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Baby, we got a bubble!?

AKS

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I base it on the quality of the buildings along with potential increase in value later in addition to if there was a recession, how would these units fare? I have experience with both buildings. I know people who bought in both. The LV one is better built. Finishes blow the CP one out of the water although I will admit, CP has nice amenities. I've seen everything at this building. Vomit, dog poop, garbage in the halls, noise, etc. Would never encourage anyone to buy a unit there for half a million or even half of that. I don't care what the market dictates. Then we can look at both communities. While CP is closer to the core, it is disconnected. It's full of traffic and is much less of a community than LV IMO. LV is more of a destination while CP is a pass through. CP is pretty much done. It's not changing. LV has a better vibe and there will be more projects coming.

IMO, the LV one is a better buy.
I can't say for the quality since I haven't seen the buildings at LV. But I've seen some of the buildings in the downtown area and CP isn't that bad. I've seen Infinity, Maple Leaf Square, and a few other buildings. I admit it doesn't compare to the one I saw at Yorkville, but they're on a different level.

As for the people living there. I have seen some drunk people. Since the building is large, I wouldn't say a majority of them are drinkers. Also, CP may not be a destination but it's very close to destinations. There's the CN Tower, Convention Centre, Train museum and Aquarium. I haven't been to LV, but I haven't heard people mention it's a destination people should see? What is there that's so interesting? King St W and Queen St W has more to see I think. You also mentioned King St W buildings. It's lively but I don't think there's a neighborhood feeling to the area either.
 

TheKingEast

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I can't say for the quality since I haven't seen the buildings at LV. But I've seen some of the buildings in the downtown area and CP isn't that bad. I've seen Infinity, Maple Leaf Square, and a few other buildings. I admit it doesn't compare to the one I saw at Yorkville, but they're on a different level.

As for the people living there. I have seen some drunk people. Since the building is large, I wouldn't say a majority of them are drinkers. Also, CP may not be a destination but it's very close to destinations. There's the CN Tower, Convention Centre, Train museum and Aquarium. I haven't been to LV, but I haven't heard people mention it's a destination people should see? What is there that's so interesting? King St W and Queen St W has more to see I think. You also mentioned King St W buildings. It's lively but I don't think there's a neighborhood feeling to the area either.
Again, I'm talking about these specific buildings. Not the area. There is much to do in LV. There are gyms, a grocery store, loads of shopping, clubs, bars, etc. So when I say it's a destination, people go there to do more than just sleep. They go there to shop, work out, have fun. Can't say the same for CP. Very sterile, cold and lacks decent retail beyond the Sobeys there and a few other places. People outside of CP aren't going there to hang out. The funny thing about CP is it's so near to all these "attractions" yet it feels so isolated from them.

CP isn't "bad" but it isn't good either and I wouldn't drop half a million dollars on a basic unit in there. No way, no how.
 

ARCHMAN

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Yes City Place is near "attractions". However these are tourist attractions. IMO they (CN tower, Ripelys Aquarium) do not add value to the downtown lifestyle. So what, you live next to the skydome. How many baseball games are you going to see a year? I would much rather live in a neighborhood with cafes and restaurants at your door such as king west or king east or annex and take a 20 minute street car ride to see the jays game.
 

Eug

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Yes City Place is near "attractions". However these are tourist attractions. IMO they (CN tower, Ripelys Aquarium) do not add value to the downtown lifestyle. So what, you live next to the skydome. How many baseball games are you going to see a year? I would much rather live in a neighborhood with cafes and restaurants at your door such as king west or king east or annex and take a 20 minute street car ride to see the jays game.
The waterfront is very nice. I used to go riding there on a regular basis. Also, it's nice being able to walk to BMO Field for example. My wife has half a season ticket subscription for Toronto FC games. Parking is $20 a shot.

I'm not a big fan of those City Place buildings specifically though. Actually, I prefer living NOT on the waterfront myself, but I can definitely see its advantages. My sis lives there (Tip Top) and she loves it.

Liberty Village has the same dog poop/noise/vomit issues but there is more of a family/neighbourhood vibe going on there -- CP has more of the frat house vibe although their residents' group works hard to create a sense of neighbourhood
I can't stand walking around some parts of downtown/near-downtown like Liberty Village in the spring. Dog landmines EVERYWHERE. WTF is wrong with these people?
 
