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Baby, we got a bubble!?

Redfirm, you are new to this thread. Stick around and you will learn the etiquettes of this thread.

Here, you always show due respect to the individuals like Simuls,CDR 108, CN Tower and Interested who always make rational, reasonable and well thought out posts. If you disagree with their posts you do so with all due respect.

Ka1, your post is timed 5 am. Are we having insomnia? LOL

Redfirm was obviously being funny which clearly you know.

By the way, maybe I am wrong, but I did not think that CN Tower was an accountant. I thought he was in Finance on Bay Street. Either way, whether "spring chicken" or "bean counter", his posts sure do make a lot of sense.
 
Ka1, your post is timed 5 am. Are we having insomnia? LOL

It is the sheer excitement of making a post and sharing thoughts with others that makes me get up at such an unearthly hour.

On a serious note, I might as well confess it publicly -- with all the consequences -- that I am also a 'bean counter'. It is that time of the year. And I have to do whatever is necessary to satisfy my fans (clients) and meet various deadlines. If that means having a case of insomania, then, so be it.
 
TREB numbers for March 2011:

Second best March on record

Greater Toronto REALTORS® reported 9,262 transactions through the TorontoMLS® system in March 2011, representing the second best March result on record. The number of transactions was 11 per cent lower than the record result reported in March 2010.

In March, the median price was $385,000, from the $370,000 recorded during March of 2010.

GTA REALTORS Report Monthly Resale Housing Market Figures

416 2011: $497,276
416 2010: $477,263

905 2011: $428,910
905 2010: $407,817

GTA 2011: $456,147
GTA 2010: $434,696
 
http://www.theglobeandmail.com/repo...oecd-upbeat-on-canadas-growth/article1971261/

Canada is expected to lead growth among G7 economies in the first and second quarter of this year, a new forecast predicts.

The Canadian economy likely grew 5.2 per cent in the first quarter of this year and 3.8 per cent in the second quarter, the OECD said in an economic outlook Tuesday. That prediction is much higher than most Canadian first-quarter forecasts of about 4 per cent.
 
Redfirm, you are new to this thread. Stick around and you will learn the etiquettes of this thread.

Here, you always show due respect to the individuals like Simuls,CDR 108, CN Tower and Interested who always make rational, reasonable and well thought out posts. If you disagree with their posts you do so with all due respect.

No comment. Will just ignore this type of stuff from now on.
 
...and affordability is expected to decrease later this year as interest rates increase...
Fixed rates went up significantly yesterday, but rates can be held from one to six months, and usually three to four. That takes us well into summer with near record low fixed rates.

Variable rates are predicted to start going up again in July. So again, summer with near record low rates.

Methinks we'll have at least moderate, but more likely moderately good, sales and prices for the next several months, with things calming down more in the fall.
 
Interest rates are no longer being dictated by the federal policy. The bond market is running the show now. With many nations continuing to dump bonds on the market, it is harder to find investors to buy them, and the yields creep up. That's what's been happening in recent weeks. We don't need to wait for the Boc to raise nominal rates (which are not particularly relevant anymore).

This debt crisis is without a doubt, one of those gifts that keeps on giving. But it also illustrates that Canada is not immune to global forces, and no amount of political strutting and claiming to be bulletproof will change that. How does the Portugal situation cause a real estate crash in Canada? We might find out.
 
From the Globe and Mail today

http://www.theglobeandmail.com/glob...-more-profitable-than-a-condo/article1973980/

Why buying a REIT is more profitable than a condo
MARTIN MITTELSTAEDT
From Thursday's Globe and Mail
Published Wednesday, Apr. 06, 2011 7:00PM EDT
Last updated Thursday, Apr. 07, 2011 6:28AM EDT

23 comments



Investors thinking of taking a flyer in the real estate market by purchasing a condo may be able to make more money by buying real estate investment trusts (REITs) that own apartment buildings.

That’s the conclusion of a study by Macquarie Capital Markets Canada Ltd., which found that REITs produced total returns that handily beat those from condos, both in the red-hot Toronto market and Calgary’s cooler one.
More related to this story


Boardwalk REIT (BEI.UN-T)
47.41 0.06 0.13%
As of Apr 7, 2011 10:01


CAP REIT (CAR.UN-T)
19.10 0.04 0.21%
As of Apr 7, 2011 10:22


The performance gap was largest in Calgary, where Boardwalk REIT (BEI.UN-T47.410.060.13%) returned 16.3 per cent last year, compared to a loss of 2.8 per cent on the equity in a typical condo. In Toronto, Canadian Apartment Properties REIT (CAP) (CAR.UN-T19.100.040.21%) returned 29.6 per cent, compared to 11.3 per cent for the condo investment.

