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FYI
I’ve been renting personal condo units for past 15 years without the use of an agent, signing about 40 leases during this period of time. It’s not for everyone, but I seem to enjoy it and gives me some satisfaction.

While I have never really had any difficulty renting, never losing even a months rent during this time, I have to agree with Ric, rental prices are way up and I am getting multiple offers. I usually have to cancel my advertising early because I can’t handle the number of appointments despite raising rents by $200 for a 625 sq 1+1 from 2 years ago. I have potential tenants crying and offering me bonuses if I choose them.
I have never experienced this level of rental demand in the last 15 years.
 
So the management company gets the concierge or superintendent to show the unit and the head office to do a credit check and draft up the standard lease. Grand total? $100.

$100 buys you a potential tenant from hell. As a small-scale landlord I would never rely on a management company. I want to get to know and feel confident about a person before I will rent to them.
 
One month rent is the norm and is extremely easy to rent out a 1 bedroom condo in a good location....Ric take a chill pill you can find a decent condo one bedroom for around $1400 (no parking) downtown,of course it be on the fringes of the core but still its there........

Don't twist my words. At no point did I say you couldn't get a one bedroom for $1400. My comment was intended for the poster who said that a newly constructed unit at 650 sq.ft averages only about $1,450 in rental income in the core. I refuted that claim. Why are you turning my "specific" statement into a general one?

Anyway, I've made my observation on the rental market and won't discuss it further. Lets get back to the subject of the thread. When will this "bubble" burst?
 
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maybe it depends on the agent, but i always thought standard was one full months rent...at half a month id be MUCH more inclined to get an agent

Sorry Adeel, I should have clarified; its one months rental (half for each side of the transaction).
 
Don't twist my words. At no point did I say you couldn't get a one bedroom for $1400. My comment was intended for the poster who said that a newly constructed unit at 650 sq.ft averages only about $1,450 in rental income in the core. I refuted that claim. Why are you turning my "specific" statement into a general one?

Anyway, I've made my observation on the rental market and won't discuss it further. Lets get back to the subject of the thread. When will this "bubble" burst?

actually, i was the poster that put up that article, but you incorrectly quoted me to it.
those words came from Ben Myers of Urbanation.

Ben Myers, vice-president of Urbanation, agrees that many investors in the GTA are not cash-flow positive on those properties, taking the loss because they’ll make money on the underlying condominium.

“It’s hard to say what is cash-flow positive. In the downtown core, at $650 to $700 per square foot with a minimum [20%] down payment, definitely not but a 905 project likely will because they only cost $400 to $450 per square foot,” says Mr. Myers.

The average size of a new condominium in the GTA is 650 square feet per year, meaning based on average price, it will cost you $330,000. With rental rates on average $2.21 per square foot, you could expect close to $1,450 per month in rent.

But will that rent cover your costs? If you put 20% down, a $264,000 mortgage at even 3% amortized over 25 years, your principal and interest costs would be close to $1,250. Monthly condo fees are about 50¢ per square foot per month on average and property taxes are about 1% of home value. Add in heat and hydro and you are easily under water.

But the condominium game continues to be about capital appreciation and a 2% the return would shrink the pool of investors. “Investors would be leery at 2% and may look elsewhere to put money,” says Mr. Myers, adding a key consideration is many investors put significant cash into a deal, not burdened with a large mortgage payment and looking for a safe long-term investment.
 
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While I have never really had any difficulty renting, never losing even a months rent during this time, I have to agree with Ric, rental prices are way up and I am getting multiple offers. I usually have to cancel my advertising early because I can’t handle the number of appointments despite raising rents by $200 for a 625 sq 1+1 from 2 years ago. I have potential tenants crying and offering me bonuses if I choose them.
I have never experienced this level of rental demand in the last 15 years.

Any idea what is causing this demand? I suppose many potential new home buyers are opting to rent instead of own, so that might be one source. But I thought that with so many investors in the condo market now, we'd be getting a glut of supply?
 
