Baby, we got a bubble!?

[KA1]

Looks like it's a waiting game now.


I'd feel extremely nervous if I bought into projects like St. Nicholas at $700+ psf just for speculative purposes.

One has to have nerves of steel to be in this 'game'. I bought a unit in AURA at $ 700 sq. ft in March 2008.

Yes, once in a while I feel butterflies in the stomach. However, most of the time, I sleep well. As a matter of fact, every day I get up excited -- let's see as to which way the wind is going to blow today.

 

[interested]

I think at $700 but the 59th floor is not the same as buying at $700 in the St. Nicholas at a lower floor. However, it is of note that we can now realistically question a retest of 2008 prices. Take some solice KA, I'm in for $864/sq. ft. at Shangrila. I suspect we are both similarly exposed, perhaps me even more than you and I bought in 2007.

 

[cdr108]

not negative ... just realist.
a 25-30% decrease within 5 years after 100+% increase in 10 years should not be considered 'doom and gloom'

Ah but there was no growth from 1989 to 2002, so 100% over 20 years and then a 25 -30% decline is doom and gloom.

but 1989 was another peak after rising 110% within 4 years from 1985.
a 100% rise from 2000 to 2010 is an average and very conservative estimate.
i know many properties in Toronto rose alot more than that.

Jaybee,
One certainly would have to worried about the downside risk, wouldn't they. Upside potential seems minimal at best the next few years.
Of course, a number of posters have been waiting for "years" for a correction so eventually I guess they have to be proven right. I think it is finally upon us now but then I thought at the end of 2007/ early 2008 was frothy. It did adjust as I expected only to be faked out with another rise. However, it was irrational to rise again as rapidly so who knows. Maybe it will irrationally rise(at least irrationally in my opinion) yet again, though I doubt it.

irrational exuberance was certainly alive from 2006 to 2010 ...
i bought a property in 2006 and sold it in 2010 after the price rose more than 65% in those 4 short years.
my timing could be off but i'm not willing to risk the capital appreciation for rental income in an environment of increasing supplies in the coming months with stagnant rents that have dominated for the past decade.

 

[interested]

but 1989 was another peak after rising 110% within 4 years from 1985.
a 100% rise from 2000 to 2010 is an average and very conservative estimate.
i know many properties in Toronto rose alot more than that.




irrational exuberance was certainly alive from 2006 to 2010 ...
i bought a property in 2006 and sold it in 2010 after the price rose more than 65% in those 4 short years.
my timing could be off but i'm not willing to risk the capital appreciation for rental income in an environment of increasing supplies in the coming months with stagnant rents that have dominated for the past decade.

To the first point, I agree entirely.
To the second, I think you were wise to sell in 2010. However, one also has to have a place to invest. Granted if real estate goes down and one can invest in something positive, that is good. Again, I view real estate as part of a balanced portfolio and when the stock market was really declining in 2008/2009, it was nice to have that rental income. However, if one had levered their real estate, then selling is very wise.
Problem is I am not smart enough to know and time that well so I keep all asset classes and hope they all don't tank at once.

 

[CN Tower]

I think at $700 but the 59th floor is not the same as buying at $700 in the St. Nicholas at a lower floor. However, it is of note that we can now realistically question a retest of 2008 prices. Take some solice KA, I'm in for $864/sq. ft. at Shangrila. I suspect we are both similarly exposed, perhaps me even more than you and I bought in 2007.

If the two 'youdz' bought your properties as primary residences and can each reasonable afford the cost of ownership then the short term paper price fluctuation (when you have no urgency to cash out) should be of minimal concern. Your greatest concern should be when will my wonderful new home be finished so I can move in and enjoy it!

 

[KA1]

If the two 'youdz' bought your properties as primary residences and can each reasonable afford the cost of ownership then the short term paper price fluctuation (when you have no urgency to cash out) should be of minimal concern. Your greatest concern should be when will my wonderful new home be finished so I can move in and enjoy it!

