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Baby, we got a bubble!?

TheKingEast said:
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".
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With thinking like this being widespread, I am very confident that we are in a bubble right now. Blanket statements like "goverment will not raise rates" are simply insane and show that reason left this market a long time ago.

The government doesn't set rates. The BoC does. The BoC has a sole mandate to control inflation. In reality, our rates will follow the Fed rates. Legislators in Canada have no control over interest rates nor does the BoC practically speaking.
 
DearSummer said:
With thinking like this being widespread, I am very confident that we are in a bubble right now. Blanket statements like "goverment will not raise rates" are simply insane and show that reason left this market a long time ago.

The government doesn't set rates. The BoC does. The BoC has a sole mandate to control inflation. In reality, our rates will follow the Fed rates. Legislators in Canada have no control over interest rates nor does the BoC practically speaking.
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Do you really believe the government and BOC opperate independently?
 
http://www.theglobeandmail.com/repo...ngover-hitting-economy-poloz/article17540181/

"As a result of the aging population, the new normal for economic growth looks to be slower than in the past, Bank of Canada Governor Stephen Poloz said in a speech Tuesday, with interest rates likely to be lower for longer."

I remember reading this a while ago and thought I'd share as people here seem to think rapidly rising rates in the near to medium term is a certainty. I understand Poloz may be trying to talk down the loonie to aid exports but you cannot entirely ignore this argument. Sure, inflation jumped in May but core inflation is still well below target. With global growth anemic and a contracting U.S. economy (harsh winter or not), it wouldn't surprise me if rates stay low (relative to historical average) in the next 5 to 10 years. By then, I would have paid off most of my mortgage while others are still on the sidelines waiting for the crash.
 
TO_Guy said:
http://www.theglobeandmail.com/repo...ngover-hitting-economy-poloz/article17540181/

"As a result of the aging population, the new normal for economic growth looks to be slower than in the past, Bank of Canada Governor Stephen Poloz said in a speech Tuesday, with interest rates likely to be lower for longer."

I remember reading this a while ago and thought I'd share as people here seem to think rapidly rising rates in the near to medium term is a certainty. I understand Poloz may be trying to talk down the loonie to aid exports but you cannot entirely ignore this argument. Sure, inflation jumped in May but core inflation is still well below target. With global growth anemic and a contracting U.S. economy (harsh winter or not), it wouldn't surprise me if rates stay low (relative to historical average) in the next 5 to 10 years. By then, I would have paid off most of my mortgage while others are still on the sidelines waiting for the crash.
Click to expand...

Right. I don't get this notion that interest rates are going to soar overnight and the market tanks the next day. Rates will stay low and will not jump out of nowhere. So a "crash" IMO won't come from a huge overnight jump in interest rates. A crash will be the result of something else.
 
TheKingEast said:
Do you really believe the government and BOC opperate independently?
Click to expand...

It doesn't matter if they do or don't. The government or BoC have to follow the Fed. The government, BoC, Fed, or anybody else isn't going to hold rates low simply to appease Canadians with big mortgages. This is a global economy.
 
TO_Guy said:
http://www.theglobeandmail.com/repo...ngover-hitting-economy-poloz/article17540181/

"As a result of the aging population, the new normal for economic growth looks to be slower than in the past, Bank of Canada Governor Stephen Poloz said in a speech Tuesday, with interest rates likely to be lower for longer."

I remember reading this a while ago and thought I'd share as people here seem to think rapidly rising rates in the near to medium term is a certainty. I understand Poloz may be trying to talk down the loonie to aid exports but you cannot entirely ignore this argument. Sure, inflation jumped in May but core inflation is still well below target. With global growth anemic and a contracting U.S. economy (harsh winter or not), it wouldn't surprise me if rates stay low (relative to historical average) in the next 5 to 10 years. By then, I would have paid off most of my mortgage while others are still on the sidelines waiting for the crash.
Click to expand...

So you're betting on something that has never happened in the history of Canada since 1935? And you're willing to stake a prediction on the next 5-10 years on this, and what has happened economically in the past month? And you think it's reasonable to invest hundreds of thousands of dollars on that?

