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Baby, we got a bubble!?
- Thread starter simuls
- Start date
interested
Senior Member
Very sound advise CAT.
I am perplexed about what is happening in the market and still believe there has to be a correction coming. I am not familiar with the area of which you speak so I am afraid I can't help you with this particular investment. If you could get me data, I would be happy to review it.
interested
Senior Member
Unlike DaveTO and other bears, I don't worry if artists or others lose money on their homes. Like poker, it's just a game of patience, luck, skill, and ultimately, winners and losers.
Btw, when the 50 weekly crosses the 200 weekly next year on the DOW, you bears are really gonna be crying in your beer.
So UD, it is official. You are definately crossing over into the "bull camp". Again, it is all the crazy external forces/politics that are resulting in this. More free money. More money for the rich with tax breaks in the US to dump into the stock market. Maybe even some recovery of US R/E market with low rates for even longer? But what does this all mean for R/E in Canada? To me, it just means if prices go up further (and incidently if I say I am a bear which I am not but believe there will be a downward adjustment when everyone above stops meddling with market forces). Eventually this liquidity has to come out of the system. In the mean time, prices are going up because why? "The economy is bad and not recovering as well as it should?" Does this make any sense "in the big picture?"
Curious as to your thoughts UD and if you are now a bull, how much longer is this "bull" going to run. The question is not irrelevant because as you know R/E is not a short term investment despite having behaved as such perhaps in the past. Not easy to get in/out quickly and significant costs associated with doing this.
marsh
Active Member
Some more food for thought.(an article from the Star)
Far fewer apartments for rent in GTA
By Tony Wong | Thu Dec 9 2010
Jason Freisen is hoping to buy a condo. But he’s unsure of the Toronto market, so he’s staying put in his rental for now.
The 26-year-old bank teller has been living with his girlfriend for the past two years in a six-plex on the east side of Toronto.
“Prices are really high right now, so we’re still trying to figure out what to do,” said Freisen. “I think it can be a little scary for first time buyers out there trying to figure out where interest rates and prices are going.”
According to figures released by Statistics Canada Thursday, new home prices increased by 0.2 per cent in October over September, as the Toronto housing market continued to show growth.
Year-over-year increases are now at 2.9 per cent.
Meanwhile, apartment vacancy rates in the Greater Toronto Area are tightening as economic uncertainty means potential first-time buyers such as Freisen are staying with rental accommodation.
Average apartment vacancy rates decreased sharply to 2.1 per cent compared with 3.1 per cent a year ago, according to a report released by the Canada Mortgage and Housing Corp., also released Thursday.
The CMHC is also forecasting that the rate will go down further next year to 2 per cent.
“Apartment vacancies declined sharply as the flow of first time buyers out of rental units slowed considerably,” said CMHC senior market analyst Shaun Hildebrand. “At the same time, the inflow of new renters increased due to rising immigration and more job opportunities.”
CMHC says the current vacancy rates are producing “some of the tightest conditions over the past 10 years.”
Strong demand for renting has meant a 30 per cent decrease in the number of vacant units.
“The most influential underlying force was the marked slowdown in demand for buying homes.”
Higher home prices and tighter mortgage restrictions have priced some home buyers out of the market. The recession was also tough on the youth labor market who are the most likely to rent according to the CMHC.
“The outflow of renter households into homeownership has been restrained by the increased presence of underemployment,” said the CMHC.
The average rent for a two bedroom apartment increased by 1.8 per cent over last year to $1,123.
Freisen said he pays only $925 for a two bedroom, but the conditions aren’t ideal. Parking is outdoors, and his building needs maintenance. He has considered renting a new condo instead, but says prices are much higher.
“We would definitely like somewhere newer that we can call our own,” he said.
Low interest rates are a great incentive to get into the market, but Freisen said many of the condos he an afford to buy in the downtown core are too small. So the couple are saving up for a bigger down payment on a larger unit. With thousands of completions of condos expected over the next several months, they figure that they can afford to wait.
Michael Shapcott, director of affordable housing and social innovation at the Wellesley Institute, said many renters are shut out of the housing market entirely and are simply struggling to pay rent.
“High rents in existing rental homes and the lack of new rental supply are critical issues facing low, moderate and middle income Canadians,” said Shapcott.
The CMHC also measures the “secondary” rental market, which includes condominiums. About one quarter of all condos purchased end up back into the rental pool by investors.
The vacancy rate for condos doubled this year to 1.6 per cent, and the highest rate recorded since the CMHC started tracking the market in 1993.
