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Baby, we got a bubble!?
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Kenny
Active Member
You want a bubble? Here's a real bubble.
43 homes. Chinese mainlanders must be laughing at our talk of bubbles.
43 homes. Chinese mainlanders must be laughing at our talk of bubbles.
cat
New Member
Have received about 4 "VIP" emails on this project in the last 2 days - and I'm certainly no VIP. The Sunnys, the Yossis, etc, etc, have deluged my inbox. But, sadly, not Condo George... 
Have any brokers started advertising - oops - blogging about this one yet on UT? Where's Condo George when ya need him?
If someone can share with me how to copy email attachments to this site/thread, I would be pleased to try and post. - C8T
Have any brokers started advertising - oops - blogging about this one yet on UT? Where's Condo George when ya need him?
If someone can share with me how to copy email attachments to this site/thread, I would be pleased to try and post. - C8T
KA1
Senior Member
Have received about 4 "VIP" emails on this project in the last 2 days - and I'm certainly no VIP. The Sunnys, the Yossis, etc, etc, have deluged my inbox. But, sadly, not Condo George...
If all the Sunnys, the Yossis and others have innundated your inbox, then, you are indeed a "V.I.P." Stop being modest. Just accept the reality and act accordingly.
I would like to see the floor plans and the price list though.
redfirm
Active Member
Kenny,
I enjoy reading these articles. One" insider" said it is hardly a bubble, the other one said the mother of all bubble's coming. Chinese recovery since 2008 is amazing, but there are ghost towns everywhere. This guy he knows flipped 43 homes...
and "Dubai X 1000" , etc, etc. All these articles make average person dizzy ...
BTW, does anyone here know anybody who flipped 43 homes in the last 3 years? That info may be the ultimate proof that our bubble is about to burst.
cdr108
Senior Member
R/E isn't a safe haven 'investment' for Chinese.
R/E is a speculative asset class.
There's a long history of HK Chinese flipping R/E in HK, BC, and ON, even before the current wave of Mainland Chinese buyers.
interested
Senior Member
Kenny,
I recall in Toronto during the 1986-89 boom, I met someone who made $40K/year, had 4 kids, and was sitting on 23 houses at various stages of construction. Back then, you put $20K down and waited a year. But prices were rising so quickly, that he was selling each house for about $60-80 profit and rolling it into 3-4 more. In 1989 early, when things came to a halt, we talked. I told him to take his profit out, rent 5 fully paid, and play another day. I stopped buying any real estate when he told me this in early 1988 as I realized the market had become totally insane. What I bought in early 1988 to be ready in 1989 went up 35% only to plummet back towards Earth after. I never intended to flip and just rented out and sold one of the 2 for about 120% of the purchase price in 2008 before the downturn but had about 7%/year return in rent over the 20 years which I was happy with. I know some will say I could have made more elsewhere but that is not the point. The other I still own today and is worth about 130% over what I bought it but remains rented for a yield around 4- 5% based on today's prices. I am happy with the income.
Returning to the original story, the person believed the market would recover in 1990. In the end, he lost the last 7 houses including the one he was living in.
Incidently, I saw him 3-4 years ago, he played the same game buying mainly Town's in Brampton and once again was a millionaire on other people's money bidding up the prices of houses. This time, however, he limited his exposure to a mere "5-10 houses" at any one time.
This mentality contributes to boom bust of the housing market. This is the question I have. How many in particular with the downtown TO condo market are doing the same thing? I hope not many because this will end badly.
Eug
Senior Member
He must have some sort of nest egg to finance that, since the rules for rentals are stricter.
Yes the mentality of some is like that, but I'd guess that for most it isn't. Most people I know cannot stand that sort of risk, at least if they have a family. OTOH, I do know a fair amount of people who would be willing to "invest" in 1 or 2 condos. I just wonder what proportion of the condo market that represents.
BTW, some people use this as an argument as to why the condo market would fall through the floor quicker than detached homes. Even as an owner of a detached home, I'm not convinced. The one advantage of condos is simply that they're cheaper. This represents two advantages actually. 1) It's easier to get a mortgage if rates go up, and 2) It's less risk in terms of absolute dollar amounts if you think the market is getting a bit frothy. OTOH in recent times of price increases, the cheaper units may offer a 3rd advantage. They increased more. The place I bought appreciated from $205000 to $380000, a return of 85%. In the same time period, I believe the much larger units went from around $400000 to about $650000-700000, a return of 63-75%.
interested
Senior Member
To the first response Eug, I told him to sell the residual 20. Given the equity rise when prices started to drop, he would have made about enough money to buy all 5 outright. So then he would have had about$10K/month rent NET after expenses before taxes. Then he could buy again when the market recovered.
