[JayBee]

I guess it was you. I remembered the post but not the poster.

My concern is that when I read CN Towers "true stats from the data" vs. the Remax selected stats that the young people you were referring to might not have the benefit of "the whole picture" and are making decisions based on advertorials.

It is difficult to sort out even for those of us with alot of interest and who study this what the exact interpretation of the data should be.

My concern is that the papers to sell copy and to appease their advertising base; the real estate industry to continue their commissions, etc. end up being the "experts" quoted all the time and unfortunately whether intentional or not, the information is often biased in the positive until it becomes undeniable and even then the 1 stat in 10 that is positive will be the one that is brought forth as indicative of the state of affairs.

Young people who saddle themselves with a lot of debt now if there is a major correction will spend alot of time recovering and this is sad. People who bought in the past 5 years (save the last 2 years) have made alot of money on paper and I am sure are telling their younger colleagues to buy since they don't know downturns. It is hard for people who are under 40 to imagine just what 1989 to 1994-6 was like or the recovery. Sure real estate recovered in Toronto but it took abou 13 years to get back to 1989 price. If you were unfortunate enough to have bought in 1988(end) or 1989 and had to sell within the 13 years, you lost money on the value of your home, let alone on all those interest payments on the mortgage you would have been carrying.

They know that the prices will drop. Some either don't care or figure they can weather through the storm. I mean, I understand that a correction's coming, but how long are people willing to wait? Some aren't willing to wait at all. Some are willing to wait a year and others maybe 5 years. Life goes on...as long as people aren't over-extending themselves, I don't see a problem.

I'm 30... I'm not sure if I fit within the young demographic but I still have a number of friends who aren't looking to buy and are fine with renting for the time being.

My only concern is the amount of projects that continue to launch. Builders can't possibly be this short sighted. There are just way too many new projects popping up.

 

[X2 Buyer]

The Elusive Canadian Housing Bubble
Fall 2010 Musings: Now and Then
- some charts for your reference
- a 25% gap suggested real price vs. price trend graphed by model on historical data

Canada's real estate overvalued, survey says
- the article I have posted previously, global housing bubbles
- 23% over-value suggested for Canada

So let us be mentally prepared a decrease may be ahead as deep as 25%. On the other hand one key thing noted - the interest rate was 12.4% 1989 and 1% now. This can explain the current RE sales stay healthy since people's comfortable zone for debt expanded (for someone believes the interest rate will not go up too much during this gloomy economic, and not as bad as US for a recession).

 

[interested]

They know that the prices will drop. Some either don't care or figure they can weather through the storm. I mean, I understand that a correction's coming, but how long are people willing to wait? Some aren't willing to wait at all. Some are willing to wait a year and others maybe 5 years. Life goes on...as long as people aren't over-extending themselves, I don't see a problem.

I'm 30... I'm not sure if I fit within the young demographic but I still have a number of friends who aren't looking to buy and are fine with renting for the time being.

My only concern is the amount of projects that continue to launch. Builders can't possibly be this short sighted. There are just way too many new projects popping up.[/QUOTE]

I see possibly 2 problems. Your young friends I understand have to get on with their lives. However, even if they can carry a mortgage today, if 5 years from now they are carrying say $250000 at 6 % instead of 3.5% will their salaries have gone up enough to cover. As well, if house prices do drop, they will have to make up equity because if there is say from $300,000 a drop of 10%, the equity will be $20000 instead of $50000. Of course in fairness in the 5 years they will have paid some of the mortgage and not only interest but still will have to qualify again. What if they are transferred, move, lose a job, as a family one get's pregnant, or other setback. I realize you have to go forward with your lives but I just think alot of young people have bought into I must have a home early and "rent " is bad because you make the landlord rich which makes perfect sense in an up market and that is all that has been experienced the last 10 years that you would be looking at (with the exception of late 2008 to 2009).

