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Baby, we got a bubble!?
- Thread starter simuls
- Start date
redfirm
Active Member
http://www.bankofcanada.ca/2011/05/speeches/canada-in-a-multi-polar-world/
Carney's speech yesterday.
Carney's speech yesterday.
redfirm
Active Member
QUOTE (posted above by klb86) - how can anybody invest here NOW is beyond me!
Condominium rents in Toronto in the first quarter of 2011 were $2.11 per square foot compared to $2.09 a year earlier, a 0.8% increase. Condominiums being registered now and ready to be occupied are priced for sale at $450 per square foot range while newer units are going for $550 per square foot.
“What happens when these newer units hit the market?” said Ben Myers, executive vice-president of Urbanation. “At $550 per square foot a 750 square feet [condominium] is $413,000. You put 25% down and you have a mortgage of $310,000. Take a five-year variable rate mortgage at 3% with 25-year amortization and you get $1,475 a month mortgage. Your condo fee is $345, property tax is another $345 and you are up to $2,200 in carrying costs. That’s a huge [operating] loss [given the average rental rate would bring in just under $1,600/month]. People are buying these for capital appreciation.”
Condominium rents in Toronto in the first quarter of 2011 were $2.11 per square foot compared to $2.09 a year earlier, a 0.8% increase. Condominiums being registered now and ready to be occupied are priced for sale at $450 per square foot range while newer units are going for $550 per square foot.
“What happens when these newer units hit the market?” said Ben Myers, executive vice-president of Urbanation. “At $550 per square foot a 750 square feet [condominium] is $413,000. You put 25% down and you have a mortgage of $310,000. Take a five-year variable rate mortgage at 3% with 25-year amortization and you get $1,475 a month mortgage. Your condo fee is $345, property tax is another $345 and you are up to $2,200 in carrying costs. That’s a huge [operating] loss [given the average rental rate would bring in just under $1,600/month]. People are buying these for capital appreciation.”
KA1
Senior Member
Redfirm, there seems to be some misunderstanding on your part and a few others also.
Who is talking about buying? I did my last buying in March 2008.
We -- or at least, I -- are indulging in gossip, taking a few minutes away from the boredom of regular work.
Take a deep breath and relax.
redfirm
Active Member
ILuvTO
Active Member
KA1
Senior Member
Read my post once again, carefully.
My last purchase -- a unit in AURA -- was in March 2008. Further, we are just indulging in gossip at this time -- taking a few minutes away from the boredom of regular work. This thread, in effect, is a few guys -- and occasionally, a gal or two -- chatting on the cyberspace instead of sitting in a bar with a jug of beer and a few peanuts.
Having said that, this is not the time to buy R/E for investment purposes -- unless one is an incorrigible optimist. If you wish to buy a unit to live in, then, wait till the Fall and then go ahead-- as long as you can afford carrying cost NOW and not in a few years down the road. On a short term, prices might go down or remain stable or even go down slightly. Over a long term horizon, prices will go up. If you need a place to live, then, variation in prices should not be your main concern-- only the affordability.
In the Fall of 2001, I was downsizing and looking a unit in what is now termed as 'core' downtown. I just did not want to rely on car anymore and wanted a place within a short walking distance from a subway -- note, a short walking distance and not walking distance. At that time, R/E market was in a slump. Quite a few 'smart' R/E experts -- including my own R/E agent -- were telling me to wait. In the sales office, agents were literally twiddling their thumbs. But I bought a pre-con unit simply because I needed a place to live. Upon completion,I was going to pay for the unit in full. As such, variation in prices did not concern me at all.
This is just my personal thoughts and not in any way an advise on investment. For that, you should go to a financial planner whose job is to tell you, in polite words, that you are 'stupid', to sell you what they think is best for you and, then, make a living off your 'smart' investment decisions.
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interested
Senior Member
Ka1,
If I look at the big picture, one does glean that you do believe that there will be no or minimal correction. It is just that the Post article clearly states what
we have been all saying for a while; that at $400/sq.ft. maybe but beyond $500/sq.ft., not making investment sense. The article quotes $550/sq.ft. but the
argument is the same.
By the way, if I look at the other article you posted that essentially one will live much longer perhaps 20 years if one is downtown... would it not make economic
sense to die younger as one could stay in the suburbs and afford the gas? (LOL; not a path I am recommending by the way).
My last purchase also was in 2008 as well at $410/sq.ft. including parking and locker in Liberty Village for "investment" or "family use". Beyond this price, I could not
justify the math. So, despite being offered things at $450 and $500/sq.ft., I did not purchase. I felt the investment was borderline at that time. Now it is probably worth $500/sq.ft. on paper. This is what I could get based on other assignments. However, I bought for LONG TERM appreciation. The fact that it went
up so much so fast to me just indicates it could a) retrace the gain and b) makes it illogical from my investment perspective.
Do we look smart... right now yes. But this is more based on stupid luck (at least in my case) rather than on firm investment decision making. For that, one has
to do the math as in the Post article and smart investments don't rely on beyond historical growth and negative cash flow and the hope that prices will rise
more than in the past.
Just my view.
If I look at the big picture, one does glean that you do believe that there will be no or minimal correction. It is just that the Post article clearly states what
we have been all saying for a while; that at $400/sq.ft. maybe but beyond $500/sq.ft., not making investment sense. The article quotes $550/sq.ft. but the
argument is the same.
By the way, if I look at the other article you posted that essentially one will live much longer perhaps 20 years if one is downtown... would it not make economic
sense to die younger as one could stay in the suburbs and afford the gas? (LOL; not a path I am recommending by the way).