The one-year results were no fluke. The firm also looked over the past three years, and found that owning apartments through the stock market beat owning a condo in every period but one.

Macquarie picked Boardwalk and CAP for comparison purposes because each of the REITs owns apartments in the city in which its results was pitted against that of a condo. (A REIT is a company that raises money from investors and buys a pool of real estate properties, returning profits to its shareholders.)

The comparison matched each REIT’s results against the total return, from rent and capital gains, produced by a condo with 900 square feet of space, two bedrooms, a small balcony and one underground parking space. The study assumed the condo was bought with 40 per cent equity, the balance borrowed through a mortgage. This capital structure is similar to that of the REITs, which also use debt.

Almost everyone has heard of someone who has bought a condo, rented it out, and had the monthly income cover the mortgage and fees, with a bit left over as profit. Even more enticing is the potential for additional upside from capital gains.

But while some tales of riches through condo flipping may be true, the Macquarie comparison suggests even greater amounts of lucre can be garnered on the stock market, with less effort.

“If you’re going to buy a condo for an investment, I think ... it’s better to buy the REITs,” contends Michael Smith, the Macquarie analyst who conducted the comparison.

He cautioned that his review applied only to condos as investments. “If you’re buying a condo to live in, then it’s a different story because then lifestyle becomes a factor,” he said.

REITs have some obvious benefits over condos. There are no calls in the middle of the night from tenants asking for repairs, no losses from deadbeat tenants and no real estate commissions.

Demographics are also favourable, as immigration into cities boosts the demand for rental accommodation. Meanwhile, most developers are concentrating their efforts on building condos and there is practically no construction of new apartments. That leads to a restricted supply of rental units, high occupancy rates and upward pressure on rents.

The apartment REITs also enjoy a low cost of borrowing, courtesy of government loan guarantees from Canada Mortgage and Housing Corp. Few companies have this leg up, which puts REITs on par with individuals who borrow with CMHC backing. “It’s a good business, owning apartments,” Mr. Smith said.

Two ways to be a landlord

In recent years, apartment REITs have usually outpaced returns from condos.
Toronto Calgary
Holding period Condo returns* Cap REIT returns Condo returns* Boardwalk returns
2008-10 (3 yrs) 21.6% 27.1% -31.7% 8.4%
2009-10 (2 yrs) 29.3% 22.6% -5.2% 77.6%
2010 (1 yr) 11.3% 29.6% -2.8% 16.3%
YTD 3.2% 11.6% 0.8% 15.5%

*For the condo, this represents the change in the equity investment of the unit assuming a 60% loan-to-value (LTV).

Source: Bloomberg, CMHC, Royal LePage, Macquarie Research, April 2011



23 comments





L

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If one looks at this article, and ignores the speculative factor of a quick flip, this certainly does make one wonder, doesn't it?
 
Hi all, I thought below post made on another forum might be interesting and relevant for this thread:

It is absolutely alarming to think Toronto alone as 17,000 new units entering the market this year. I’m sure people cannot comprehend what that really entails, but allow me to break it down. All things are relative.
The closest U.S. market to a city such as Toronto would be New York City. Each city is the beacon of financial strength within each country, and each are relatively close to one another on the Eastern side of each country. Here’s the deal… Stay with me now…
Toronto has a metro population of 5,113,000 people. New York City has a metro population of 19,007,000 people. Toronto has 17,000 ADDITIONAL condos coming to market this year, NOT including existing inventory today. New York has about 12,700 condos on the market today. These are the data points we will use for this discussion.
New York is almost 3.72 times the size of Toronto, or 372% larger than Toronto. However, New York has significantly less aggregated inventory coming to fruition compared to that of Toronto. New York has 4,300 LESS condos in inventory than Toronto to serve a market that is 372% larger than Toronto.
Prices, even in New York, have declined over 20%. Yes, prices fell that much even with inventory supply at that minimum level. So, what’s this say for Toronto? Well, these numbers indicate that, when adjusted for population, Toronto has 500%, FIVE HUNDRED PERCENT, of the inventory of New York. THAT DOESN’T EVEN INCLUDE EXISTING TORONTO INVENTORY.
 
Shtopor,

This is an interesting analysis but this talks about additional new condos this year. I think what might be more relevant would be to talk about the total inventory available and add the new for both cities and then compare it. I say this because I am wondering if there is already more existing supply in NYC and therefore the fact that we add 4300 more may in fact not be too relevant when looking at the total available condo/coop supply in both cities. Or maybe, the numbers won't change and be similar. Do you happen to have the numbers of existing inventory in both cities?
 

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