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Baby, we got a bubble!?

Think that single detaches increase 10% yoy, and many many first time young buyers can afford that? If they cannot buy a single family house, they have to buy a condo. If they cannot buy a condo, they have to rent a condo. If they cannot use 50% of their income to rent, they have to use 70% of their income. The bottom line is that they cannot sleep on streets, right!? No one will deny this simple fact right? So as long as single detaches' prices keep soaring, we will utimately see a very promising condo market and rental market. The current red hot rental market is definitely a good indication for this simply theory.
 
Or people will move out of the city. Or chose to rent apartments which have closer to a 4 or 5% vacancy. People are going to condos right now because they are newer and nicer and still affordable. But at some point, carrying your logic, that may give way to apartment vacancy dropping.
 
interested said:
Or people will move out of the city. Or chose to rent apartments which have closer to a 4 or 5% vacancy. People are going to condos right now because they are newer and nicer and still affordable. But at some point, carrying your logic, that may give way to apartment vacancy dropping.
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Apartment is not cheap in dt core neither. Plus they are usually very old and dirty, and with almost no amenities. You will never feel the urban living style in these old dt apartments. You can also move far away from dt by spending 4 hours on our horrible public transit system everyday and have no personal life after going back home at 8 pm, cooking and sleeping your baby. In the end of the day people will still enter into the dt condo market and push the sales back.
 
Chris_Hull said:
Apartment is not cheap in dt core neither. Plus they are usually very old and dirty, and with almost no amenities. You will never feel the urban living style in these old dt apartments. You can also move far away from dt by spending 4 hours on our horrible public transit system everyday and have no personal life after going back home at 8 pm, cooking and sleeping your baby. In the end of the day people will still enter into the dt condo market and push the sales back.
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The problem I have with this argument is that it seems to suggest that rents will go to any value. I am suggesting perhaps not by choice that reality will set in for a lot of individuals who may want the urban living style but will not be able to afford it. Again, I don't know what percentage that will be but like this whole discussion, it will become a contest between landlord ability to push up rent vs. renters ability to drive it down based on whichever holds the balance of power.
 
interested said:
The problem I have with this argument is that it seems to suggest that rents will go to any value. I am suggesting perhaps not by choice that reality will set in for a lot of individuals who may want the urban living style but will not be able to afford it. Again, I don't know what percentage that will be but like this whole discussion, it will become a contest between landlord ability to push up rent vs. renters ability to drive it down based on whichever holds the balance of power.
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At current stage the rental market is already hot and population will continue to boom in the foreseeable future. Developers also delay their new projects such as Ten York which will result in a tight supply in 2015 and 2016.
 
I think at current stage rental market is hot because people are sitting on the sidelines. With "the elephant in the room" that CN Tower referred to (18000 condos) to come on this year and more next year...some of which I addressed in a previous post, the numbers may not quite unfold as you are anticipating. I am not saying you are wrong or right. Frankly I don't know what will happen for the reasons I suggested in previous posts.
 
Chris_Hull said:
For example, a 1+1 at city place with parking and locker is now renting around $340,000 to $350,000. After 30% down payment, you borrow around $250,000 from the bank for 20 years, and your monthly mortgage payment is $950, and your maintainence fee is $350, and tax is $150, which totally added up to 1450. Such unit can be rented at $1700 to $1750 in the market. You can easily make a $250 to $300 cash gain. Also, never forget you have around 50% of mortage payment goes to yourself, only another 50% is waste as interest payment, so there will be another $475 income. These totally add up to around $750 income per month even if without any capital gains! Btw most maintainence fees do include water and heat, and for hydro bill, everyone knows tenants pay for this! There are many more examples here. Can any other investors give a live example to show us how you make a positive cash flow here?
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Your assumptions produce an annual pre-tax return of $9k on your $100k investment (downpayment)

Here are some problems with your assumptions

1. Acquisition costs (land transfer costs, etc).
2. Sale costs (if you ever wish to sell)
3. Vacancy costs. (it is unrealistic to presume 100% occupancy for eternity)
4. Maintenance/damage costs (at some point you'll need to fix something or replace something)
5. Special assessment condo fees (it happens to most condos at some time)
6. Management costs. (if you do this yourself, then you must factor in your time as a cost)
7. Finally, you have assumed 3% interest rates unchanged over the life of your mortgage. I trust you realize that is unlikely?

