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Suburbs - our new slums?
- Thread starter Brandon716
- Start date
cdr108
Senior Member
what would you guess would be TO's historical average 'price to annual rents' ratio?
i found the following article in cnnmoney from Fortune magazine:
http://money.cnn.com/magazines/fortune/price_rent_ratios/
what i found interesting ... the 15-year national average for the US was 16.9; however the 15-year average for New York was only 11.7 !
My best guestimate is 12 for TO average based on prices and rents pre-bubble; and currently sits @ 15 - 16.4.
jaycola
Active Member
The Secondary Rental Market Study found that the secondary rental market (basement apartmants and apartments over stores) accounts for the following portions of the overall rental market
35% in the City of Toronto
73% in Suburban GTA
Around the GTA second suites are legal in Toronto, Newmarket and East Gwillimbury, as well as Pickering, Ajax, Whitby and Oshawa and Oakville.
Markham is on the verge of legalizing accessory apartments
Aurora is considering legalizing them.
In Brampton, Mississauga, Richmond Hill and Vaughan they are presently illegal and are not considering them at this time although discussions are ongoing.
35% in the City of Toronto
73% in Suburban GTA
Around the GTA second suites are legal in Toronto, Newmarket and East Gwillimbury, as well as Pickering, Ajax, Whitby and Oshawa and Oakville.
Markham is on the verge of legalizing accessory apartments
Aurora is considering legalizing them.
In Brampton, Mississauga, Richmond Hill and Vaughan they are presently illegal and are not considering them at this time although discussions are ongoing.
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suv
Guest
Ha ha ha...wow. Hey silly Rabbit, cash flow is for legitimate business models. This is how we avoid irrational bubbles. I'd try to explain further, but I'm not sure how I can if I only use the red smarties...
By the way, CDR and Jaycola, terrific numbers! It just shows how out of touch people are with what is yet to come....don't confuse a ledge with a bottom
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suv
Guest
I'd say Toronto's would have a variance from 10 to 14 depending on your proximity to (1) the core and (2) to subway and future RT lines; by any of those ratios though, houses are still grossly overvalued (especially the ones that went insane from '02 to '08. Wait till those poor suckers have to retrofit (the historic and older ones) to cope with enormous energy bills in a few years.
As well, the mammoth tax bills. Once you use CASH FLOW you can then gain a valid and sustainable perspective on price. Wait till these homeowners (of grossly overpriced homes) come to grip with retirement income. Holy hell hole Batman!
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suv
Guest
i found the following article in cnnmoney from Fortune magazine:
http://money.cnn.com/magazines/fortune/price_rent_ratios/
One more thing...I took a look at this link, it is dated Nov 2007. The five year projections have been absoloutely demolished. In the span of a year and a half prices have been crushed almost to the tune of 40%; Meredith Whitney (google her, save me the time) is now forecasting a 50% peak to trough correction in the US.
For the five year forecast to hold, after next year prices will have to rise nort of 40% in the next two years to make the 2007 forecast hold. Ha ha ha, to quote Bart Simpson 'Eat my shorts, dude'...
http://money.cnn.com/magazines/fortune/price_rent_ratios/
One more thing...I took a look at this link, it is dated Nov 2007. The five year projections have been absoloutely demolished. In the span of a year and a half prices have been crushed almost to the tune of 40%; Meredith Whitney (google her, save me the time) is now forecasting a 50% peak to trough correction in the US.
For the five year forecast to hold, after next year prices will have to rise nort of 40% in the next two years to make the 2007 forecast hold. Ha ha ha, to quote Bart Simpson 'Eat my shorts, dude'...
ponyboy
Active Member
That cnn/fortune piece struck me as a little odd. Why did they forecast rental price increases to go with the house price declines? I presume they wanted to lighten the blow to readers who are worried about the value of their homes. If they had reported the price drops holding rents constant, then they would have been much larger. Presuming that rents will increase when prices drops is foolish...simultaneous house price and rental price drops can just as easily happen in a severe recession.
Also, are these annual rents net of expenses? It doesn't say anywhere in the methodology. In Toronto, 10 x gross annual rents is reasonable for an investment (rental) property (espeically subdivided into multiple units), but many homeowners pay 15-25 times gross rent for places that only they occupy (no second suite).