Any idea what is causing this demand? I suppose many potential new home buyers are opting to rent instead of own, so that might be one source. But I thought that with so many investors in the condo market now, we'd be getting a glut of supply?

My take is there seems to be a strong rental market for the glut of condos. The next few years may balance things a bit as previously sold units will continue to enter the market.
Demand has been robust and I believe vacancy rates in the core have been roughly 1-2% for the past decade (needs to be verified). So it must be Flaherty's changes to mortgage rules and Carney's message about household debt that has scared everyone into holding off from purchasing. People have to live somewhere, if they are not buying they will be renting, resulting in higher demand and higher rents.
 
My take is there seems to be a strong rental market for the glut of condos. The next few years may balance things a bit as previously sold units will continue to enter the market.
Demand has been robust and I believe vacancy rates in the core have been roughly 1-2% for the past decade (needs to be verified). So it must be Flaherty's changes to mortgage rules and Carney's message about household debt that has scared everyone into holding off from purchasing. People have to live somewhere, if they are not buying they will be renting, resulting in higher demand and higher rents.


from what i've seen, rental rates in dt core Toronto have not exceeded $36 psf gross/year except for certain areas like yorkville proper or short-term rentals.

it's been stuck around $30-36 psf gross/year for the past decade even though taxes and maintenance fees continued to rise; and as every new project ages that rental rate remains constant or goes down as it's no longer the 'it' place or new kid on the block.
 
I don't know where you got that information from but I dont know of any new project downtown that you can rent a 650 sq ft unit for $1,450. Have you seen the rental market over the past 3-4 months? New 1br starts at minumum $1600 with multiple offers. But, by all means let me know when you find that $1,450 unit. I have at least 9 clients who need to find somewhere by November.

There has been a significant rise in rental rates for new products on the market just over the past few months (this has also pulled the rest of the market up). This isn't Realtor BS; this is a fact.

Yes, I agree with Ric. 1600 is a good deal right now. I have seen sub 500 sqft condos in certain buildings rent for 1700 if not more. Rental rates have increased 10% at least this year.
 
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Neil Macdonald: Why a U.S.-style housing nightmare could hit Canada

How Canada resembles a slow-motion replay of the American crash

An expatriate always thinks about going home. The longer the time abroad, the stranger the prospect of re-entry feels.

But if you're a Canadian living abroad these days, the idea of returning home has become downright frightening. Stories are now routinely surfacing in the Canadian media suggesting collective madness when it comes to affordable living.

Our biggest real estate markets — Toronto and Vancouver — seem to have decided they're really London and Manhattan. Several of our smaller cities are wildly optimistic, too, with year after year after year of six-, seven-, even 10-per-cent increases in property values.

Friends and colleagues who own homes in Canada are the very pictures of smug. They seem convinced the markets in which they happily reside will keep rising forever. Or at the very least, never drop.

And any discussion of the subject usually involves condescending lectures about how Americans, who are only beginning to recover from a six-year nightmare of foreclosures, could have used a dose of Canadian common sense and prudence.

Well, I watched America's nightmare unfold, and it appears pretty evident to me that a sequel of some sort is coming to Canada.

So I ran that thesis past Robert Shiller, of Yale University, probably the foremost authority on real estate in America. He co-founded the Case-Shiller Home Price Index and predicted the American collapse in 2005, a year before it happened.

"I worry," he told me, "that what is happening in Canada is kind of a slow-motion version of what happened in the U.S."

Nosebleed levels of debt

What Shiller was getting at — and what is most alarming to economists and to the Bank of Canada — is the debt Canadians are carrying.

As was the case in America when I arrived here nine years ago, Canadians have for years been so desperate to avoid being left behind by a surging housing market that they've been stretching themselves beyond reasonable financial limits to jump in, thus of course ensuring continued surges.

In the process, household debt has doubled, going from a manageable 75 per cent of household income in the early 1990s to 150 per cent today.