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Condo George

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GREATER TORONTO REALTORS® REPORT MID MONTH RESALE HOUSING
MARKET FIGURES
TORONTO, June 17, 2014 – Toronto Real Estate Board President Dianne Usher announced that both
sales and new listings were up substantially during the first 14 days of June 2014 compared to the same
period in 2013.
“If the first two weeks of June are any indication, we may be seeing a turnaround in the supply of homes
for sale in the Greater Toronto Area. New listings were up on a year-over-year basis for most major
home types in the City of Toronto and surrounding regions. However, sales growth outpaced growth in
new listings, which suggests that there is still a lot of pent-up demand yet to be satisfied, so sellers’
market conditions will likely remain in place for the remainder of 2014,” said Ms. Usher.
Sales reported through the TorontoMLS system during the first two weeks of June amounted to 4,938 –
up by 11.3 per cent in comparison to 2013. New listings were up over the same period by 7.8 per cent to
8,825.
The average selling price for June mid-month transactions was $582,100, which represented an increase
of 8.6 per cent compared to the average of $535,865 in 2013.
“Average selling prices were up across the GTA for low-rise home types like singles, semis and
townhouses as well as for condominium apartments. This is no surprise given that the number of
transactions was up compared to 2013 by a greater rate than the number of new listings, which suggests
that competition between buyers arguably increased,” said Jason Mercer, TREB’s Senior Manager
 

AKS

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Again, I'm talking about these specific buildings. Not the area. There is much to do in LV. There are gyms, a grocery store, loads of shopping, clubs, bars, etc. So when I say it's a destination, people go there to do more than just sleep. They go there to shop, work out, have fun. Can't say the same for CP. Very sterile, cold and lacks decent retail beyond the Sobeys there and a few other places. People outside of CP aren't going there to hang out. The funny thing about CP is it's so near to all these "attractions" yet it feels so isolated from them.

CP isn't "bad" but it isn't good either and I wouldn't drop half a million dollars on a basic unit in there. No way, no how.
Unless you're living in the area, people don't usually come to hang out. There's a soccer field that people use to play soccer. There are cafes people sit around. So people living in the area do hang out in the area sometimes. There's a Fox and fiddle that's pretty busy in the summer. There's also a new restaurant with a patio at the parade building. A 24 hr Tim Hortons opened up and starbucks is opening up. Pet lovers probably like the pet store that sells items for their pets. There's a dry cleaning and print shop too if people want dry cleaning and printing. But you are correct about the grocery store. Sobeys is over priced and I seldom shop there. I seldom go to cityplace Tim Horton as well because they always lack the donuts I like. I do enjoy the library though and hope they build up more books and dvds in the next few years.

I don't mind the cityplace area because it's close to places I frequent such as the waterfront and king street. It's close to a few shoppers drug mart where I can get milk for a good price too.
 

James

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Some more writings on trying to determine where the Toronto real estate market is heading...

http://www.theglobeandmail.com/life...state-market-is-no-easy-task/article19236176/

Reading Toronto’s real estate market is no easy task
CAROLYN IRELAND
The Globe and Mail
Published Thursday, Jun. 19 2014, 10:29 AM EDT


Queen’s University professor John Andrew is as puzzled as any observer trying to interpret the dynamics in Toronto’s real estate market.

Runaway house prices, he notes, are simply incongruent with stagnating sales.

“I’ve been perplexed about that for a couple of years.”

Prof. Andrew is director of the Executive Seminars on Corporate and Investment Real Estate at Queen’s. Among his teaching duties, he lectures in Queen’s School of Business. A sudden burst of activity last month led to the strongest May on record, he notes, but the broader trend in Canada has been a gentle downturn.

Prof. Andrew expects the Toronto market to stabilize and settle down in July and August, as it so often does in the summer.

Looking out toward the fall and action in the bond market, he anticipates an uptick in bond yields, which in turn may lead to higher mortgage rates in Canada.

In May, Prof. Andrew suggests, the market in Toronto was playing catch-up after a slow start in the spring. Cool temperatures may have held back listings and discouraged buyers, he says.

When more listings suddenly sprouted in May, some of the pent-up demand was absorbed. Last week the Canadian Real Estate Association reported that sales across the country rose 5.9 per cent in May compared with April. The largest gains driving the national increase were in Greater Toronto, Calgary and Montreal.

Earlier this month the Toronto Real Estate Board said that the average selling price in the Greater Toronto Area jumped 8.3 per cent compared with May of 2013.

Prof. Andrew says the numbers are particularly startling in light of warnings last week from the Bank of Canada and the Organization for Economic Co-operation and Development.

