.

Something a lot of people were stating in UK forums at the height of their 'housing bubble' over a decade ago (it's still intact) is "Every bubble eventually pops". It became lore, and next to none had checked the research or the history to realize that *many if not most don't*! More deflate in a controlled way than 'pop'. An example I often referenced to them, since Brits tend to relate to Aussie's more than Cdns, is that the Australian housing market 'bubble' of two decades ago not only slowly deflated, it did so at the rate of inflation. Prices stood still for close to a decade while 'value of investment' deflated at the rate of inflation. Most of Canada (Toronto is a prime example) is doing very similar. The market is in a time of stability, albeit on a plateau, and demand alone underpins it staying there.

Affordability is another issue, but that's another discussion.
 
Indeed, and a lot of research supports your intuition.

Something a lot of people were stating in UK forums at the height of their 'housing bubble' over a decade ago (it's still intact) is "Every bubble eventually pops". It became lore, and next to none had checked the research or the history to realize that *many if not most don't*! More deflate in a controlled way than 'pop'. An example I often referenced to them, since Brits tend to relate to Aussie's more than Cdns, is that the Australian housing market 'bubble' of two decades ago not only slowly deflated, it did so at the rate of inflation. Prices stood still for close to a decade while 'value of investment' deflated at the rate of inflation. Most of Canada (Toronto is a prime example) is doing very similar. The market is in a time of stability, albeit on a plateau, and demand alone underpins it staying there.

Affordability is another issue, but that's another discussion.
Ya affordability sucks, definetly a negative factor
 
The glory days of Toronto Real Estate are long gone. A few years ago, any fool could make money with their eyes closed.
You need to be very careful & make sure you have the right people working with you.
I'm tending to agree. My neighbour in prime Cabbagetown had his semi on the market for over a month at about $980K and after multiple open houses finally got a single offer. 2-3 years ago he would have got over a million. I think the LTT, new mortgage stress test rules and rising interest rates are slowing the market. Plus, as the Boomers get older, there's less money to fund your kids' housing dreams.
 
I just got my mortgage discharge documentation last week and in the letter from my bank they said to contact the insurance company to tell them the mortgage is discharged.

So, I did, and guess what? My insurer has a huge discount for mortgage-free owners. I got almost a 20% discount! This was with my TD Meloche Monnex Primmum group plan. I was completely unaware of this discount, but apparently it's actually a common thing... that nobody advertises. That discount alone will save me hundreds of dollars a year (which BTW, is something nobody here ever factors into the calculation when doing financial projections regarding prepayments for mortgages). Definitely check that out once your mortgage is fully paid off.

https://www.moneysense.ca/save/reduce-your-home-insurance-by-20/

Paid off your home in full? You’re entitled to more than a pat on the back. A number of the country’s top home insurance providers offer steep discounts to mortgage-free customers—in some cases as high as 20% off your premiums.
Hmm... I have TD insurance on my house, and a TD LoC against the house, with maybe $10K on it. I wonder if I pay off the $10K or remove the property connection if I'll reduce my insurance rate? I already got a significant discount by moving from Cooperators to TD as my wife gets a TD group rate through her employer.
 
I think a few things are happening:

(1) I note that condo apartment prices, especially in the 416, keep rising, some months many many points above SF homes and towns. That could be a function of supply as well as affordability, i.e. where younger generations can't afford the dream home and are settling for starter homes in the sky. Or it could also be a product of the Boomer downsizing wave. Or both. And/or something else. But whatever the reasons, demand continues.

(2) I think a lot of "kids" really don't want houses and all that comes with them, lawns, shoveling, raking, cleaning eavestroughs etc. Many of them grew up in the burbs and, once they have a taste of downtown living or commuting to university, want no part of spending the weekend looking for new sprinklers at Home Depot and weekdays on the DVP. As long as they have sufficient space for strollers and all the other baby equipment, and there are playgrounds, schools, daycares, transit, bike paths, car shares and/or Ubers nearby, they are happy in apartments. Many don't even cook. They buy ready made food or go out. I recently had a conversation with a lawyer in his 30s who grew up in Mississauga and he and his wife (also a professional) live near Liberty Village with a baby and a toddler. They have no intention of buying anything else, at least not in the near term They can both take the streetcar or walk to work, there's a condo playground with lots of other kids downstairs (no driving around for playdates) and daycare close by. Are they typical? I dunno but I do know that, in some friends' building (to which they downsized from Riverdale as well) near the St. Lawrence Market, I ride up the elevator with many children and strollers. So I suspect their numbers are growing -- and will continue to do so as long as more bigger-than-a-shoebox condos are built. But then, I have been saying this ever since I signed up for this forum.

(3) That whole picket fence, two-car garage thing no longer is. It's a creature of a later 20th century past that we, as a society, can no longer afford for many reasons -- although, perhaps among larger immigrant families, it's still a dream. For example, millennials are not as into car ownership as Boomers were. They want to be as close to "where the action is" as possible. They are envionmentally-conscious and want as small a carbon footprint as possible.

(4) There is no bubble because, as steveintoronto above notes, the fundamentals are there. Toronto is growing and it keeps growing. It's crazy. You can only live so far away from the city in a suburb and work in the city. The commutes are nightmarish and getting worse by the year. That's why centrally-located condo apartments are climbing, physically and financially.

(5) The esteemed Admiral Beez notes that "as the Boomers get older, there's less money to fund your kids' housing dreams." If I am correctly interpreting that, I disagree -- at least for the present. The huge Riverdale Victorian we bought in 1985 sold again a few years ago for much more above a million. The downsized Riverdale house we sold in 2012 is now worth a solid 20-30% more than we sold it for. The value of the condo apartment we are now in, based on sales over the past two years, has increased a stupefying 60% over six years. But it is large, solidly built as it is a vintage building and in very walkable, TTC-able, bike-able etc. location. I know that the sales (and there is a very low turnover BTW) over the past three years have all consisted of downsizing Boomers who, like us, wanted space and location, location, location. Units are snapped up without even getting on MLS, the demand is that high. If those people are all selling houses in the surrounding areas (Riverdale, the Beach, Rosedale etc.) then chances are, if they are mortgage-free when they sell, they are getting more than enough to buy into the building and subsidize their kids. All this said, I recognize that ours may be a unique building in a unique location. That plus I believe that Riverdale, Leslieville and prime Beaches are areas that really never corrected for very long. In other words, prices hiccuped in the early 90s but, over the long term, trended up and up and up.

So Baby, unless the bubonic plague hits us, or there is a total environmental or infrastructure collapse, there ain't no bubbles gonna burst at least not for certain sectors.
 
Time for another round of "are we in a bubble or not"...


Toronto, Vancouver among biggest property bubbles in the world, UBS says
Swiss investment bank UBS has deemed Toronto and Vancouver to have among the world's biggest housing bubbles, with mispricing that's even more pronounced than it is in expensive cities like Paris and San Francisco. They looked at 20 cities around the world that are considered to be financial centres, local metropolises that are hubs for their regional economies.
https://www.cbc.ca/news/business/toronto-vancouver-housing-bubble-1.4842272


Thoughts?
 

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