My last purchase also was in 2008 as well at $410/sq.ft. including parking and locker in Liberty Village for "investment" or "family use". Beyond this price, I could not
justify the math. So, despite being offered things at $450 and $500/sq.ft., I did not purchase. I felt the investment was borderline at that time. Now it is probably worth $500/sq.ft. on paper. This is what I could get based on other assignments. However, I bought for LONG TERM appreciation. The fact that it went
up so much so fast to me just indicates it could a) retrace the gain and b) makes it illogical from my investment perspective.
Do we look smart... right now yes. But this is more based on stupid luck (at least in my case) rather than on firm investment decision making. For that, one has
to do the math as in the Post article and smart investments don't rely on beyond historical growth and negative cash flow and the hope that prices will rise
more than in the past.
Just my view.
daveto
Active Member
Midmonth TREB figures are out
Sales down 2% prices up 8%, YOY.
May 2010 was somewhat of an anomaly with comparatively low sales due to the flurry of sales in March/April with the CMHC changes. see http://guava.ca/ for an illustration
The 8% YOY price increase continues the April result and is shocking indeed. Look at those price graphs from guava and you'll see how irregular April's price increases were compared to the past 6 years.
Supply continues to remain at an all time low.
ps. KA1, I'm not just some dude gossiping in cyberspace to avoid doing my work...I'm a Ferrari Testarossa of raw intellect, carving corners on the streetscape urban realty racetrack in my mind
Sales down 2% prices up 8%, YOY.
May 2010 was somewhat of an anomaly with comparatively low sales due to the flurry of sales in March/April with the CMHC changes. see http://guava.ca/ for an illustration
The 8% YOY price increase continues the April result and is shocking indeed. Look at those price graphs from guava and you'll see how irregular April's price increases were compared to the past 6 years.
Supply continues to remain at an all time low.
ps. KA1, I'm not just some dude gossiping in cyberspace to avoid doing my work...I'm a Ferrari Testarossa of raw intellect, carving corners on the streetscape urban realty racetrack in my mind
TCW
New Member
Great article on Chinese buyer's influence in Vancouver
http://www.bloomberg.com/news/2011-...th-make-vancouver-homes-pricier-than-nyc.html
http://www.bloomberg.com/news/2011-...th-make-vancouver-homes-pricier-than-nyc.html
KA1
Senior Member
Midmonth TREB figures are out
Sales down 2% prices up 8%, YOY.
The 8% YOY price increase continues the April result and is shocking indeed. Supply continues to remain at an all time low.
ps. KA1, I'm not just some dude gossiping in cyberspace to avoid doing my work...I'm a Ferrari Testarossa of raw intellect, carving corners on the streetscape urban realty racetrack in my mind
I didn't know you have such a thin skin.
I never said that I gossip to avoid doing my work. It is the other way around. I just take a break -- on the cyberspace, rather than at water cooler -- from the boredom of the work. Back I go then, again.
Anyway, mid-month increase -- shocking, as far as you are concerned -- proves my repeated posts that, as far as downtown is concerned, specifically core downtown, there was no bubble, there is no bubble and there will be no bust either. It is just that individuals too busy analysing raw data look at their narrow viewpoint miss the broader picture.
Tell me, in the light of latest numbers, are you still cautious in your outlook going forward ?
CN Tower
Banned
FWIW I don't like terms like Bubble/Bull/Bear etc. It implies a dogmatic perspective that I instinctually avoid.
My bigger concern is not so much that condo prices start dropping a little but more than that the volume of sales declines sharply. Considering that the volume of sales outpaces the real demand for condo living by an enormous margin that is probably the greatest risk seen to kill this market. If China invades Canada and sends 100,000 new troops per year into Toronto for 'strategic purposes' and Toronto developers build 100,000 houses for these troops what happens when China pulls out? How does the local economy look?
My bigger concern is not so much that condo prices start dropping a little but more than that the volume of sales declines sharply. Considering that the volume of sales outpaces the real demand for condo living by an enormous margin that is probably the greatest risk seen to kill this market. If China invades Canada and sends 100,000 new troops per year into Toronto for 'strategic purposes' and Toronto developers build 100,000 houses for these troops what happens when China pulls out? How does the local economy look?
KA1
Senior Member
Yes. With a caveat. I am referring to downtown, specifically, to core downtow with a few exceptions -- 'projects' like City Place.
Look at the following factors:
gas prices will never go down too much. Read the book by Jerry Rubin, former chief economist of CIBC. About couple of years ago, he had predicted oil at $ 200 per barrel. He was a few years ahead of his time. However, oil prices will reach that level soon. Add to this the congestion on 401, 404, Don Valley. More and more people will try to driving less. Apart from GO train, public transport is 'pits'. That will encourage, seniors and others with financial means to move downtown or as close to downtown as possible.
Various real estate brokerage firms --Baker Real Estate is the one name that figures prominently --have permanent sales offices in various countries, Hong Kong, China etc. Their job is to peddle cheap real estate in Canada, especially in GTA or upscale real estate in Vancouver.
Canderel was hawking units in AURA -- Executive, sub-penthouse floors and even the penthouse -- in a publication in UK.
In one of the earlier posts, I had mentioned about hearing, on the internet, an ad in an ethnic radion station in Vancouver by one Toronto Investment Group about great opportunities in cheap Toronto real estate. This 'foreign' money -- from Vancouver, Canada should have some affect on the prices.
Daveto has posted mid month figures showing 8% increases over the same period last year. "shocking' was the word used.
Add it all up and you can see, prices will go sideway, slightly up and down for a while. No 15 to 25% decreased in the next 18 to 24 months.
CN Tower
Banned
And next year there will be another change and another explanation for low sales....
My point is that the low sales is a leading indicator of lower prices and more ominously a liquidity freeze.