He did buy again with the $20K down that builders were asking on Townhouses in Brampton or whatever it was and worked his way up again. Realize that when this was being done originally in 1985-1989, the leverage was remarkable. You could put $20K down on a $250K house that was worth $325 1 year later for about a 3 year period of rises. So $20 became $95. Multiply that by a number of houses and you become wealthy on paper very quickly.
What you refer to with the least expensive units has always been the case. Investors will always tell you buy the smallest unit in a place because you have the least downside potential. I believe what is now happening in the condo market however is that there is more End User demand for 1 bedroom/dens or small 2 bedrooms as people realize the difficulties with having a 1 bedroom. If it is a couple especially, the den helps alot for someone to work and just for the size so lately I believe the 1 bedroom/den and small 2 bedrooms have been approaching the same $/sq.ft increases and a similar return to less expensive smaller units.
There are those who feel if there is a correction, it will be in the small investor units as there are more of them. Would make some sense but one has to recall that renters are rent sensitive and a smaller unit will always be more affordable than a larger one. When I bought in 2001 on paper, I bought what I thought was a small 1 bedroom (625 sq.ft approx). This was in fact the largest 1 bedroom they had and the 1 bedroom dens were 650 sq.ft. and up. I did not buy the bachelor at 450 sq.ft. because I figured if there was a downturn in the rental market or an excess supply, these very small bachelors ( and this one I describe is not that small by todays standards) would be undesirable and people would fill the 1 bedroom as more livable. Of course, I have not been able to test the theory out because the market has continued along merrily and there is if anything a shortage of downtown good rentals if the 1% vacancy rate is to be believed for condos in the core.
redfirm
Active Member
Long live the flippers!
For those who have cash: buy and sell, flip, good for you ...
For those who borrow to flip: just remember this one from our friend W.B.: You only find out who is swimming naked when the tide goes out.
Eug
Senior Member
That's a reasonable point. However, 1 bedrooms have been very popular for a very long time (as you suggest below), but there will always be lots of single people wanting to pay less (esp. renters).
Heh. Yeah, how times have changed in terms of size. I remember my bud's 550 sq. foot 1 bedroom unit as being painfully small. Now it's the norm. My townhouse was 1040 square feet for a 2 bedroom, although truthfully it was probably more like 950 since there was wasted hallway and stair pace. But even then, I felt it was kinda small (which is why I bought a house).
BTW, at the time I bought the 2-bedroom the bank had actually approved me for over $400000 which meant I could have purchased a 3-bedroom 1400 sq. foot place. Given that the build was actually 2 years off, I could have afforded it, but in truth I think the $400000 approval was rather heavily optimistic because if I had to start paying right away (for a resale condo or house), it would have been at the very edge for affordability. In retrospect it would have been OK even if I had to take possession sooner because I got a very stable and higher paying job earlier than I was originally planning, but I didn't know that until after I had put down the deposit.
So, even though I was approved for something like $440000, in truth I was only comfortable with a purchase up to maybe $350000. That's about 80% of what I was approved for. Perhaps this might be a reasonable guide. If you are approved for X amount, you should really be looking for a place at maybe 0.8X or less. In the end I got a place that was < actually 0.5X.
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interested
Senior Member
Eug,
Clearly you have your head screwed on correctly. Going at 80% and not overextending yourself was definately wise. We are all brilliant in hindsite.
As I like to say, I have 100% ability to predict the past. The future.... not so good.
If we would have know prices were essentially going to go straight up for 14 years, all of us would have been extremely foolish not to extend ourselves to the absolute max. Of course, as refirm pointed out in his above quote in deference to W.B. "You only find out who is swimming naked when the tide goes out."
So I would bet that you slept well at night, made a reasonable decision, and have made a tidy profit, if perhaps not as much had you might had made if you had a crystal ball to know what was happening. Of course the corollary to all this is: had there been a downturn, you would not have been the one trying desperately to hold onto a property on which you were overextended.
