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Baby, we got a bubble!?

Bubba, I think there is some credibility in the theory that Toronto is maturing and demographic trends are leading it towards being a structurally unaffordable market. Many global and regional centres in the world are essentially unaffordable for the local population. However, I think we should not get too carried away with this. Toronto is not such a centre, even if certain niche markets are trending in that direction.

I still think debt servicing levels is one of the key factors here. As I mentioned before we still haven't maxed out the debt servicing limitations of the average borrower. This means that current price levels are theoretically sustainable if conditions do not change, if no one makes any moves like increasing interest rates. Trouble is the average Canadian and Canadian family is still ramping up debt on the expense side and have started to max out their income potential on the revenue side, and are doing so with very little stake in their homes by historical standards. The headlines people posted saying "property to rise, or property rose this month" might as well read, "Canadians drive up debt levels to historic levels for the privilege of owning less of their home than ever before".

The implications of this do not mean bubble or no bubble but that we will be lucky if all that happens is the financial position of the average Canadian stagnates for a long period. This does not mean there is no money to be made in real estate. But it does mean that soon there will be no resiliency left in the system. The system will be maxed out and at the utter mercy of marginal changes in key variables.
 
kettal said:
Maybe the market for tiny shoebox condos will become saturated... but developers find a new niche with 3 bedroom units, and development continues :)
Click to expand...

The problem is that the 3-bedroom units will be $700,000+, thus forcing families with kids to the burbs, where a 3 bedroom home can be had for $350,000-$400,000 including a backyard and garage in a very nice area.
 
safeashouses said:
I'm not concerned about you John. I'm merely attempting to give the forum a clearer picture of the situation.
Click to expand...

Is it so hard to believe that people can profit from real estate investment? Seems a lot of people here enjoy attributing success to “blind luckâ€.

I’ve learned a lot through the years and I’m happy to share some of those experiences and hands-on advice with anyone interested. At the moment, I just feel the need to counter the general consensus who claim real estate to be a poor investment vehicle.

yogz,

Yes, employment and debt ratios are a risk. But the employment picture in Canada is already stabilizing, debt ratios have been much higher in the past, debt is easier to manage while household net worth continues higher, and income levels are still growing. I’m not blind to the risks here. I just think Canada is well placed (particularly when compared internationally) for future events given our natural resource base and stable financial sector.
 
makattack said:
The problem is that the 3-bedroom units will be $700,000+, thus forcing families with kids to the burbs, where a 3 bedroom home can be had for $350,000-$400,000 including a backyard and garage in a very nice area.
Click to expand...

Not so sure about that... medium sized 4 bedroom suburban homes right now are selling for about $700,000
 
kettal said:
Not so sure about that... medium sized 4 bedroom suburban homes right now are selling for about $700,000
Click to expand...

i'm not so sure about that either ... what's 'medium sized' - 1500, 2000, 2500, 3000 SF ???

and what locations are you referring to?
 
Johnzz said:
Is it so hard to believe that people can profit from real estate investment? Seems a lot of people here enjoy attributing success to “blind luckâ€.

I’ve learned a lot through the years and I’m happy to share some of those experiences and hands-on advice with anyone interested. At the moment, I just feel the need to counter the general consensus who claim real estate to be a poor investment vehicle.

yogz,

Yes, employment and debt ratios are a risk. But the employment picture in Canada is already stabilizing, debt ratios have been much higher in the past, debt is easier to manage while household net worth continues higher, and income levels are still growing. I’m not blind to the risks here. I just think Canada is well placed (particularly when compared internationally) for future events given our natural resource base and stable financial sector.
Click to expand...

No need to apologize for your view points johnzz...it's refreshing to hear some other thought/analysis compared to the fearmongering/doom and gloom posts that are typical on this forum.
 
Johnzz said:
Is it so hard to believe that people can profit from real estate investment? Seems a lot of people here enjoy attributing success to “blind luckâ€.

I’ve learned a lot through the years and I’m happy to share some of those experiences and hands-on advice with anyone interested. At the moment, I just feel the need to counter the general consensus who claim real estate to be a poor investment vehicle.

yogz,

Yes, employment and debt ratios are a risk. But the employment picture in Canada is already stabilizing, debt ratios have been much higher in the past, debt is easier to manage while household net worth continues higher, and income levels are still growing. I’m not blind to the risks here. I just think Canada is well placed (particularly when compared internationally) for future events given our natural resource base and stable financial sector.
Click to expand...

Johnzz, the majority of this forum is doom and gloomers. I think they have an erection or something predicting or searching for real estate bad news. Nothing but the negative coming out of them, sad really.
 
Fearmongering? Doom and gloom? Sigh....

So if rational thought and analysis leads one to a conclusion you don't like, then it is "Doom and Gloom"? Human psychology is a fascinating thing.

As it happens, I'm generally regarded as one of the most irrepressibly optimistic people that anyone knows. And yet despite that I'm unable to see any source for optimism in our local or national RE markets.

But maybe you're right. Maybe there is some miswiring in my own psychology which provides me pleasure in perceiving bad RE news.

Self knowledge is elusive, and either way the truth will eventually out. It will either serve me as a great learning experience about my unwitting desire & sadistic pleasure to fearmonger, or alternatively an affirmation of Al Gore's comment about the difficulty in convincing someone of something when their income precisely depends on not listening to you.

I will say that I find it somewhat revealing that your chosen option to refute the critical opinions presented about RE is to 100% dismiss those opinions as evidence of a character flaw by the posters.
 
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"But the employment picture in Canada is already stabilizing, debt ratios have been much higher in the past, debt is easier to manage while household net worth continues higher, and income levels are still growing. I’m not blind to the risks here. I just think Canada is well placed (particularly when compared internationally) for future events given our natural resource base and stable financial sector."

Johnzz, this seems to be the prevailing media based opinion but I don't think it paints an accurate picture. It is too soon to even tell if the employment picture in the country is stabilizing, debt servicing costs have been higher in the past but ratios are at historic highs. The only reason servicing costs are not at historic highs is because interest rates have never been lower. House-hold net worth is only high because of real estate, there is no other significant factor at play. And on the income side I'm actually not sure. I am under the understanding that real personal income growth has been fairly stagnant for some time. Certainly if we compare incomes to real estate appreciation over the last decade you would expect to find income growth to be an insignificant factor.

On a personal note we all act in our own vested interest. I write about real estate here because I have skin in the game and it is a good way to work out ideas in my own head. There are actually very few people you can have a deep conversation on these topics about. Most people just take what the media is spoon fed by the real estate and development industry at face value, or they argue points to rationalize their own circumstances. If you are smart it shouldn't matter to you what direction the market takes because you will have already positioned yourself accordingly. So there should be no reason to be too emotionally attached to the outcome.
 
makattack said:
The problem is that the 3-bedroom units will be $700,000+, thus forcing families with kids to the burbs, where a 3 bedroom home can be had for $350,000-$400,000 including a backyard and garage in a very nice area.
Click to expand...

- $400K will buy you a home un the burbs, but I'm not so sure about a "very nice area".
- You can still buy houses in Parkdale, Junction, Danforth East, Riverside/Leslieville, and Corktown for less than $400K.
 
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