macookie
Active Member
There has to be a better way to bring affordable housing to all Canadians... because there is no good reason for that percentage of Canadians to be in debt in their golden years.
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Baby, we got a bubble!?
- Thread starter simuls
- Start date
There has to be a better way to bring affordable housing to all Canadians... because there is no good reason for that percentage of Canadians to be in debt in their golden years.
Kenny
Active Member
There has to be a better way to bring affordable housing to all Canadians... because there is no good reason for that percentage of Canadians to be in debt in their golden years.
It's not necessarily unaffordable for them. A lot of Canadians are buying expensive properties because of cheap debt. Why pay off your home when you mortgage interest is less than 3%? It's also quite probable that many are buying multiple properties and renting them out.
If interest rates rise substantially, then we might have a problem. I don't see that happening any time soon, though.
brockm
Active Member
It's not necessarily unaffordable for them. A lot of Canadians are buying expensive properties because of cheap debt. Why pay off your home when you mortgage interest is less than 3%? It's also quite probable that many are buying multiple properties and renting them out.
If interest rates rise substantially, then we might have a problem. I don't see that happening any time soon, though.
Speak for yourself. I think sometime in the next 2-5 years, interest rates are going to rise rapidly and suddenly as the burgeoning government debt around the world reaches a breaking point coupled with inflationary pressures which will eventually come to bear from all the crazy currency debasement which has been going on for some time.
cdr108
Senior Member
Hey guys I was away on vacation last few weeks, just catching up with what I've missed. So of course I start with reading Garth's blog, on May 3rd he wrote this:
Any idea which one's he's referring to? I'm still jet lagged but off the top of my head is this 88 Scott, Eau Du Soleil and...? Then again I'm not sure if this is a case of Garth being Garth but I just wanted to know if anyone has any other insights.
Reason I ask as well is while I was gone my father in law is looking at a $700K unit at Eau. I told him before I left to tread very lightly but he's 'horny' as Garth would say. This would be an 'investment' (using quotes because as this thread has discussed to death is precon at >$650 PSF an investment?) for him. He wants me to go check things out this weekend, I'm trying to figure out how to break it to him that now isn't a good time for pre con (or maybe real estate in general). Problem is he's self-employed, little debt, lots of cash on hand looking to burn it (no pun intended?)
Anecdotely he also told me of one of his fellow self-employed friend who bought 3 larger units (I think all 2 beds, maybe even a 3 bed) at the Marilyn towers in Mississauga and collectively between the 3 units he's -800 a month negative cash flow. I told him this kind of is the writing on the wall, he didn't have a retort. Sometimes I wonder how these guys can be so successful in business yet can't figure out something as simple as calculating their bottom line. But then again that leads me to another issue right now: too many pre con vvvvip agents get in their ears and sell them the dream, especially in my ethnic community, some of these guys are some slick con men (no disrespect to the agents with integrity, out some of these guys are scum).
Anyway, back to the above, has anyone heard anything about the latest launches and how they've been moving?
i got vvvip notices for several projects in april/may:
60 colborne, 88 scott and Eau Du Soleil, 111 bathurst
pricing was mostly starting from $650-700 psf.
looking at it objectively based on cash flow, even with the low interest rates, it doesn't make any sense.
maintenance fees are higher and more realistic at around $0.55-0.60 psf but electricity and gas are separately metered too.
i've heard too many horror stories of pre-con advertised at $0.40-0.50 psf to only see the fees get jacked up to $0.55-0.60 psf after 2-3 years of occupancy.
interested
Senior Member
I believe that since resale is $500-550/sq.ft. and now people are openly questioning whether there will be price increases or a correction...no one can realistically believe buying at $650-700 sq.ft. is likely to produce gains for would be buyers looking to "flip",
As cdr points out, maintenance fees and taxes mean negative cash flows at these values.
the real estate industry can try and spin it how they would but real investors know that rents have to catch up, incomes increase before these investments can be viewed as anything other than "speculative".
the High end is having difficulty. The next thing will be the $650-800 will have difficulty. And it will percolate down the food chain.