With tens of thousands of condominium completions coming onstream over the past several years, renters have much more to choose from.
However, condos are getting more expensive to rent. In 2009, the average one bedroom condo was 39 per cent more expensive to rent than an apartment. This year it’s 46 per cent.
The introduction of the HST is also cited as a factor in increasing rents despite rising vacancy rates. Average maintenance fees were up by 8 per cent in the third quarter, verses a year earlier.
“Rising rent levels are a reflection of increasing purchase prices,” said the CMHC.
Having to choose between a newer condo or an apartment, some renters are voting with their wallets. But that means tighter vacancy rates for apartments moving forward.
“Improving economic conditions will support further tightening in rental markets and the continued downtrend in apartment vacancy rates,” said Ted Tsiakopoulos, CMHC regional economist.
Nationally, vacancy rates decreased at a more moderate level, from 2.8 per cent to 2.6 per cent
Far fewer apartments for rent in GTA
By Tony Wong | Thu Dec 9 2010
Jason Freisen is hoping to buy a condo. But he’s unsure of the Toronto market, so he’s staying put in his rental for now.
The 26-year-old bank teller has been living with his girlfriend for the past two years in a six-plex on the east side of Toronto.
“Prices are really high right now, so we’re still trying to figure out what to do,” said Freisen. “I think it can be a little scary for first time buyers out there trying to figure out where interest rates and prices are going.”
According to figures released by Statistics Canada Thursday, new home prices increased by 0.2 per cent in October over September, as the Toronto housing market continued to show growth.
Year-over-year increases are now at 2.9 per cent.
Meanwhile, apartment vacancy rates in the Greater Toronto Area are tightening as economic uncertainty means potential first-time buyers such as Freisen are staying with rental accommodation.
Average apartment vacancy rates decreased sharply to 2.1 per cent compared with 3.1 per cent a year ago, according to a report released by the Canada Mortgage and Housing Corp., also released Thursday.
The CMHC is also forecasting that the rate will go down further next year to 2 per cent.
“Apartment vacancies declined sharply as the flow of first time buyers out of rental units slowed considerably,” said CMHC senior market analyst Shaun Hildebrand. “At the same time, the inflow of new renters increased due to rising immigration and more job opportunities.”
CMHC says the current vacancy rates are producing “some of the tightest conditions over the past 10 years.”
Strong demand for renting has meant a 30 per cent decrease in the number of vacant units.
“The most influential underlying force was the marked slowdown in demand for buying homes.”
Higher home prices and tighter mortgage restrictions have priced some home buyers out of the market. The recession was also tough on the youth labor market who are the most likely to rent according to the CMHC.
“The outflow of renter households into homeownership has been restrained by the increased presence of underemployment,” said the CMHC.
The average rent for a two bedroom apartment increased by 1.8 per cent over last year to $1,123.
Freisen said he pays only $925 for a two bedroom, but the conditions aren’t ideal. Parking is outdoors, and his building needs maintenance. He has considered renting a new condo instead, but says prices are much higher.
“We would definitely like somewhere newer that we can call our own,” he said.
Low interest rates are a great incentive to get into the market, but Freisen said many of the condos he an afford to buy in the downtown core are too small. So the couple are saving up for a bigger down payment on a larger unit. With thousands of completions of condos expected over the next several months, they figure that they can afford to wait.
Michael Shapcott, director of affordable housing and social innovation at the Wellesley Institute, said many renters are shut out of the housing market entirely and are simply struggling to pay rent.
“High rents in existing rental homes and the lack of new rental supply are critical issues facing low, moderate and middle income Canadians,” said Shapcott.
The CMHC also measures the “secondary” rental market, which includes condominiums. About one quarter of all condos purchased end up back into the rental pool by investors.
The vacancy rate for condos doubled this year to 1.6 per cent, and the highest rate recorded since the CMHC started tracking the market in 1993.
With tens of thousands of condominium completions coming onstream over the past several years, renters have much more to choose from.
However, condos are getting more expensive to rent. In 2009, the average one bedroom condo was 39 per cent more expensive to rent than an apartment. This year it’s 46 per cent.
The introduction of the HST is also cited as a factor in increasing rents despite rising vacancy rates. Average maintenance fees were up by 8 per cent in the third quarter, verses a year earlier.
“Rising rent levels are a reflection of increasing purchase prices,” said the CMHC.
Having to choose between a newer condo or an apartment, some renters are voting with their wallets. But that means tighter vacancy rates for apartments moving forward.