the other issue is unfortunately past history has shown us that developers do get it wrong. They are in the business of building homes and they continue to work. There is also a much greater time lag with large condo projects and so it is a bit like a big ship heading towards an iceberg. By the time everyone sees the crash coming, there is nothing you can do but watch as it slowly unfolds in front of you. I can virtually guarantee that there will continue to be crashes going forward just because noone,no matter how forward seeing, can predict all this 3 years in advance with absolute accuracy. Developers will unload product at below market prices if they have to and then the competition is with all the new product. It becomes an undesirable result but reality of doing business from time to time

 

[daveto]

The Elusive Canadian Housing Bubble
Fall 2010 Musings: Now and Then
- some charts for your reference

Excellent, comprehensive, factual report.

 

[cdr108]

I remember my friend who lives in Dubai saying a few months before the real estate crash that no locals were touching real estate as it was grossly over priced and it was mainly foreigners buying.

After the crash her rent went from $2800 to $2200 overnight.

do you know how the prices for RE reacted in Dubai to give us an idea, like $ PSF?

thanks

 

[BrianPersaud]

Does anyone know a source of published statistics for foreign ownership of Toronto properties?
I would like to do some basic research on scenarios where the Canadian Dollar continues it's decline in value against world (ex-US) currencies.

According to a recent survey by Tridel. Those numbers are 10%...however, many foreign investors do have Canadian addresses and SIN cards so its very hard to tell. Judging by how much Barbara Lawlor travels this might be different.

On the flip side Concord and a few brokerages closed down their International offices

 

[BrianPersaud]

Meanwhile, the "vast majority" of units sold in Toronto's downtown core were bought by Asian and Middle Eastern investors who plan to hold the condos for the long term

From the article: this is one big assumption. Let's hope it holds because if the first part of the statement is true, if those same Asian and Middle Eastern investors require their money, have a better place to invest, or simply change their mind about the investment state of Canada, there will be one heck of a price to pay. I would like to see objective figures as everyone quotes statements like this and I have never seen hard evidence. It probably exists and it would be great if someone could post it. Otherwise, it is just an assumption.

Sales of Toronto condos priced over $1 million are up 49 per cent year-over-year,
I hope this is right and probably explains why there are price increases at the high end. We will have to follow and see if the incentives we have been seeing/expecting in the mid range: $550-700/sq. ft. (I know this is crazy to call this mid range but for sake of argument, let's just assume it is) materialize.

Anedotally, Immigration consultants have been working with Iranians and Chinese investors to liquidate their oversea assets and use POA's to buy condos. Some of the top "sellers" for certain developers weren't even licensed...just immigration guys

 

[BrianPersaud]

Thank you CN Tower. I guess "selective spin by Remax" . Now there is a suprise.

That said, do you have any data which shows differentiation by markets in a location: For eg. Is the luxury market really up from last year. And if so, was it down significantly in 2009 from 2008 and therefore "just back to normal".

What is happening with the mid market. And what is happening with the entry level sales and sales prices.

Please give us data if you can regarding TO and if possible, downtown TO condo markets in particular.

Finally, I will ask you directly if you have access to any information which might confirm or deny the statement that said that the vast majority of condo sales are going to Asian and Middle Eastern investors?

Funny, if you take out the record Q1 numbers...this year doesn't look as good.

 

[BrianPersaud]

They know that the prices will drop. Some either don't care or figure they can weather through the storm. I mean, I understand that a correction's coming, but how long are people willing to wait? Some aren't willing to wait at all. Some are willing to wait a year and others maybe 5 years. Life goes on...as long as people aren't over-extending themselves, I don't see a problem.

I'm 30... I'm not sure if I fit within the young demographic but I still have a number of friends who aren't looking to buy and are fine with renting for the time being.

My only concern is the amount of projects that continue to launch. Builders can't possibly be this short sighted. There are just way too many new projects popping up.