I call that INSANE.
 
nrb said:
So you're betting on something that has never happened in the history of Canada since 1935? And you're willing to stake a prediction on the next 5-10 years on this, and what has happened economically in the past month? And you think it's reasonable to invest hundreds of thousands of dollars on that?

I call that INSANE.
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"This time is different" ;)
 
nrb said:
So you're betting on something that has never happened in the history of Canada since 1935? And you're willing to stake a prediction on the next 5-10 years on this, and what has happened economically in the past month? And you think it's reasonable to invest hundreds of thousands of dollars on that?

I call that INSANE.
Click to expand...

Nope, not betting. Those who wait and try to speculate interest rate movments are betting. I bought because I needed a place to live.
 
TheKingEast said:
You so want to be right, huh? You've been wrong for some time now.
Click to expand...

Nah I've been cashing out betting on the USD and stock market for years...

https://finance.yahoo.com/echarts?s...osshair=on;ohlcvalues=0;logscale=off;source=;

Much better performance than most real estate assets that I know of...

Everything is going up right now. Housing is going up slower than equity though. Maybe that will change in the future, but equity was the spot to be over the last 5 years.
 
DearSummer said:
It doesn't matter if they do or don't. The government or BoC have to follow the Fed. The government, BoC, Fed, or anybody else isn't going to hold rates low simply to appease Canadians with big mortgages. This is a global economy.
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Agreed. However, The Fed Reserve, ECB (negative overnight rates!), BOJ, China, etc. will FORCE nterest rates down (ZIRP) for foreseeable future. Canada is merely a passenger on this high speed train heading for a cliff. Enjoy the ride for years/decades to come and try and lock in some gains before the giant reset comes.

Toronto property in high barrier to entry locations (ie close to transit and amenities) that yields income in excess of the cost of capital is as safe a store of wealth as anywhere in North America, in my opinion.
 
DearSummer said:
Nah I've been cashing out betting on the USD and stock market for years...

https://finance.yahoo.com/echarts?s...osshair=on;ohlcvalues=0;logscale=off;source=;

Much better performance than most real estate assets that I know of...

Everything is going up right now. Housing is going up slower than equity though. Maybe that will change in the future, but equity was the spot to be over the last 5 years.
Click to expand...

For passive investments I too would recommend a balanced portfolio of publicly traded equities over REITS or other passive investment vehicles.

However, if you're keen on being more active with your capital the risk/return equation strongly favors owning real estate directly (ie free of massive fees from managers) with a reasonable yield. Equities swing violently and can catch you off guard and are absurdly manipulated by competing forces. They also lack yield for the most part and if leveraged will be sold from underneath you on a margin call.
 
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CN Tower said:
Agreed. However, The Fed Reserve, ECB (negative overnight rates!), BOJ, China, etc. will FORCE nterest rates down (ZIRP) for foreseeable future. Canada is merely a passenger on this high speed train heading for a cliff. Enjoy the ride for years/decades to come and try and lock in some gains before the giant reset comes.
Click to expand...

Agreed. That's what's happening now and appears to be the prognosis for the future. However, many things can change the course of the central banks. It's hard to predict even 1 year out, let alone 3, 5, or 10.

CN Tower said:
Toronto property in high barrier to entry locations (ie close to transit and amenities) that yields income in excess of the cost of capital is as safe a store of wealth as anywhere in North America, in my opinion.
Click to expand...

Tough to find those properties right now in my opinion. I think real estate is extremely risky though for most of us because we can't truly diversify due to the high cost of real estate versus equity investments (i.e. you could buy an ETF with thousands of stocks in it for $40...most real estate cost $300,000+ minimum in Toronto.)
 
CN Tower said:
For passive investments I too would recommend a balanced portfolio of publicly traded equities over REITS or other passive investment vehicles.

However, if you're keen on being more active with your capital the risk/return equation strongly favors owning real estate directly (ie free of massive fees from managers) with a reasonable yield. Equities swing violently and can catch you off guard and are absurdly manipulated by competing forces. They also lack yield for the most part and if leveraged will be sold from underneath you on a margin call.
Click to expand...

I wonder what people value their time at for directly managing real estate. I've never been a landlord but I imagine it's a ton of work and stress. I don't think it's worth my time when I could invest in other assets that are passive. I have a full-time job, I don't want to go home and do landlord stuff. Just a personal preference thing more than anything.
 
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