Edit: Wait a moment. $950 a month is $11.4k a year. How does that pay off a $250k mortgage balance in 20 yrs, let alone cover the interest costs?
 
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Chris_Hull said:
At current stage the rental market is already hot and population will continue to boom in the foreseeable future.
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New housing stock has exceeded population growth in Toronto over the past decade.
There has been no population "boom" in Toronto. Immigration/population growth has been steady for more than a decade.

I've posted supporting data sources on this before (from Stats Can). Those who are interested can do a search back over my posts, or find the data themselves from the Stats Can website
 
Chris_Hull said:
For example, a 1+1 at city place with parking and locker is now renting around $340,000 to $350,000. After 30% down payment, you borrow around $250,000 from the bank for 20 years, and your monthly mortgage payment is $950, and your maintainence fee is $350, and tax is $150, which totally added up to 1450. Such unit can be rented at $1700 to $1750 in the market. You can easily make a $250 to $300 cash gain. Also, never forget you have around 50% of mortage payment goes to yourself, only another 50% is waste as interest payment, so there will be another $475 income. These totally add up to around $750 income per month even if without any capital gains! Btw most maintainence fees do include water and heat, and for hydro bill, everyone knows tenants pay for this! There are many more examples here. Can any other investors give a live example to show us how you make a positive cash flow here?
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daveto said:
Edit: Wait a moment. $950 a month is $11.4k a year. How does that pay off a $250k mortgage balance in 20 yrs, let alone cover the interest costs?
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I think $250K 20 yrs @ 3% is around $1,400 per month including interest so just from a cash flow perspective, it changes from $250 or $300 monthly cash gain to a short of $150 or $200 monthly.
 
Chris_Hull said:
For example, a 1+1 at city place with parking and locker is now renting around $340,000 to $350,000. After 30% down payment, you borrow around $250,000 from the bank for 20 years, and your monthly mortgage payment is $950, and your maintainence fee is $350, and tax is $150, which totally added up to 1450. Such unit can be rented at $1700 to $1750 in the market. You can easily make a $250 to $300 cash gain. Also, never forget you have around 50% of mortage payment goes to yourself, only another 50% is waste as interest payment, so there will be another $475 income. These totally add up to around $750 income per month even if without any capital gains! Btw most maintainence fees do include water and heat, and for hydro bill, everyone knows tenants pay for this! There are many more examples here. Can any other investors give a live example to show us how you make a positive cash flow here?
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Are these figures accurate? I didn't know CityPlace 1+1s are rented out for over $1,700/month. That'd be a pretty good rental return, moreso if the unit was purchased when it was new, as I personally know many people who did.
 
robere said:
I think $250K 20 yrs @ 3% is around $1,400 per month including interest so just from a cash flow perspective, it changes from $250 or $300 monthly cash gain to a short of $150 or $200 monthly.
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No worries, no matter how things change, I can't really see the return can go negative recently. And in the medium run or long run there will always be capital gains as additional benefit. We will see whether these investors will rush to dump their load, or they're gonna transfer the burden to renter by increasing the rent accordingly.
 
Chris_Hull said:
Can you tell me the change of housing prices over the past decade? You believe the price won't increase in next five years,or next ten years?
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Ahem, don't change the subject. Please explain your mortgage at $950 a month to pay of the interest and principle on $250k in 20 years.

ps. No, I don't think prices will increase, adjusted for inflation, in either the next 5 or 10 years.
http://cuer.sauder.ubc.ca/cma/data/ResidentialRealEstate/HousingPrices/housing-pri-toronto.pdf
 
James said:
Are these figures accurate? I didn't know CityPlace 1+1s are rented out for over $1,700/month. That'd be a pretty good rental return, moreso if the unit was purchased when it was new, as I personally know many people who did.
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There are some low level units with bad exposure and carpet(not wood flooring) charge lower rent(between $1550 to $1650) but the price of such unit is also lower. I'm talking about the unit my friend has which is typical medium level unit.
 
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