As cdr points out, maintenance fees and taxes mean negative cash flows at these values.
the real estate industry can try and spin it how they would but real investors know that rents have to catch up, incomes increase before these investments can be viewed as anything other than "speculative".
the High end is having difficulty. The next thing will be the $650-800 will have difficulty. And it will percolate down the food chain.
cdr108
Senior Member
It's not necessarily unaffordable for them. A lot of Canadians are buying expensive properties because of cheap debt. Why pay off your home when you mortgage interest is less than 3%? It's also quite probable that many are buying multiple properties and renting them out.
If interest rates rise substantially, then we might have a problem. I don't see that happening any time soon, though.
interest rates don't have to rise "substantially" so to speak.
with BoC overnight rate at 1%, just a return to pre-emergency levels of 4.50% from 2007 will affect many on the fringes that should not have bought/over-bought in the first place.
those 350 basis points will increase a mortgage payment by at least 30-35% if one has only paid down the minimal amount over the past few years even thought the principal may have been reduced by 10%.
one of the worst explanations i hear from people as to why TO r/e values won't drop is the assumption that mortgage rates have to hit 15+ % like in the 1980s to cause any damage. as i previously stated, just a return to 'normal' requires 30+% more per month.
if mortgage rates were to hit 15+%, then the BoC overnight rate would be somewhere around 10%, then one's mortgage payment would be almost double !
the debt remains the same, but the value of the property fluctuates with the market.
Kenny
Active Member
with BoC overnight rate at 1%, just a return to pre-emergency levels of 4.50% from 2007
Yeah, I highly doubt that's gonna happen any time soon. Carney knows what kind of $hitstorm that would cause.
ILuvTO
Active Member
Yeah, I highly doubt that's gonna happen any time soon. Carney knows what kind of $hitstorm that would cause.
Carney can't and hasn't up to this point adjusted rates based on one sector of the economy. House prices have skyrocketed due to low rates and he's left them there for the overall good of the economy. If for some reason he has to raise rates for the good of the overall economy then I would not be surprised if he did, housing/mortgage consequences be d@mned.
macookie
Active Member
Carney can't and hasn't up to this point adjusted rates based on one sector of the economy. House prices have skyrocketed due to low rates and he's left them there for the overall good of the economy. If for some reason he has to raise rates for the good of the overall economy then I would not be surprised if he did, housing/mortgage consequences be d@mned.
Carney has talked a good game, but his real concern is inflation... and managing the economy so that we close to full employment. So as long as we don't have run away inflation and we don't all go to work... and then demand higher wages... he's not going to tinker too much with interest rates.
And while Carney is concerned about higher debt levels... and housing... they is really nothing he can do other than monitor and provide liquidity to banks once the housing prices fall if they do... however, he'd do his job and ensure stability... so really we have nothing to fear... if housing prices fall... 10% or 25% or 50%... we know that Carney will do his job... to promote stability... will work his magic to keep a majority of Canadians working.
interested
Senior Member
Carney has talked a good game, but his real concern is inflation... and managing the economy so that we close to full employment. So as long as we don't have run away inflation and we don't all go to work... and then demand higher wages... he's not going to tinker too much with interest rates.
And while Carney is concerned about higher debt levels... and housing... they is really nothing he can do other than monitor and provide liquidity to banks once the housing prices fall if they do... however, he'd do his job and ensure stability... so really we have nothing to fear... if housing prices fall... 10% or 25% or 50%... we know that Carney will do his job... to promote stability... will work his magic to keep a majority of Canadians working.
While I agree with the theory macookie, it is just not that easy. Look at the devil of a time his counterpart Ben Bernacke is having "trying to work his magic trying to promote stability while trying to keep the majority of American's working".
klb86
Active Member
TORONTO, May 16, 2012 – Greater Toronto REALTORS® reported 5,142 transactions through the TorontoMLS System during the first 14 days of May 2012. This result was up by more than 14.5 per cent in comparison to the first 14 days of May 2011. The number of new listings continued to grow at a slower pace than sales – up 13 per cent year-over-year to 8,749.
“Annual growth in sales was experienced across the GTA for all major home types in the first half of May. Sales growth was strongest for the condominium apartment segment. While the condo market has generally been the best supplied market over the past year, we have continued to see enough demand to exert moderate upward pressure on average selling prices in this market segment,†said Toronto Real Estate Board President Richard Silver.