That's just about exactly the nosebleed level Americans were at when everything imploded here in 2006.

Worse, as the Bank of Canada has been pointing out, Canadian debt is disproportionately concentrated in the most vulnerable households, defined as those devoting 40 per cent or more of household income to paying interest charges.

That means those households are extremely sensitive to any sort of shock — be it a rise in interest rates, a drop in home prices, or, worst of all, job loss.

The central bank's analysis suggests that if interest rates rise to 4.25 by mid-2015, fully one fifth of all Canadian debt would be held by those households least able to finance it.

"That is rather scary," says Don Drummond, a former federal mandarin who also spent many years as the chief economist of the TD Bank.

Drummond says an interest rate of 4.25 by 2015 would not be out of the question, given the levels of economic stimulus in recent years. He also says the bubble in Canada is bursting right now.

"My base case expectation would be that most markets in Canada over the next two years would see a pullback of housing prices of 10 to 15 per cent."

A similar delusion

Now, both Shiller and Drummond are quick to say Canadians are not likely to experience the near-total meltdown Americans experienced.

For one thing, Canadian banks never joined in the subprime-lending lunacy that inflated the American bubble to such extremes.

For another, Canadian mortgages are insured by the federal government through Canadian Mortgage and Housing Corp.

But Shiller says Canadians do seem to be suffering from the same delusion that afflicted Americans: the notion that housing prices always rise.

He has studied data going back a century, and says that when you factor in inflation, and depreciation of the home's physical structure, "historically home prices haven't gone up. Real home prices were essentially unchanged over that interval."

There are bursts of growth, as in the past 10 years in Canada, but historically they are offset by retreats.

Shiller says real estate bubbles are nothing more than groupthink, and that they "always have their end built into them."

"People are investing in real estate that is tough for their budgets because they think it will make them rich, and that can continue only as long as [prices] keep increasing.

"When they stop increasing," he says, people back off, and the bubble then collapses. "So it has its own internal dynamic."

Exactly when this groupthink changes course, says Shiller, is hard to pinpoint, but one sign is a flurry of media stories. Such as this one, I suppose. Not to mention the attention we are giving this subject on The National.

Even though many of us in the media own homes ourselves — and have a self-interest in the market continuing to rise — there clearly comes a point when the subject begins to dominate public discussion.

Shiller also points out that it was not the financial crisis that burst the American housing bubble. Rather, when the groupthink that caused the bubble turned, the market collapsed, and that in turn triggered the financial meltdown and the crisis among lenders.

"The same sort of thing might well happen in Canada," Shiller told me.

Canadians seem to think that stricter government regulation in Canada protects them. But they are in some ways more vulnerable than Americans.

Americans at least have the option of lifetime payment stability. The gold standard here is the 25- or 30-year fixed mortgage. The interest rate can be locked in for the life of the loan.

In Canada, most mortgages "renew" every few months, or years, and payments can spike by hundreds of dollars a month if rates rise even slightly.

Americans also deduct interest payments from their taxable income. So many people get a big annual refund, which provides a financial cushion.

If you take that tax refund into consideration, prices in Ottawa are now approaching or equal to prices in Washington, DC., a city steeped in wealth and power.

Seen from this distance, by a longtime expat, that is just unmoored from reality.

http://www.cbc.ca/news/business/story/2012/09/20/f-rfa-macdonald-housing-prices.html?cmp=rss
 
Canadians seem to think that stricter government regulation in Canada protects them. But they are in some ways more vulnerable than Americans.

Americans at least have the option of lifetime payment stability. The gold standard here is the 25- or 30-year fixed mortgage. The interest rate can be locked in for the life of the loan.

In Canada, most mortgages "renew" every few months, or years, and payments can spike by hundreds of dollars a month if rates rise even slightly.

Americans also deduct interest payments from their taxable income. So many people get a big annual refund, which provides a financial cushion.

If you take that tax refund into consideration, prices in Ottawa are now approaching or equal to prices in Washington, DC., a city steeped in wealth and power.