Last week, the central bank said valuations are stretched, there is overbuilding in some parts of the country and indebtedness remains high. Those elements could lead to a correction, which in turn could hurt the overall Canadian economy, Bank of Canada Governor Stephen Poloz says.

Mr. Poloz told reporters he believes the risk of a housing market crash in Canada remains low.

Prof. Andrew says it will be particularly interesting whether the federal government heeds the OECD’s cautions about the risk to the taxpayer in light of all the mortgage debt out there insured by the Canada Mortgage and Housing Corp.

In a report, the Paris-based OECD said, “regardless of whether or not a housing price bubble exists, very high household debt levels represent a major vulnerability.”

The report noted, for example, that the mortgage insurance system, and Canada Mortgage and Housing Corp.’s dominant role in it, “concentrates a significant amount of risk in public finances.”

“The Canadian taxpayer is bearing far too high a risk compared with lenders,” Prof. Andrew says of the OECD’s position.

To reduce growing taxpayer exposure, the OECD urges Ottawa to tighten mortgage insurance rules to cover only part of lenders’ losses in case of defaults. Mortgage insurance pays the lender back in full if the homeowner defaults on the loan. The OECD suggests that taxpayers bear a large responsibility.

Prof. Andrew believes that if the federal government were to force banks to take on more responsibility, “it would immediately be passed on to consumers.”

Such a change would discourage many potential buyers, he says.

“That could have a hugely chilling effect on the market.”

Prof. Andrew says the federal government is in a tight spot. Increasing the minimum down payment required for mortage insurance would also serve to take some steam out of the market, but home builders are lobbying tremendously hard against such a move.

“I think they’re terrified to increase the minimum down payment.”

One worry, Prof. Andrew says, is that the “stress tests” banks perform to make sure a borrower can afford to continue to pay a mortgage at higher rates are not rigorous enough.

Looking back at historical interest rate levels, it’s not at all far-fetched to imagine they could return to 7 or 8 per cent, he cautions.

“You don’t have to go back very many years.”

His “biggest fear,” he adds, is that rates eventually rise – prompting a lot of homeowners to try to sell at the same time as they watch the value of their asset decline.

If you’re in your house for the long haul, it doesn’t matter if rates rise or values fall, the professor points out – unless the mortgage comes up for renewal at a rate the owner can’t afford or doesn’t want to pay.

“They’ll scale back in 100 ways to not lose their home.”

That risk is highest in the condo market, he adds, because those owners tend to be investors.

“If it’s an investment, then it’s easy to cut and run.”

As the average selling price approaches the $1-million mark for a detached house in Toronto’s 416 area code, Prof. Andrew says the milestone – if it is reached – won’t have a big impact on the market.

If there is a flurry of attention, that may draw some foreign investment, he says, but over all he expects the impact would be small.

“Vancouver passed that a while ago. We don’t want to overstate the psychology because it had little impact in Vancouver.”

Prof. Andrew adds that he doesn’t know if prices will climb that high or not. It’s possible the market will taper off during the summer. Higher mortgage rates in the fall could further temper demand.

If prices in the city do pass that threshold, they could also fall back, he cautions.

“It’s really just about mortgage rates.”

Prof. Andrew says many buyers get sucked in emotionally when buying a house and often begin looking for ways to tick more of the boxes on their “wish list.”

Some borrow money from parents; others dip into their retirement savings plans, which Prof. Andrew advises against.

“Everybody spends more than they ever think they’re going to spend.”
 

NBGtect

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One can't deny that investing in condos is risky. Taking advice from those who make their profits in real estate development is not very wise now, is it? Investing in freeholds has normally, and historically, been a wise choice. But there is zero evidence that the money that people spend in today's market on a condo will produce a positive cash flow or appreciate in value.

The quarterly resale market stats really don't mention all the condo listings that don't sell and the fact that people can't unload them like a freehold.

Chose wisely people or rent. There's very little money to be had (if any) in condo investing. Don't give these guys your hard earned money. You are only helping to buy them a fancy car while you ride transit and see your money go poof!
 

NBGtect

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While it's fine and dandy to 'prove' that there isn't a bubble, the reality is that there is ever increasing prices per square foot; smaller and smaller units; and poorer and poorer quality of construction. Only sales people and developers are making money.

The reason why individual investors can't make any money flipping their condo units after 4 years of waiting for the building to be completed is because of the poor, poor quality of construction. Their units are worth less than what they paid.

Even if you paid cash for a unit, the maintenance fees and special assessments on poorly constructed condos will kill you over time. As condo fees go up, your unit's value trends down.