The average selling price for transactions in the first 14 days of May was $517,242 – up by six per cent compared to the same period in 2011.
“A shortage of listings in the low-rise segment of the market has resulted in a lot of competition between buyers and above average annual rates of price growth. Tight market conditions are expected to remain in place for the balance of 2012,†said Jason Mercer, TREB’s Senior Manager of Market Analysis.
http://www.torontorealestateboard.c...market_updates/news2012/nr_mid_month_0512.htm
“Annual growth in sales was experienced across the GTA for all major home types in the first half of May. Sales growth was strongest for the condominium apartment segment. While the condo market has generally been the best supplied market over the past year, we have continued to see enough demand to exert moderate upward pressure on average selling prices in this market segment,†said Toronto Real Estate Board President Richard Silver.
The average selling price for transactions in the first 14 days of May was $517,242 – up by six per cent compared to the same period in 2011.
“A shortage of listings in the low-rise segment of the market has resulted in a lot of competition between buyers and above average annual rates of price growth. Tight market conditions are expected to remain in place for the balance of 2012,†said Jason Mercer, TREB’s Senior Manager of Market Analysis.
http://www.torontorealestateboard.c...market_updates/news2012/nr_mid_month_0512.htm
interested
Senior Member
^^^
2 condo markets klb86.
The resale may still be going (especially SFH's) but remember prices in the core $500-550 / sq.ft.
I suspect PRECON in the core at $650-700 is encountering resistance as suggested in the above posts.
Also, precon has gone to taking out the parking spot and increasing the price for the spot. In many cases
the marketing used to include the parking in 1 bedroom/den and larger units and now they don't which can add
close to $100/sq.ft. to the price.
2 condo markets klb86.
The resale may still be going (especially SFH's) but remember prices in the core $500-550 / sq.ft.
I suspect PRECON in the core at $650-700 is encountering resistance as suggested in the above posts.
Also, precon has gone to taking out the parking spot and increasing the price for the spot. In many cases
the marketing used to include the parking in 1 bedroom/den and larger units and now they don't which can add
close to $100/sq.ft. to the price.
Southcore
Active Member
Thanks guys. Yeah I too was surprised to see maint fees at 0.45-.50 cents in some of these new projects, NOT including heat, hydro or water. WTF? I remember being cautious when looking at a resale at Maple Leaf Square a year ago and was surprised to see fees at 0.73 cents PSF, not including electricity (as with all post 2007 builds). This is even worse! And we haven't even got to parking/locker maintenance which I've seen can be anywhere from $30-$60 per month for 2012 launches. Ugh...even if you bought in full cap rates are going to be minuscule.
I'm thinking even buying a Leslieville semi in a 6 way bidding war would be better off than pre con. This is straight out hustling by the pre con developers/agents right now.
I'm thinking even buying a Leslieville semi in a 6 way bidding war would be better off than pre con. This is straight out hustling by the pre con developers/agents right now.
ILuvTO
Active Member
Thanks guys. Yeah I too was surprised to see maint fees at 0.45-.50 cents in some of these new projects, NOT including heat, hydro or water. WTF? I remember being cautious when looking at a resale at Maple Leaf Square a year ago and was surprised to see fees at 0.73 cents PSF, not including electricity (as with all post 2007 builds). This is even worse! And we haven't even got to parking/locker maintenance which I've seen can be anywhere from $30-$60 per month for 2012 launches. Ugh...even if you bought in full cap rates are going to be minuscule.
I'm thinking even buying a Leslieville semi in a 6 way bidding war would be better off than pre con. This is straight out hustling by the pre con developers/agents right now.
Wow! That is expensive for such a new building. Does anyone have more info on MLS and why maint fees are so high? Does it have a large number of amenities that require significant upkeep costs?
interested
Senior Member
If you are going to get into bidding wars, set a price you feel it is worth/maximum you would be willing to pay and can make the numbers work. Then go in objectively and don't get caught up in any frenzy and do not exceed the price you were willing to pay.
Good luck to you/your father in law.
Good luck to you/your father in law.