Seen from this distance, by a longtime expat, that is just unmoored from reality.

http://www.cbc.ca/news/business/story/2012/09/20/f-rfa-macdonald-housing-prices.html?cmp=rss


I was with him until these last couple of paragraphs. Canadian mortgages are dominated by 5-year terms, so it's not 'every few months', and what got the Amerks in trouble was not being able to afford the 30-year fixed, and so getting 2-year teaser ARMs that ballooned -- WAY more risky than here. Also, the interest rate deduction caused many, many people (including my brother in San Francisco) to max out their mortgage to not pay taxes. So, another way to look at that tax deduction is not as helping to lower 'real' prices, but rather to encourage leverage and therefore risk.

It's also an amazingly ex-pat condescending thing to say that Washington is 'a city steeped in wealth and power' while Ottawa is not. Really? Where's Ottawa's equivalent of the SE? Or even the NW around Catholic U? I'd say west-end Ottawa, or around Stornoway, sure as heck rivals Alexandria or Georgetown (respectively).

Canada, especially West Van and parts of Toronto (maybe Saskatoon?) have bubble dynamics, but we're in much better shape than the craziness that was the US in 2006.
 
I was with him until these last couple of paragraphs. Canadian mortgages are dominated by 5-year terms, so it's not 'every few months', and what got the Amerks in trouble was not being able to afford the 30-year fixed, and so getting 2-year teaser ARMs that ballooned -- WAY more risky than here. Also, the interest rate deduction caused many, many people (including my brother in San Francisco) to max out their mortgage to not pay taxes. So, another way to look at that tax deduction is not as helping to lower 'real' prices, but rather to encourage leverage and therefore risk.

It's also an amazingly ex-pat condescending thing to say that Washington is 'a city steeped in wealth and power' while Ottawa is not. Really? Where's Ottawa's equivalent of the SE? Or even the NW around Catholic U? I'd say west-end Ottawa, or around Stornoway, sure as heck rivals Alexandria or Georgetown (respectively).

Canada, especially West Van and parts of Toronto (maybe Saskatoon?) have bubble dynamics, but we're in much better shape than the craziness that was the US in 2006.

Agree with you about mortgages being tax deductible thus encouraging people to take on more debt.

Disagree with you about the differences between US teaser ARM's and our 3,4,5 year fixed rate mortgages. They really are no different IMO. If someone here takes a out a 3 or 4 year to get the best fixed rate, how are they any different from someone in the US with a teaser rate mortgage that resets after 2 years? Who says our rates won't reset much higher for the people that took out 4 year terms?
 
Disagree with you about the differences between US teaser ARM's and our 3,4,5 year fixed rate mortgages. They really are no different IMO.

Since Canadians are signing a new mortgage they can adjust the amortization back up (possibly back to 25 years again) to reduce payments as they will have paid down a bit of principal.

In the US, trying to adjust the mortgage as it stepped up to its full rate from the introductory rate would cause numerous refinancing penalties to come into play.

It's not much, but it does give a tiny bit of manouvering room.
 
Canada, especially West Van and parts of Toronto (maybe Saskatoon?) have bubble dynamics, but we're in much better shape than the craziness that was the US in 2006.

Canada housing prices in 2012 are higher than the US in 2006. And unlike the US in 2006, we don't have the benefit of lowering mortgage rates to relieve mortgage costs for at risk homeowners.
 
Agree with you about mortgages being tax deductible thus encouraging people to take on more debt.

Disagree with you about the differences between US teaser ARM's and our 3,4,5 year fixed rate mortgages. They really are no different IMO. If someone here takes a out a 3 or 4 year to get the best fixed rate, how are they any different from someone in the US with a teaser rate mortgage that resets after 2 years? Who says our rates won't reset much higher for the people that took out 4 year terms?

Are you denying that Canada is special? Everyone knows that gravity applies everywhere but here. Just like in the US before 2008.
 

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