“Improving economic conditions will support further tightening in rental markets and the continued downtrend in apartment vacancy rates,” said Ted Tsiakopoulos, CMHC regional economist.
Nationally, vacancy rates decreased at a more moderate level, from 2.8 per cent to 2.6 per cent
interested
Senior Member
Today in the National Post:
http://www.nationalpost.com/Tight+resale+market+raises+prices/3962314/story.html
What is sad in this article is that the author, a realtor and president of treb, admits that the only thing making housing "affordable" is the low interest rates and people could even afford a moderate slight increase in price.
I read that as: load yourself up with debt: Then when interest rates go up, you will have to sell. We TREB will be happy to capitalize on your misery, selling you a home you can barely afford now, and then selling it at a loss for you if/when interest rates go up. And should it continue to go up, then we will make money anyhow.
I do not have great respect for the real estate profession but when I read articles "infomercials" like this, it certainly goes a long way to understand why so much of the real estate profession is held in such low regard. I really feel for the hardworking realtor out there trying to do a decent job because having to fight the perception when your elected representatives puts out such a self serving article that clearly is totally self serving, it is an embarassment for the whole "profession".
I sincerely hope that people who are looking to invest/buy real estate now do a very careful calculation, take into their assumptions that the economy is not expected to perform well (Mark Carney keeps raising alarm flags) and that people ignore such biased advise and do the calculations with their own situation in mind anticipating some adverse jolts possibly affecting them. I fear most for those young first time buyers who may stretch themselves because "so called professionals say they can afford it". Maybe they can, but do they really need to be a slave to a real estate investment if they are able to afford something based on historic low interest rates?
http://www.nationalpost.com/Tight+resale+market+raises+prices/3962314/story.html
What is sad in this article is that the author, a realtor and president of treb, admits that the only thing making housing "affordable" is the low interest rates and people could even afford a moderate slight increase in price.
I read that as: load yourself up with debt: Then when interest rates go up, you will have to sell. We TREB will be happy to capitalize on your misery, selling you a home you can barely afford now, and then selling it at a loss for you if/when interest rates go up. And should it continue to go up, then we will make money anyhow.
I do not have great respect for the real estate profession but when I read articles "infomercials" like this, it certainly goes a long way to understand why so much of the real estate profession is held in such low regard. I really feel for the hardworking realtor out there trying to do a decent job because having to fight the perception when your elected representatives puts out such a self serving article that clearly is totally self serving, it is an embarassment for the whole "profession".
I sincerely hope that people who are looking to invest/buy real estate now do a very careful calculation, take into their assumptions that the economy is not expected to perform well (Mark Carney keeps raising alarm flags) and that people ignore such biased advise and do the calculations with their own situation in mind anticipating some adverse jolts possibly affecting them. I fear most for those young first time buyers who may stretch themselves because "so called professionals say they can afford it". Maybe they can, but do they really need to be a slave to a real estate investment if they are able to afford something based on historic low interest rates?
cdr108
Senior Member
the above quote from the article is the mosting striking to me and very true.
the commentators that he refers to have not left out the impact of interest rates.
in fact, most of the commentators cite that low interest rates and extension of mortgages to 35-year amortizations as the two main factors that has allowed prices to reach as high as they are.
without the low rates and longer amortizations, we would be back to reality ... at least 20-30% lower evaluations.
it boggles my mind that people will listen to these 'professionals' with vested interest, than heed the many warnings of BoC Govenor Mark Carney of having too much debt and imminent rising rates.
interested
Senior Member
cdr, we are on the same page.
I fear like I say mainly for young people who are being lulled in because they don't have real world experience. They are at least in some cases naive enough to read that if it is in the paper and stated this way, it must be true.
The real issue is: interest rates can't go lower or much lower. Mortgage amortizations have been brought back from 40 to 35 years. Personally I think 25 should be the max period. So a change in either a lower amortization or a rate rise and bingo, alot of people under water. I don't forsee what they could throw forward to help if interest rates start to rise to preserve the market and frankly I don't think they should anyway as that just postpones the day of reckoning.
I fear like I say mainly for young people who are being lulled in because they don't have real world experience. They are at least in some cases naive enough to read that if it is in the paper and stated this way, it must be true.
The real issue is: interest rates can't go lower or much lower. Mortgage amortizations have been brought back from 40 to 35 years. Personally I think 25 should be the max period. So a change in either a lower amortization or a rate rise and bingo, alot of people under water. I don't forsee what they could throw forward to help if interest rates start to rise to preserve the market and frankly I don't think they should anyway as that just postpones the day of reckoning.