Also, are these annual rents net of expenses? It doesn't say anywhere in the methodology. In Toronto, 10 x gross annual rents is reasonable for an investment (rental) property (espeically subdivided into multiple units), but many homeowners pay 15-25 times gross rent for places that only they occupy (no second suite).
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suv
Guest
First of all, that Fortune article was from 2007. In the midst of a bubble anyone who tried to rationally present a contra arguement was brushed off as idiotic.
Not too disismilar to the clowns on here asking 'So when are condos going to crash?' in a smug view this is not going to happen. Don't mistake timing and non-events. The freaking crash of condos WILL come here. It's going to be sudden, and of cliff diving of epic proportions.
Given that we are clearly in a debt deflaiton environment; this is a balance sheet contraction event; rents will pummel down just as fast as home prices. The unemployment number R4 in Canada and U6 in the States are both approaching unheard of territory post Great Depression.
Rents are not net of expenses, they are gross.
Yes, many here over the last few years have paid multiples of 15 and 25 times gross annual rents. No different than Spain, the UK, US, Austrailia, Japan 1980's, Iceland, etc. etc., soon China included. Will soon have their asses handed to them.
cabbagetowner
Active Member
the rent ratio, is a quick and easy way to determine the viability of an investment property. i generally only look at ones that are 10 or better (meaning less than 10). You'll also need to factor in cap (to account for expenses) and roi (or something similar to account for the cost of borrowing). the margins are pretty thin for the rental business. i'm not sure how people do when the rent ratios are greater than 10 or if they reach the average of 15??
cdr108
Senior Member
They lose money but have bought under the impression RE always goes up and will be able to flip the property for profit
From my calculations, any condo costing more than $350 PSF bought with less than 25% deposit will put one in a monthly NEGATIVE cashflow.
assumptions: $2.50 PSF/m rental rate, $0.50 PSF maintenance fees, 1% property tax, 4% interest 5/25 amort.
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suv
Guest
They lose money but have bought under the impression RE always goes up and will be able to flip the property for profit
From my calculations, any condo costing more than $350 PSF bought with less than 25% deposit will put one in a monthly NEGATIVE cashflow.
assumptions: $2.50 PSF/m rental rate, $0.50 PSF maintenance fees, 1% property tax, 4% interest 5/25 amort.
I'd suggest this thread needs it's title changed. The whole premise of the Suburbs being the new slums was fostered by the notion of urban pricing going to the moon, and all the single 20 adn 30 somethings desiring to live in a rat cage in the sky.
Um, take your kids to school from there. Oh wait, you have no children. Set your kick ass home theatre system to 'make sub woofer crawl on the floor'. Oh wait can't do that in the rat cage either....
Talk about your unsustainable events!!!!!! Oh, the irony. Seems like there are several well informed posters on this thread who understand the sustainabilty of math vs. the unsustainability of hope.
The end of suburbia? How about the beginning of alternative energy vehicles moving people as we've all become accustomed to...
Glen
Senior Member
scarberiankhatru
Senior Member
Suburbs may be our new ghettoes...but they're far too new to be our new slums. Wait 30 years and then we'll see if homes in Rexdale and Scarborough are consistently renovated, how retail changes, etc.
Again, no one suggested that.
Again, no one suggested that.
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suv
Guest
Hang on a second...this whole notion that all of Scarborough or Rexdale is in need of gentrification is a joke. What's actually funny, is that it is the middle of Scarborough (Warden to Morningside, Eglinton to Sheppard) that needs a major overhaul. The rest of Scarbororugh is in fairly great shape.
What will truly overhaul Scarborough in the next decade is twofold: 1. Urban transit that is street and pedestrian friendly - thereby remaking the face of the transit route itself; 2. An aging population that has already shown up south of the 401 for much of the city - a dramatic decrease in the youth cohort that tends to frollick in crime.
The areas in the 416 that offers close proximity to Town and Country will be the long term winners...the perennial Forest Hill, Rosedale will not be enough; and no one really dreams of living in a rat cage in the sky...its where you may begin living, but 'the condo life is limiting' - quote unquote from an architect that works for Maz...
Watch the crime rate soar in Peel, York, Durham due to this cohort in the next decade with nothing to do in the land of big homes. This cohort always goes bannanas wherever they grow...
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