This is totally unsustainable. The recent builds will not last long and will require major repairs in a relatively short period. There are only so many corners that a developer can cut!!
 

TheKingEast

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While it's fine and dandy to 'prove' that there isn't a bubble, the reality is that there is ever increasing prices per square foot; smaller and smaller units; and poorer and poorer quality of construction. Only sales people and developers are making money.

The reason why individual investors can't make any money flipping their condo units after 4 years of waiting for the building to be completed is because of the poor, poor quality of construction. Their units are worth less than what they paid.

Even if you paid cash for a unit, the maintenance fees and special assessments on poorly constructed condos will kill you over time. As condo fees go up, your unit's value trends down.

This is totally unsustainable. The recent builds will not last long and will require major repairs in a relatively short period. There are only so many corners that a developer can cut!!
Bad construction existed 5+ years ago too. I can tell you of some terribly constructed condos that are 10 years old now. While poor construction is an issue, it's an even bigger issue now because condos have soared in cost. The hidden costs have soared. Buying a poorly built condo for 5% down and paying just a few thousand in closing costs was great "back in the day". Why? Because even if you got a poorly built condo. By the time it was built (5 years later) the value would likely double. So, you could just fix it youself or sell it and make good money off of it. This doesn't happen anymore. Now everyone wants a slice of the pie so getting a solid built condo now is crucial because there's so much money invested (20-25%), appreciation is less and the costs are far higher. Going forward, condo boards are going to be extremely important because they're really the only group that can hold the builder accountable to an extent and make sure things are fixed properly and maintained.

The market will not "crash" due to bad construction. It will crash when housing is no longer affordable. I guess you can say we're at that point now. But, with low interest rates, sustainability shouldn't be an issue. Government will not raise rates. They make way too much money from the real estate boom to create a "crash".

A lot of pre con purchasers are in the dark about a lot of things and there's really no information out there. But if you buy pre con you take the risk of buying something that will most likely not be to your standards. Builder has your money, they're protected by tarion, there is no incentive to go over and above. It's not just builders. It's like that in other industries too. Basically, the reality is...you buy precon now, be prepared to a) spend years in a construction zone b) years to get things fixed in your own unit. c)take a loss on your investment.

Homework on the builder and construction company is crucial nowadays. I know people that would not be caught dead in a condo for this reason. They are rich enough to afford a house, though.
 

cdr108

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a house is out of reach because of the inflated prices in Toronto and Canada in general.

prices in Toronto are over-valued by 30% because of ultra-low rates and buyers/consumers are being fed the idea that prices are affordable due to monthly serviceability.
however, that's only applicable for the short term until one's mortgage is due for renewal at the new rate which will definitely not be current ~3% for 5-year fixed.

many are not aware that a rate increase of only 1% (100 basis point to 4%) will cause one's monthly payment to increase by 9+% based on original 5-year term/25-year amortization even with the smaller loan outstanding after 5 years of interest and principal repayment.

if rates go up by 2% (ie. 200 basis points to 5%), that will increase the monthly payment by ~19%;

if rates go up by 3% (ie. 300 basis points to 6%), that will increase the monthly payment by ~29%;

if rates go up by 4% (ie. 400 basis points to 7%), that will increase the monthly payment by ~39%



The Bank of Canada determines interest rates; however, inflation rate is based upon the consumer price index (CPI) and had increase in May 2014 to 2.3%. Even the "core" rate, which strips out "volatile items" like food and energy prices, increased from 1.4 per cent to 1.7, so there's a broad-based uptick in prices.

http://www.cbc.ca/news/business/canada-s-inflation-rate-jumps-to-2-3-in-may-1.2682011
 
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nrb

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Government will not raise rates. They make way too much money from the real estate boom to create a "crash".
While I agree with most of what you write.. I do not understand this thinking at all. Do you really believe the BoC is going to keep it's rate at 1% in perpetuity? Does anybody believe this or have any reason to think rates are going to stay the same for forever?

cdr108 does a good job showing why everyone should be concerned about rates rising. And it will happen. If not this year then the next, or the next. It doesn't matter. And when it does, there are going to be an awful lot of people who suddenly can't afford their mortgages. The ONLY reason banks are even willing to risk the mortgages that have been driving this bubble is because they're insured by CMHC. The situation is so similar to the housing bubble in the united states and their crash it's comical. Cheap credit, risks that are not carried by the banks originating the loans, prices skyrocketing past incomes.
 

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