KA1
Senior Member
I was going through my file and noticed that in March 2010, a 817 sq ft unit in 1 Bloor, on floors 8-38 SW exposure was offered at $ 622,990. In April 2010, the same unit was offered at $ 653,990. Parking was $ 47,900 and Storage was $ 4,950. It came to around $ 864 sq.ft. -- almost equal to the price at Shangri-la around 2008. It seems that investors/flippers in this project will have to either take a big shave to get rid of their unit or wait a long long time for the market price to come back up to the level of $ 864 sq. ft.
Any thoughts from Simuls, CDR108, Interested, CN Tower and others who, in the past, have made very sensible posts in this thread ? Apologies, in advance, to others whose names I have not mentioned.
Any thoughts from Simuls, CDR108, Interested, CN Tower and others who, in the past, have made very sensible posts in this thread ? Apologies, in advance, to others whose names I have not mentioned.
JayBee
Senior Member
interested
Senior Member
As Jaybee says, while I suspect if they have started that it will be more like 4 years, I don't have a crystal ball to know whether it will be a steal or absurd as it approaches completion.
I will make the following observation however. It is about $827 all in based on March and $864 in April 2010.
Given the location which I think is advantageous, though not the "Best location in the City" as was originally hyped; being on 2 subway lines and Bloor and Yonge is definately in my view a preferred location. Given every other mid range project in the core is pretty well high $500's if not $600's to $700/sq.ft. and not as well located as this, and I would believe this is a mid to high level project, I don't know that it is much more out of line than anything else in the City.
I guess my point Ka1 is that if investors in this higher end project have to wait to make money on their investment, so will anyone else in most other high end projects who bought in 2010. To compare it to SL at 2008 price is somewhat unfair to 1 Bloor. A bit like comparing SL in 2008 to Trump in 2006. Yes it is higher/sq.ft. but everything was proportionately higher. I know SL for lower floors 18 and up is closer to $1100/sq.ft now so relatively that would be saying Bloor would have been in 2008 $188/sq.ft. less or $639/sq.ft vs. March price or$676/sq.ft.in April. Still expensive but not so bad if we compare apples to apples.
The issue is more: how many investors in the building and how much of the building goes for sale when it registers? If it is 10%, may not be bad. If it is 30%, would impact prices much more I believe.
I personally do not understand "investments at this price" and there is a limit I would think to how many renters there are who would pay a premium for all the premium properties being built in the core and for that matter a limit to how much premium they will pay when there is alot more premium property on the market in the future as will be the case when SL hits in 2 years, let alone 1 Bloor in anywhere from 4 years to 6 years(as Jaybee suggests).
I guess the final answer Ka1 was that if any of us where that smart as to know what will happen in the future, we would all make pretty smart investment decisions and know whether we should line up to buy the rest of 1 Bloor while we can or alternatively, doing our best to unload the investment now. I do believe however that 1 Bloor will continue to carry a premium because I do actually like the building appearance but more importantly, everyone in the City will know "Yonge and Bloor" and it will command extra for its familiarity and in particular location on 2 subway lines and its "cache" as recognizable.
I will make the following observation however. It is about $827 all in based on March and $864 in April 2010.
Given the location which I think is advantageous, though not the "Best location in the City" as was originally hyped; being on 2 subway lines and Bloor and Yonge is definately in my view a preferred location. Given every other mid range project in the core is pretty well high $500's if not $600's to $700/sq.ft. and not as well located as this, and I would believe this is a mid to high level project, I don't know that it is much more out of line than anything else in the City.
I guess my point Ka1 is that if investors in this higher end project have to wait to make money on their investment, so will anyone else in most other high end projects who bought in 2010. To compare it to SL at 2008 price is somewhat unfair to 1 Bloor. A bit like comparing SL in 2008 to Trump in 2006. Yes it is higher/sq.ft. but everything was proportionately higher. I know SL for lower floors 18 and up is closer to $1100/sq.ft now so relatively that would be saying Bloor would have been in 2008 $188/sq.ft. less or $639/sq.ft vs. March price or$676/sq.ft.in April. Still expensive but not so bad if we compare apples to apples.
The issue is more: how many investors in the building and how much of the building goes for sale when it registers? If it is 10%, may not be bad. If it is 30%, would impact prices much more I believe.
