[paperchopper]

First Baker calls the Canadian Housing Bubble, then the Olympic Village goes bankrupt. Jarislowsky called the bubble back in February. Jarislowsky, in his 80's, is a billionaire real estate investor.

http://www.vancouversun.com/busines...vership+city+takes+control/3847165/story.html

I'd like to hear it from the RE pumpers (Realtors excluded, )-- What could possibly justify paying $300K for a 600 sq ft shoddily constructed "condo" that more resembles a tomb than a habitable environment?

A friend of mine recently purchased a 780 sq ft condo for $405,000-- on a $55K a year salary. He put nothing down, TD gave him a LOC to cover the downpayment. It's at Yonge and Finch, hardly "downtown". The condo fees alone are $700 a month. He hopes to sell it for $600K+ in 5 years.

Anyways, it's bloody obvious Canada is about to melt as hard or harder than Ireland, but I'm just shocked at the naiveness of the speculators, which is what 99.9% of the vast majority of RE purchasers are currently. This board is a testament to that fact.

I did a stint as an investment banker, and not on Baby Bay St, but Wall St. I do admit, I have psychopathic tendencies, one of the main hiring considerations for investment banking. I worked the mortgage desk at at a bulge bracket, with initials resembling GS or MS, although I'm not too akin to ties. The MD back in '05 raked in over $20M. He'd fly to his French villa on weekends in his private jet just to take a shit in his gold plated toilet. We made insane, no no, unfathomable amounts of money-- easily chopping over $60B a month, quite literally laughing all the way to the bank.

That was back in 2005. Fast forward to today. Short sales fetching $75K with the home owner stuck with a $450K mortgage, his only escape in scoring a deed-in-lieu of trust or sucking on the barrel of a .44 Magnum. Housing-related suicides are the norm and quietly swept under the rug.

Sigh. I don't even know why I bother, but be ready. It's going to be ugly, and most likely, very bloody. But don't come crying when your 600 sq ft $350K condo is worth $150K and you're stuck paying a $200K non-performing debt for the next 35 years, hell, 40 years if you were stupid enough to amortize over 40 years.

 

[cy8bu]

I also bought a preconstruction 820 sqf unit near north york center for $400 2 years ago.
Now the same unit is selling for 500 right now. (Still preconstruction. Just started digging in November)
Wouldn't be surprised if the price increases abit more when the construction is finished.

 

[carturo15]

your friend paid $520 psf in Yonge and Finch? and he's expecting to sell it at $770 psf in 5 years? $700 condo fee for 780 sq ft? that's $0.90 cents psf. I am sorry, but either this information you are giving is wrong or something wrong is happening with your friend.

 

[CN Tower]

Chinese Export Wealth

Paperchopper,

You and I are simpatico my friend. However, I cling not to attachments or emotional arguments. Clearly Yonge + Finch at $520 psf is wildly overvalued. I refer to this CL listing:

$1500 / 1br - Luxury fully furnished 1BR condo, steps to Subway (Yonge & Finch) (map)
Date: 2010-11-17, 7:09PM EST
Reply to: hous-cjx8c-2066183724@craigslist.org [Errors when replying to ads?]

Steps to the Finch Subway Station, 1 bright fully furnished 1 Bedroom condo, apx 700 sqf, famous Monaco Condominium building.

Furniture includes brand new leather Sofa, chair, 40 inch plasma HD TV, DVD and Home Theatre player, 5 piece dining set, Phone set, Bookshelf, Queen bed, Office desk, Bookcase, Study Lamp, Computer, LCD Monitor and Printer. All the necessary dishes, Coffee Maker, blender, towels, Iron and ironing table, etc... are already there, so just move in with your suitcases.

Washer, Dryer, Dishwasher, Vacuum Cleaner, water, Heat and Hydro included as well.
Large Closets and extra-large window looking at Yonge & Finch intersection with no noise.

It's very bright with a large balcony for hanging out and BBQ which is allowed in this building.

Building has a 24hr security, Swimming Pool, Sauna, whirlpool, Study Room, Gym, Party Room, etc...