If we look historically at pre-construction sales in Toronto. Projects took some time to sell out vs during the past 5 years, developers have been spoiled selling enough to get construction financing after opening weekend.

There is still a lot of capital chasing Toronto Real Estate. Brad Lamb and Peter Freed via Kingsett have no problem raising funds. It makes Hamilton look like a rounding error....despite what Harry Stinson will tell you.

 

[simuls]

The Elusive Canadian Housing Bubble
Fall 2010 Musings: Now and Then
- some charts for your reference
- a 25% gap suggested real price vs. price trend graphed by model on historical data

Excellent, well thought out and statistically backed article. While I don't anticipate as much of a drop, the drop/stagnation might indeed end up around the same amount. As I said, much of Toronto is already 10% below peak and it's starting to show in the new condo market as well.

 

[howl]

Another thing to consider: Rob Ford spent a lot of time on the campaign trail talking about how he would reduce development charges for developers and make the development approval process quicker and simpler once he was elected. Right now there are more units being built than there are people moving into the City, which is only possible because the persons-per-unit rate is shrinking and the economy is condusive to buying rather than renting. If Ford follows through on these promises it will likely mean a sudden increase in development as developers rush to get things approved while the 'sheilds are down'. That may push the market over the limit and 'burst the bubble'. The only way to avoid that is to get more people to move into the City, which would require a great wave of new immigrants.

 

[drewp]

I think the majority of condos bought by investors are in the dowtown core near universities. One factor that I don't hear is that these condos can be rented out to students who move to the GTA from throughout Canada and the world. So yes I see the saturated condo market affecting re-sale value. I don't know if it will impact the renter market, becuase so many people throughout the country come to Toronto for university. Maybe this is why its a safe investment.

Does anyone know the numbers of individuals who move out from there parents house and rent a condo downtown, because we will always see a need for renters, hence the investment by the foreign market.

 

[cdr108]

Another thing to consider: Rob Ford ... The only way to avoid that is to get more people to move into the City, which would require a great wave of new immigrants.

And we know RF's stance on new immigrants ...
so more development with less buyers, hmmm

 

[EXgeMMy]

do you know how the prices for RE reacted in Dubai to give us an idea, like $ PSF?

thanks

No idea on $psf. She was telling me how no local would touch real estate there as it just didn't make any sense. A day after they defaulted she said it didn't matter as Abu Dhabi would bail Dubai out.

Point is sometimes locals do know better.

As mentioned I work in the media. In regards to Rob Ford's plans, I believe his transit plan (subways) is heavily dependent on partnering with developers, similar to what Lastman did when he built the Sheppard line. If there is a real estate crash I wonder how that would affect partnerships.

 

[mig174]

I think the majority of condos bought by investors are in the dowtown core near universities. One factor that I don't hear is that these condos can be rented out to students who move to the GTA from throughout Canada and the world. So yes I see the saturated condo market affecting re-sale value. I don't know if it will impact the renter market, becuase so many people throughout the country come to Toronto for university. Maybe this is why its a safe investment.

Does anyone know the numbers of individuals who move out from there parents house and rent a condo downtown, because we will always see a need for renters, hence the investment by the foreign market.

This factor is more or less constant. Also, those investing in expensive condos probably wouldn't be able to rent them out to students because most undergraduates don't have >$1000/month to spend on just living housing. Many share and there are tons of apartment buildings with significantly cheaper rent than investors would ask for new condos to not be cashflow negative. The only students that would not mind paying big bucks for housing expenses are probably the professional students (med, law, pharm, nursing - i.e. those that can get substantial loans), some grad students, and married/serious couples that can split the $1500 or so for a 1 bedroom that is the usual near universities. There is probably 10000-15000 students like that downtown MAXIMUM at any given time.Also, most of these students prefer to rent close to their universities. So this means bay corridor, young/carlton, annex, kensignton are prime areas for that. Those areas are already quite saturated.