I personally do not understand "investments at this price" and there is a limit I would think to how many renters there are who would pay a premium for all the premium properties being built in the core and for that matter a limit to how much premium they will pay when there is alot more premium property on the market in the future as will be the case when SL hits in 2 years, let alone 1 Bloor in anywhere from 4 years to 6 years(as Jaybee suggests).
I guess the final answer Ka1 was that if any of us where that smart as to know what will happen in the future, we would all make pretty smart investment decisions and know whether we should line up to buy the rest of 1 Bloor while we can or alternatively, doing our best to unload the investment now. I do believe however that 1 Bloor will continue to carry a premium because I do actually like the building appearance but more importantly, everyone in the City will know "Yonge and Bloor" and it will command extra for its familiarity and in particular location on 2 subway lines and its "cache" as recognizable.
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JayBee
Senior Member
I really can't think of a better location than Y&B.
interested
Senior Member
I agree the location from public transport and immediate recognizability is great.
However, I believe that those who may want Yorkville as the "address" to be will want to actually be in the heart of Yorkville.
Business exec's may view it on par in my view with the heart and core of the financial district; alternatively, they may think it is better as a quick subway ride to the core and a few minute walk to Yorkville.
interested
Senior Member
Yet another article in the Globe and Mail today on line:
http://www.theglobeandmail.com/report-on-business/economy/household-debt-ratio-hits-record/article1835268/
While the article states debt at all time high, it postulates that it will improve because net worth increased in the 3rd quarter and debt will come down next year. Great, but how much of that net worth is people's homes. Hence, this is a circular argument. Debt not as great because the home is worth more, home is worth more so I can have more debt, etc. You get the picture.
As well, in the actual paper today on the front page, Flaherty is in talks to further tighten mortgages by possibly shortening amortization periods and/or increasing money down further or making it harder to qualify.
But prices will just keep going up, right?
http://www.theglobeandmail.com/report-on-business/economy/household-debt-ratio-hits-record/article1835268/
While the article states debt at all time high, it postulates that it will improve because net worth increased in the 3rd quarter and debt will come down next year. Great, but how much of that net worth is people's homes. Hence, this is a circular argument. Debt not as great because the home is worth more, home is worth more so I can have more debt, etc. You get the picture.
As well, in the actual paper today on the front page, Flaherty is in talks to further tighten mortgages by possibly shortening amortization periods and/or increasing money down further or making it harder to qualify.
But prices will just keep going up, right?
hodgkinsken
Active Member
What would be interesting to know would be the breakout of household debt - Good vs Bad. How much is mortgage vs how much is consumer vs how much has been used to purchase investments?
I carry zero consumer debt, no mortgage, but have taken advantage of low interest rate to borrow $100k and invest it in dividend paying CDN stocks (threshold was equitys that had a higher payout ratio then my interest rate). I'm still currently way ahead (+30%) but would start to sell if interest rates rise and my payments become greater than my dividends.
So technically I'm part of the masses that have large debt but can easily exit my equity position and payoff my debt tomorrow. Out of my circle of friends about 50% of us have done this.
I carry zero consumer debt, no mortgage, but have taken advantage of low interest rate to borrow $100k and invest it in dividend paying CDN stocks (threshold was equitys that had a higher payout ratio then my interest rate). I'm still currently way ahead (+30%) but would start to sell if interest rates rise and my payments become greater than my dividends.
So technically I'm part of the masses that have large debt but can easily exit my equity position and payoff my debt tomorrow. Out of my circle of friends about 50% of us have done this.
interested
Senior Member
I would think what you are doing represents a small minority of what is being reported.
Sound investment practices I do not believe is what Mr. Carney is worried about.
As well, should there be a sudden jolt and a rapid rise in interest rates, which while unlikely could occur, you could find yourself behind on this kind of investment. You fortunately have a 30%+ cushion. But what if there was a headline stating for eg. "solvency of bank questioned?" Could you not see that gain being wiped out overnight.
Again, you have made a very sound business decision but I am sure most debt is not based on investment but rather to finance consumer debt or a mortgage, car payment etc.
Sound investment practices I do not believe is what Mr. Carney is worried about.
As well, should there be a sudden jolt and a rapid rise in interest rates, which while unlikely could occur, you could find yourself behind on this kind of investment. You fortunately have a 30%+ cushion. But what if there was a headline stating for eg. "solvency of bank questioned?" Could you not see that gain being wiped out overnight.
Again, you have made a very sound business decision but I am sure most debt is not based on investment but rather to finance consumer debt or a mortgage, car payment etc.