Steps to all "Yonge & Finch" restaurants, shopping centers, Dominion, Theatres.

Available Immediately.

$1500 / 700 sq. ft. = $2.14/sq. ft. x 12 = $25.71 gross rent. At a 65% operating margin (very high) that's about $16.71/sq. ft. net.

$16.71/550= 3%, before HST, LTT, closing costs, etc. etc. Furthermore, this luxury unit is furnished!

No mortgage is serviceable at 3% on a stabilized basis. Conclusion is that this unit is wildly overvalued at today's prices on an economic basis.

The only valid consideration in this instance is whether China will continue to export/safe harbor wealth in Toronto. If you remove that 'stimulus' from our local scene values will deflate down to the point where that unit would yield somewhere between around a 6% return based on today's cost of mortgage financing. A 6% return on that rental income stream equates to $278/ sq. ft.

I think I am being ultra generous with all my estimates but please point on my errors.

 

[Roy G Biv]

I'm feeling good for buying at $350k/sqft downtown. And a completely custom penthouse at that!

 

[cdr108]

I'm feeling good for buying at $350k/sqft downtown. And a completely custom penthouse at that!

sounds good but wasn't that 3-4 years ago at Sherbourne/Wellesley ?

 

[Kenny]

Don't we already have a huge thread that covers this topic?

 

[JayBee]

You should make this thread when the bubble actually pops.

Also your friend is delusional. Why didn't you talk him out of making that purchase?

 

[interested]

First Baker calls the Canadian Housing Bubble, then the Olympic Village goes bankrupt. Jarislowsky called the bubble back in February. Jarislowsky, in his 80's, is a billionaire real estate investor.

http://www.vancouversun.com/busines...vership+city+takes+control/3847165/story.html

I'd like to hear it from the RE pumpers (Realtors excluded, )-- What could possibly justify paying $300K for a 600 sq ft shoddily constructed "condo" that more resembles a tomb than a habitable environment?

A friend of mine recently purchased a 780 sq ft condo for $405,000-- on a $55K a year salary. He put nothing down, TD gave him a LOC to cover the downpayment. It's at Yonge and Finch, hardly "downtown". The condo fees alone are $700 a month. He hopes to sell it for $600K+ in 5 years.
Anyways, it's bloody obvious Canada is about to melt as hard or harder than Ireland, but I'm just shocked at the naiveness of the speculators, which is what 99.9% of the vast majority of RE purchasers are currently. This board is a testament to that fact.

I did a stint as an investment banker, and not on Baby Bay St, but Wall St. I do admit, I have psychopathic tendencies, one of the main hiring considerations for investment banking. I worked the mortgage desk at at a bulge bracket, with initials resembling GS or MS, although I'm not too akin to ties. The MD back in '05 raked in over $20M. He'd fly to his French villa on weekends in his private jet just to take a shit in his gold plated toilet. We made insane, no no, unfathomable amounts of money-- easily chopping over $60B a month, quite literally laughing all the way to the bank.

That was back in 2005. Fast forward to today. Short sales fetching $75K with the home owner stuck with a $450K mortgage, his only escape in scoring a deed-in-lieu of trust or sucking on the barrel of a .44 Magnum. Housing-related suicides are the norm and quietly swept under the rug.

Sigh. I don't even know why I bother, but be ready. It's going to be ugly, and most likely, very bloody. But don't come crying when your 600 sq ft $350K condo is worth $150K and you're stuck paying a $200K non-performing debt for the next 35 years, hell, 40 years if you were stupid enough to amortize over 40 years.

Most of us would agree this is ludicrous.

That said, if your friend has this income, at least I am going to assume it has been verified and is true. Does not make the investment logical nor intelligent. It is however here less likely that it is not a NINJA loan, falsified paperwork, mortgage teaser rate for 2 years and then ARM kicks in.

My point is it is ridiculous and we all agree but fortunately (not intelligently because Harper and his gang introduced 40 year no money down mortgages) 2 years later, we do not have anywhere near as much of this nonsense to mop up. They just had the benefit of witnessing the US housing implode and therefore could cut it off here earlier so that hopefully and I say this "hopefully" we will avoid the full scale meltdown experienced in some of the most inflated US markets.