I don't know about Interested but I did not buy the unit to use as a primary residence. I already live in RoCP1. However, depending upon the market conditions, I would have the option to turn the unit into a primary residence, rent or sell and take my profits and run. If Canderel wants my money, then, it will be their worry to finish the project on time. My RE agent tells me that he has not come across any project that was completed on schedule.

 

[interested]

If the two 'youdz' bought your properties as primary residences and can each reasonable afford the cost of ownership then the short term paper price fluctuation (when you have no urgency to cash out) should be of minimal concern. Your greatest concern should be when will my wonderful new home be finished so I can move in and enjoy it!

the answer is yes. I like Ka, bought it not as a primary residence but for potential family use and if not to rent, not sell. I think Ka's response reflects my feeling. I would obviously prefer to have options when it is completed just in case we decide not to keep it but I will not and have not lost any sleep about this investment. I frankly can very easily live with the 25 to 30% decline from present prices and fully expected in fact not to make money on this when I bought it but rather to just have normal 2-3% escalation in price over a prolonged time frame (5-10 years).

Incidently my unit is now $1164/sq. ft from builder or 34.2% price increase since 2007 purchase my unit. The unit 1 floor above me is available from the builder ($5000 premium on my suite for about 34.6% above what I paid). I can live with it going back to 2007 prices which would represent a 25.5% drop from its present price. I even can live with it going going lower by 5 or 10% down from my original purchase price or $750/sq. ft. I believe (and hope) there will be very few undercapitalized "investors" in Shangrila because of the price point and the fact that it could not be rented out for periods less than 6 months, hence "investors" who did their homework would have realized and not counted on rental income vs. say in Trump, a hotel unit where it was marketed as "income producing".

I have no anxiety about this investment and will frankly close mainly if not totally with cash. So I can ride it out. I always bought real estate based on what I could afford to carry if it was empty and based my calculations on less than current rents and assuming 1-2 months vacancy a year for investment purposes. Understand this was not my goal but my worst case scenario view.

My concerns are not with my particular investment. My concerns are with the economy in general and with the overall real estate market in particular.

Ka has expressed some concern in some of his posts. I will get concerned when we get beyond the 25 to 30% decline which you have eluded to. Not because financially it will be a problem for me, but no one likes to lose money. When one has a significant investment even if it is a home, while not relying on income from it, one still does not wish to have a depreciating asset as you will understand.

Similarly, when the stock market declined 30%, I was OK but when it started approaching 40 to 50% last year, that did start to upset me. At 40 to 50% it essentially wiped out all my gains over 10 years which has now recovered but may go back down 15% here again. I don't lose sleep about 5-15% fluctuations.

Finally, I don't think there is a need for you to refer to us as "youdz". You may think it and ultimately we will all see whether we were right or wrong.
A rationale concern over a large investment does not make one a youdz however.

 

[JayBee]

Well, I have a unit at Murano which is rented. I purchased the 1 bed unit for a bit over $200K. It quickly rose to over $300k (in retrospect I should have sold it as I felt the price was severely inflated). I didn't and have it rented out. I can deal with a 20-25% drop from the current price as it would bring me back down to what I originally paid for the unit. I really hope this doesn't happen, obviously. The one good thing is the unit is located in a prime area right by the hospitals, UofT and Ryerson. Even if things get absolutely dire, I think I won't have problem getting my unit rented near what it's rented for now.

I also purchased another unit at King East (which is under construction) for $439 psf...I plan on moving into this one, so if the price drops, I can live with it. I also think that King street and Bay/College and other prime areas will fare better than a lot of less desirable areas when prices drop. My plan is to sell my Murano unit when King East is completed (2-3 years).. my only worry is I won't make anything on the Murano unit to put down on the new unit. So maybe I'll just continue to rent it out until the market recovers. I won't lose sleep, but I won't be happy if prices really take a tumble (30%).

