Drive behing the Market? Status Fad?

[js97]

I'm trying to find the drive behind this insanely inflated Toronto Real estate market.

I went to see an open house on Galt ave. (Jones and gerrard). Detached, possibly 1200 sqft 'duplex' with a lipstic paint job. (older appliances, no nice finishes). listed at 419k, it sold for 475!!!! - the only thing it had going for it was the fact that it was detached.

Exacly like this one. http://www.realtor.ca/propertyDetails.aspx?propertyId=8737314

And now I hear 550 sq ft condos for 300k.....

Are consumers blindly getting into the fad of 'home buying' just for the sake of the title? I recently spoke to mortgage broker and she told me that most of the mortgages are now 35 yr amortization periods... with fixed payments (so if interest goes up, and it will, payments stay fixed,- extending the length of the amortization).

now to me, this is simply financial mismanagment. If you think of the risks involved in home ownership and the rewards(300 dollars a month into equity?) why are people still scooping up property like no tomorrow?

The savings you receive from a low interest rate is off-set by the extended amortization period. Your in essence 'renting' from the bank, with the potential to take on capital gains in the furture.

Are Torontonians blinded by possibiilty of the gains people made in the last 8 years and expect the next 8 to be the same???

insane!

 

[UserNameToronto]

It's insane. Everybody is an idiot, except you. I'm sure average home prices in Toronto will fall by 50% of more because ... <transmission from crazyland interrupted>

 

[Johnzz]

Are Torontonians blinded...insane!

Hey, if you think Torontonians are insane, just look at Londoners, New Yorkers, Hong Kongers, Sydney, Tokyo, Paris, etc....

I can't believe these insane blinded people all want to buy homes!!!

 

[UserNameToronto]

Average Toronto homebuyer:

 

[MBS-Guru]

Hey, if you think Torontonians are insane, just look at Londoners, New Yorkers, Hong Kongers, Sydney, Tokyo, Paris, etc....

I can't believe these insane blinded people all want to buy homes!!!

i lived in a couple of those cities and if you start comparing toronto to real world class cities then ..... ..... Don't get me wrong, Toronto is great but those other cities are in a totally different class and property values are justified. Just b/c Mel Lastman said it doesn't mean it's true ....

 

[simuls]

There is definitely a frenzy going on in Toronto, especially the core, right now, but it will all be corrected within the next year and get back to more sane levels.

 

[Johnzz]

Toronto is great but those other cities are in a totally different class

Which is why Toronto prices are still half the value of those cities listed...

 

[Team Me]

Which is why Toronto prices are still half the value of those cities listed...

That's true. For most of the cities on that list, you're looking at at least $1000/sq ft. for your average condo. Here we're closer to $400, so there's really no comparison in terms of affordability.

 

[sam1025]

We are still cheaper than most cities !!! Look at Vancouver !!!! $600-$700 psf....Toronto is still a deal considering its the largest city in Canada! Prices will only continue to head upword !

 

[daveto]

I'm trying to find the drive behind this insanely inflated Toronto Real estate market.

...

Are Torontonians blinded by possibiilty of the gains people made in the last 8 years and expect the next 8 to be the same???

I think it is the effect of low interest rates combined with a tragic financial illiteracy amongst many of the recent buyers, and the naive belief that the past decade of capital appreciation is a sustainable trend.

Canadian housing price appreciation over the past decade has been in lockstep with the increase in mortgage debt, and all made sustainable only due to the downward trend in the mortage costs over that time.

We now have Toronto prices at 5.4x average income. Eventually it will correct down to under 4x income, and everyone will wonder why they didn't see it coming. The same disbelief that has been seen in Ireland, UK, the US, and so many other countries.

I'm presently renting downtown at an annual cost equal to 3.5% the equivalent purchase price for my home, and less than 15% of my gross income. No risk, no closing costs, no stress

If others want to pay silly money for housing, I'm happy to let them and I'll be waiting cash in hand when the market rebalances.

 

[js97]

Hey, if you think Torontonians are insane, just look at Londoners, New Yorkers, Hong Kongers, Sydney, Tokyo, Paris, etc....

I can't believe these insane blinded people all want to buy homes!!!

Not to burst your bubble, but you really can't compare Toronto to any of those cities (except maybe sydney)

Not sure if you realise but those cities are at least three times (except sydney) as large as Toronto and with business sectors exponentially larger.

Salaries in those major cities also are substantially more.
Also, if you did a study of the amount of 'wealth' per capita, i'm sure those cities would blow Toronto out of the water.

Entry level positions short of Law and Ibanking in Toronto is probably around 40k.

tell me how someone with that salary can afford a 300k Condo?

even if it was based on 'couples' - 80k salarry for a 300k condo is a fairly pricey purchase.


I think this trend will continue as I can't see interest rates going up in the next 3 years due to our high dollar and low inflation. Of course, Realtors have a hand in contributing to this buzz. 20,000+ realtors registered in Toronto: pretty large sales force for only 3 million.

 

[BobBob]

In your example, though, entry-level earners (40k) are perhaps doing non-entry-level things, like buying expensive downtown real-estate (300k condo).

 

[MadMax]

I think it is the effect of low interest rates combined with a tragic financial illiteracy amongst many of the recent buyers, and the naive belief that the past decade of capital appreciation is a sustainable trend.

Canadian housing price appreciation over the past decade has been in lockstep with the increase in mortgage debt, and all made sustainable only due to the downward trend in the mortage costs over that time.

We now have Toronto prices at 5.4x average income. Eventually it will correct down to under 4x income, and everyone will wonder why they didn't see it coming. The same disbelief that has been seen in Ireland, UK, the US, and so many other countries.

I'm presently renting downtown at an annual cost equal to 3.5% the equivalent purchase price for my home, and less than 15% of my gross income. No risk, no closing costs, no stress

If others want to pay silly money for housing, I'm happy to let them and I'll be waiting cash in hand when the market rebalances.

To each his own...some people are renters and some people are purchasers - only one major difference....people that rent and continue to rent will never have a chance to make money off of real estate, while people who buy have an extremely good chance of making money off of real estate. There is no comparison, really. Sitting on the sidelines and waiting for some magic number that signifies a balanced market is un-realistic. When prices were at their lowest last year after the downturn and you didn't buy, then when will be a good time to buy? When interest rates start rising? I live for today, and in the moment so to speak. Nobody ever flourished financially by sitting on the sidelines with cash in hand waiting for the market to rebalance!

 

[urbandreamer]

What if you rent and own at the same time? Rent and live cheaply while your home provides you with income from your tenants.

 

[PukeGreen]

Frankly I don't think most people buy houses or condos to get rich. They buy them because they want to a decent to place to live which is in their own name, even if ownership is mainly with the bank for a few decades. If they make some money over time, that's just a bonus. Real estate in the Toronto core is somewhat expensive due to the simple rule of supply and demand: the city of Toronto proper with good transit access to downtown is a fixed size, and many people want to live there. Limited resource + high demand = higher cost.

Perhaps some people are also waking up to the higher hidden costs of living further from downtown. Sure a house at Jones and Gerrard costs more per square foot than one in, say, Keswick, but if you work downtown you can go with one fewer cars and save a huge amount of money on commuting every year, which you can put into the house instead. Just my thoughts.