Clearly you have your head screwed on correctly. Going at 80% and not overextending yourself was definately wise. We are all brilliant in hindsite.
As I like to say, I have 100% ability to predict the past. The future.... not so good.
If we would have know prices were essentially going to go straight up for 14 years, all of us would have been extremely foolish not to extend ourselves to the absolute max. Of course, as refirm pointed out in his above quote in deference to W.B. "You only find out who is swimming naked when the tide goes out."
So I would bet that you slept well at night, made a reasonable decision, and have made a tidy profit, if perhaps not as much had you might had made if you had a crystal ball to know what was happening. Of course the corollary to all this is: had there been a downturn, you would not have been the one trying desperately to hold onto a property on which you were overextended.
Eug
Senior Member
Actually the place I bought was < 50% of what I was approved for. I would have been relatively comfortable with 70-75%, but would have been quite uncomfortable above 80%. There is only so much Mac-and-Cheese one can eat...
The reason I went a $205000+ place and not a $305000 place was because the $275000-325000 2-bedroom condos had a lot of features that I was not interested in, such as squash courts, swimming pools, or 24/7 concierge. As for the $400000 place, as a single guy I really didn't need 3 bedrooms.
The reason I went a $205000+ place and not a $305000 place was because the $275000-325000 2-bedroom condos had a lot of features that I was not interested in, such as squash courts, swimming pools, or 24/7 concierge. As for the $400000 place, as a single guy I really didn't need 3 bedrooms.
KA1
Senior Member
Link to an article in Sunday's The Globe and Mail.
http://www.theglobeandmail.com/news...ney-into-canadian-real-estate/article1939457/
There goes the bubble.
http://www.theglobeandmail.com/news...ney-into-canadian-real-estate/article1939457/
There goes the bubble.
interested
Senior Member
This speaks to the question that I asked quite a while ago. Would the Chinese now start buying first in BC and then in Toronto if they could not invest in Bejing due to the new requirements.
This trend too will end badly I fear. I can't say when but let's play this out.
A number of foreign investors, be they Chinese or elsewhere buy and bid up the prices to a point where either the Canadian locals can no longer afford it or alternatively they decide they do not wish to live in a place where a significant amount of the population is non resident. Unfortunately, there may also be a segment that will not want to live there because the area is too foreign. I am not supportive of this but just stating it is unrealistic to not consider this as possible.
Prices increase and locals move out or even if they don't. Let's say something happens in China or elsewhere; eg. the Japanese Earthquake and Tsunami or the economy in China overheats and the Chinese government puts further controls. My point is let's say an event that hits China more directly since we are talking about China in this article.
In Japan, they are repatriating their money now, expected to raise the Yen and put pressure on the USD and C$ and the Euro etc. If the Chinese say 3 years down the road decided en mass to repatriate for whatever reason, it would create a US style collapse at least in those markets that have been the beneficiary of all that foreign money.
My point is this is a large foreign investment that is not tied to Canada and can choose to leave at any time.
But this is great for those "speculator flippers in the short run". Problem is the rest of the population here will be left to clean up the mess when/if it occurs.
This trend too will end badly I fear. I can't say when but let's play this out.
A number of foreign investors, be they Chinese or elsewhere buy and bid up the prices to a point where either the Canadian locals can no longer afford it or alternatively they decide they do not wish to live in a place where a significant amount of the population is non resident. Unfortunately, there may also be a segment that will not want to live there because the area is too foreign. I am not supportive of this but just stating it is unrealistic to not consider this as possible.
Prices increase and locals move out or even if they don't. Let's say something happens in China or elsewhere; eg. the Japanese Earthquake and Tsunami or the economy in China overheats and the Chinese government puts further controls. My point is let's say an event that hits China more directly since we are talking about China in this article.
In Japan, they are repatriating their money now, expected to raise the Yen and put pressure on the USD and C$ and the Euro etc. If the Chinese say 3 years down the road decided en mass to repatriate for whatever reason, it would create a US style collapse at least in those markets that have been the beneficiary of all that foreign money.
My point is this is a large foreign investment that is not tied to Canada and can choose to leave at any time.
But this is great for those "speculator flippers in the short run". Problem is the rest of the population here will be left to clean up the mess when/if it occurs.