I had expected this when I purchased at King East which is why I did not want to go over $450psf. Other projects I had gone to were well over $600psf with very average features. Jjust a few months ago we were looking at over $700psf for some decent but nothing amazing type projects. I really hope the public didn't jump at these prices because they were ridiculous. Hopefully there are a large sum of people who are waiting on the sidelines, waiting for prices to drop before pouncing. I have a few friends who are looking to buy and I have told them to hold off if possible.

We'll see what happens. Think I'll be able to get a unit at 1Bloor for $500psf?

What does "youdz" mean?

 

[KA1]

the answer is yes. I like Ka, bought it not as a primary residence but for potential family use and if not to rent, not sell. I think Ka's response reflects my feeling.

On a lighter note, Interested, you have got to stop agreeing with me over everything. Otherwise, people might start calling us "Boobsy Twins" and that may or might not be preferable than being called "youdz".

 

[KA1]

What does "youdz" mean?

Who cares? As long as we enjoy the benefits of the ownership of our unit -- with all the pride and our heads held up high.

While I was signing for my unit -- as Interested has pointed out, it is on the 59th floor -- an individual sitting next to me was signing for a unit on 45th floor. His rationale for buying a unit on 45th floor was that all his life others have looked down upon him. It, now, will be his turn to sit on the balcony and look down upon others and throw stone at them. That's what matters.

Unfortunately, I do not have a balcony.

 

[urbandreamer]

I always thought the point of investing was to make money. Maybe I'm wrong?

 

[CN Tower]

Finally, I don't think there is a need for you to refer to us as "youdz". You may think it and ultimately we will all see whether we were right or wrong.
A rationale concern over a large investment does not make one a youdz however.

Thoughtful response. No disrespect intended at all. Saw 'My Cousin Vinny' on the tube again recently.


Personally I would never want to see anyone suffer but I would welcome a big market correction as a opportunity to deploy my capital into the market.

 

[KA1]

I always thought the point of investing was to make money. Maybe I'm wrong?

Not only you are wrong, you are dead wrong.

God did not put us on this earth to work our behind and leave a big legacy for the next generation -- who are going to splurge it any way -- but to enjoy the life full up to the brim.

As someone used to say in my college days -- and that, by the way, was quite a few moons ago -- that on the day of Judgment I will tell the Lord that you gave me the body, I took good care of it. Gave the body all the wine and women I could. Now, it is your decision to send me to Heaven or Hell.

Amen.

 

[interested]

the answer is yes. I like Ka, bought it not as a primary residence but for potential family use and if not to rent, not sell. I think Ka's response reflects my feeling.

On a lighter note, Interested, you have got to stop agreeing with me over everything. Otherwise, people might start calling us "Boobsy Twins" and that may or might not be preferable than being called "youdz".

Ka, I will gladly disagree with you when you are wrong or I have a different opinion. On this particular matter, we just happen to share common views.

CNR tower: I understand the reference and your thought re My cousin Vinny. Thank you for clarifying.

 

[interested]

I always thought the point of investing was to make money. Maybe I'm wrong?

I think people who only invest to make money fail to appreciate alot of things in life. Personal pleasure / reward may come from investments that don't necessarily produce profit but produce some other form of satisfaction. For example investing in the arts. That said, you are correct that when one invests, one usually will attempt to make positive investments that make money.
I believe you have posted in the past that this is relatively easy to do in the stock market. Perhaps. Right now, alot of wealthy people I have encountered have said to me that investing today is about preservation of capital rather than making alot of money. Turbulent times ahead. As I said previously, I am just not that smart to know how to invest correctly, especially more than 50% of the time.
I am sure that if an individual had told someone however in 2004 that the real estate was totally valued and look at what happened, it does not make that individual wrong or the one purchasing right for having purchased. Perhaps the reasoning in 2004 may have been correct, the market proved the individual wrong but it could just as easily be that the market got it wrong and therefore in the future may reward the individual who got it right last time the next time. Hope this makes some sense.