Kenny
Active Member
You're paying too much for bread.
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You're paying too much for bread.
CN Tower
Banned
I like to keep things simple. Maybe that's why I'm so successful
http://bigmacindex.org/1989-big-mac-index.html
Canada C$2.15
http://bigmacindex.org/2012-big-mac-index.html
Canada C$4.73
A Big Mac has gone up 2.2x since 1989 in nominal terms. Housing has not. Therefore housing today has not kept pace with inflation using 1989 as a base year.
Kenny
Active Member
I like to keep things simple. Maybe that's why I'm so successful
http://bigmacindex.org/1989-big-mac-index.html
Canada C$2.15
http://bigmacindex.org/2012-big-mac-index.html
Canada C$4.73
A Big Mac has gone up 2.2x since 1989 in nominal terms. Housing has not. Therefore housing today has not kept pace with inflation using 1989 as a base year.
A Big Mac was 3.89 in 2009. Is an increase of 25% in the last 3 years a result of inflation, or could it possibly be that other market factors affect Big Mac prices? e.g. rising cost of beef, gas, higher Canadian dollar, etc...
neubilder
Banned
I like to keep things simple. Maybe that's why I'm so successful
http://bigmacindex.org/1989-big-mac-index.html
Canada C$2.15
http://bigmacindex.org/2012-big-mac-index.html
Canada C$4.73
A Big Mac has gone up 2.2x since 1989 in nominal terms. Housing has not. Therefore housing today has not kept pace with inflation using 1989 as a base year.
Sure, but you're ignoring the fact that a year after 1989 prices dropped as much as 40%, meaning that while between 1989 & 2012 prices didn't double, between 1991 and 2012 they more than doubled?
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CN Tower
Banned
I never trusted the CPI. I think the BMI is more honest and less subject to manipulation.
Housing is much less frenzied than in 1989 and the risks of a deep correction are mitigated through substantial pre-sales and big deposits.
CN Tower
Banned
Daveto said 2012 prices are 20% higher than the '89 peak inflation adjusted. My point is that they are actually much lower than the '89 peak and the projects are more stable.
daveto
Active Member
So to summarize:
1. First you contend that price inflation has been 250% since 1989, (bread from $1 to $3.50). Inflation of 6% annually
2. Then you say that price inflation has been 120% since 1989 (Big Max from $2.15 to $4.73). Inflation of 3.6%. You offer no explanation for your changed #s.
3. You place more trust in the Big Mac index, and/or your recollection of the price you pay for bread, than you do in the Stats Can CPI.
Finally house prices from the peak of 1989 have gone up by 90% in nominal terms from $250k to $475k. (up 20% net of the Stats Can CPI)
Maybe you should run along and let the adults talk amongst themselves.
CN Tower
Banned
So to summarize:
1. First you contend that price inflation has been 250% since 1989, (bread from $1 to $3.50). Inflation of 6% annually
2. Then you say that price inflation has been 120% since 1989 (Big Max from $2.15 to $4.73). Inflation of 3.6%. You offer no explanation for your changed #s.
3. You place more trust in the Big Mac index, and/or your recollection of the price you pay for bread, than you do in the Stats Can CPI.
Finally house prices from the peak of 1989 have gone up by 90% in nominal terms from $250k to $475k. (up 20% net of the Stats Can CPI)
Maybe you should run along and let the adults talk amongst themselves.
The Big Mac Index is quite legimtate, and frankly not subject to distortion like your selectively excluding CPI.
Furthermore, talk to anyone who was active in real estate in '89 and they'll laugh you under the table if you try to draw any comparisons to today's market.
daveto
Active Member
It would seem that you don't understand the relevance of Real (ie excluding CPI) vs Nominal price changes. Excluding the CPI doesn't distort prices changes, it does the exact opposite, it removes the distortion price changes.
Your own quote states that the BMI is intended to informally compare PPP between different countries/currencies.
However you are using it as a formal proxy for Cost of Living increases (inflation) within the same country/currency.
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Regular
New Member
Very interesting reading this thread.
Admiral Beez
Superstar
I remember, as a teen I had a $5K GIC at IIRC 17.5%. Today they're about 2%. That's something we don't think about much, how the low interest rates are forcing people into the riskier stock market to find hope at building a retirement fund.
js97
Senior Member
I think people are also forgetting that general population growth (immigration) and demand growth through household splitting (Family of 4 now requires 2 SFH's as childern move out) vastly add to the equation. From my perspective, housing prices of SFHs should continue to rise compared to 20 years ago. Think of the affordability bell curve and average SFH's was a point on that curve, that point would continue to move right as demand raises the curve more than supply is able to keep up (Toronto's geographic limitations). This is at least in the Toronto market. We can look to more mature cities and civilizations to gauge the future of home affordability. IF you take a look at metropolises with similar economic (Finance, diverse, somewhat urban, white collar positions) like Toronto, most of those homes near transit and considered 'good neighbourhoods' are not affordable to the average Joe. Chicago and Frankfurt are first few that come to mind.
I'm not saying prices should continue to rise without recourse, but an attitude that buying is a birthright is unfortunately incorrect. And one can make a credible argument that because of our high rate of home ownership, prices still have room to rise. That being said, I wouldn't be 'investing' in the current Toronto market - there are plenty of other cities with more upside than TO.
Also, Toronto today vs Toronto in the 80/90's are two very different cities. We are much more globalized with much more international money looking for safe harbours... especially now with the US currency uncertainties as a result of Congress...
I'm not saying prices should continue to rise without recourse, but an attitude that buying is a birthright is unfortunately incorrect. And one can make a credible argument that because of our high rate of home ownership, prices still have room to rise. That being said, I wouldn't be 'investing' in the current Toronto market - there are plenty of other cities with more upside than TO.
Also, Toronto today vs Toronto in the 80/90's are two very different cities. We are much more globalized with much more international money looking for safe harbours... especially now with the US currency uncertainties as a result of Congress...
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NorthYorkEd
Active Member
interested
Senior Member
In other words, this time it's different...
^^^
Exactly. I have heard that many times before. It's always different until it isn't. However, js is right in that if there is a fundamental change in a city/country status....it's premier city may defy previous growth estimates. Not saying it will, and I am not convinced that prices will rise for SFH's for 20 years as suggested...but who knows.
What about the potential new Free Trade Agreement with Europe though....do you think this will if ratified change the fundamentals of the "premier financial city" of Canada given what the potential of this could be?
rbt
Senior Member
In other words, this time it's different...
There are some genuine differences this time in the Toronto region.
For example, the condo versus freehold market-share split has most likely changed for the long-term in part due to the greenbelt legislation.