 

[Ric]

A friend of mine recently purchased a 780 sq ft condo for $405,000-- on a $55K a year salary. He put nothing down, TD gave him a LOC to cover the downpayment. It's at Yonge and Finch, hardly "downtown". The condo fees alone are $700 a month. He hopes to sell it for $600K+ in 5 years.

Sorry Dude but this part of your story makes no sense. Either your friend is lying to you or you fabricated this to make your point. I'm sure you could find much better examples for why there is a bubble in Canada than this crap.

 

[Ric]

Interesting stuff. I wonder who will win this debate...I guess the future will tell

http://www.moneyville.ca/blog/post/893796--why-we-won-t-see-a-housing-collapse

 

[cdr108]

Interesting stuff. I wonder who will win this debate...I guess the future will tell

http://www.moneyville.ca/blog/post/893796--why-we-won-t-see-a-housing-collapse

well, the writer of the article lost total credibility when he kept confusing Dean Baker (one of the first economists to predict the U.S. housing crisis, said that Canada’s market is due for major U.S. style correction soon. If interest rates rise by 2 per cent, he says, housing prices would fall by about 30 per cent.) with Ian Lee (a professor at Carleton’s Sprott School of Business and former mortgage manager with BMO).

Throughout the article, he cites Baker as explaining why the Canadian market won't collapse, while it's Lee he should be referencing.

 

[GraphicMatt]

Isn't there a difference between the housing market and the speculative preconstruction condo market?

They overlap, sure, but I could see the latter crashing far harder than the former.

 

[Ric]

well, the writer of the article lost total credibility when he kept confusing Dean Baker (one of the first economists to predict the U.S. housing crisis, said that Canada’s market is due for major U.S. style correction soon. If interest rates rise by 2 per cent, he says, housing prices would fall by about 30 per cent.) with Ian Lee (a professor at Carleton’s Sprott School of Business and former mortgage manager with BMO).

Throughout the article, he cites Baker as explaining why the Canadian market won't collapse, while it's Lee he should be referencing.

Agreed, but my point was to show that every "expert" has an opinion on whether there is or isn't a bubble. My personal opinion is that the fundamentals indicate we are overpriced and there most likely will be a correction. The problem is nobody knows when or by how much. It could be next month, next year or 5 years from now. So, what should we do? Well if you are an end user (going to live in your purchase), make sure you have at least 10% as a deposit. Plan to hold on to your purchase for at least 5 years, buy something you like that wont stretch you too much financially and move on with your life.

If you are waiting for a 30% drop in prices to then purchase, chances are 1. You most likely would have lost your job and wouldn't be able to purchase anyway or 2. You would be so scared that you would still miss the boat, as when prices drop 30% you would then be holding out for a 50% drop.

If you are a Condo Flipper buying now and looking for a 40% windfall in 2014 good luck, that ship already sailed. Positive cash flow will be the name of the game going forward. If your unit cannot rent to cover your expenses I would strongly suggest that you stay away.

 

[interested]

Agreed, but my point was to show that every "expert" has an opinion on whether there is or isn't a bubble. My personal opinion is that the fundamentals indicate that we are overpriced and there most likely will be a correction. The problem is nobody knows when or by how much. It could be next month, next year or 5 years from now. So, what should we do? Well if you are an end user (going to live in your purchase), make sure you have at least 10% as a deposit. Plan to hold on to your purchase for at least 5 years, buy something you like that wont stretch you too much financially. Buy and move on with your life.

If you are waiting for a 30% drop in prices to then purchase, chances are 1. You would have lost your job andl wouldn't be able to purchase when prices fall or 2. You would be so scared that you would still miss the boat, as when prices drop 30% you would then be holding out for a 50% drop.

If you are a Condo Flipper buying now and looking for a 40% windfall in 2014 good luck, that ship already sailed. Positive cash flow will be the name of the game going forward. If your unit cannot rent to cover your expenses I would strongly suggest that you stay away.

All good points Ric.
We are on similar pages.