Real Estate

Did we just hit the peak of the Toronto RE bubble?

  • Last Updated:
  • Mar 16th, 2019 9:08 am
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Dec 5, 2009
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As we've discussed here, certain parts of the 905 have been even more out of whack than Toronto ....

http://www.yorkregion.com/news-story/70 ... port-says/

Richmond Hill and Vaughan are at the forefront of soaring house prices in the Greater Toronto Area, with little relief in sight, according to a report from Royal LePage.

The price of a home in the GTA in the fourth quarter of 2016 rose 16.1 per cent over the same period of 2015, with Toronto’s growth lagging behind regions outside the city, the report said.

Richmond Hill led the charge, with house prices skyrocketing 30.1 per cent to an average price of $1.138 million.

Oshawa and Whitby were next, with prices climbing 26.9 and 21.4 per cent respectively, followed by Vaughan, which saw prices jump 19.9 per cent to $927,371.
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Dec 6, 2006
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Toronto
fdl wrote:
Jan 16th, 2017 10:02 am
As we've discussed here, certain parts of the 905 have been even more out of whack than Toronto ....

http://www.yorkregion.com/news-story/70 ... port-says/

Richmond Hill and Vaughan are at the forefront of soaring house prices in the Greater Toronto Area, with little relief in sight, according to a report from Royal LePage.
...
Yeah, I was a little surprised when I first saw your posted Dec Toronto average price, that it actually went down. As I'm mostly looking at detached RH/Markham & nearby areas, and they didn't drop a bit. The few listings and transactions I looked at kept going up even in Dec in the dead of winter.... god knows what's going to happen in the spring.... detached at $2mil average by end of 2017 maybe??! Disappointed But Relieved Face
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May 31, 2007
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MoreDealsPlease wrote:
Jan 8th, 2017 9:54 pm
To make it more realistic, most people using the couch potato strategy will be following the model portfolio which includes TDB909, TDB900, TDB902, TDB911 instead of putting everything in 1 fund. I wonder what the return would have been in that case?
Absolutely. It was only a reply to manne3702 because he said the best fund in couch potato has not outperformed GTA housing since the bottom of 2009 crash. Clearly the the s&p500 in CAD did. And I did say it was only response for that, because we know it's very unlikely to predict and very risky to put all your money in one fund you think you can outperform next.

But like you said, if one had 25% split on those funds, total return Jan 1 2009-Dec 31 2016 (not even the bottom of 2009) the portfolio would be up 116% vs 112% for toronto median detached with no costs or taxes. (march 2009-Dec 2016) however After 7 years when you subtract property tax, $14,000, double land transfer tax, $12,000, home insurance, $4200, maintenance $7,000? mortgage Interest$? Re agent& lawyer, buying/closing fees to sell $47,500, now 93% return for detached.

Assuming we are comparing an equal portfolio, not all that bad considering we are comparing the all mighty detached Toronto house.
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May 31, 2007
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Mike15 wrote:
Jan 9th, 2017 10:00 am
This link has the e-Series model portfolios,

http://canadiancouchpotato.com/wp-conte ... s-2015.pdf

With the 'aggressive' (30/30/30/10) mix, the 10 year annualized return is 5.95% (includes '08 crash). The 5 year annualized return is 10.20% (post-crash). That 5 year annualized works out to a 62.5% cumulative return.
New returns are available now to include 2016.
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May 31, 2007
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fdl wrote:
Jan 16th, 2017 10:02 am
As we've discussed here, certain parts of the 905 have been even more out of whack than Toronto ....

http://www.yorkregion.com/news-story/70 ... port-says/

Richmond Hill and Vaughan are at the forefront of soaring house prices in the Greater Toronto Area, with little relief in sight, according to a report from Royal LePage.

The price of a home in the GTA in the fourth quarter of 2016 rose 16.1 per cent over the same period of 2015, with Toronto’s growth lagging behind regions outside the city, the report said.

Richmond Hill led the charge, with house prices skyrocketing 30.1 per cent to an average price of $1.138 million.

Oshawa and Whitby were next, with prices climbing 26.9 and 21.4 per cent respectively, followed by Vaughan, which saw prices jump 19.9 per cent to $927,371.
Durham has been one of the cheapest regions to buy a detached, now it appears some areas are catching up to the rest of the GTA.
However it's no were near those regions in York but considering you might still find value here compared to the rest of the GTA
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May 31, 2007
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arsenalrocks wrote:
Jan 9th, 2017 12:46 pm
said from day 1 as long as there are immigrants GTA market will never go down (much)
rate increase of 0.5, 1, or 2% does nothing, people will just cut back on unnecessary spending
You realize Canada has a population of 35 million but only created 60,000 full time jobs last year?
As these immigrants keep flooding in and the jobs market keeps getting diluted. Unless they are bringing millions in cash, there is a plateau to be hit here. Interest rates will make this come faster.
Last edited by Jungle on Jan 16th, 2017 8:54 pm, edited 1 time in total.
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manne3702 wrote:
Jan 7th, 2017 5:36 pm
The mark-up in fashion retail is around 300-400℅, do you think it is unethical for the retailer to advertise a 50℅ off sales but still make a 100℅ profit? What make housing the difference, to me it is just another product in the market, it is not a necessity
Well the price of a t-shirt vs 2.5 million house is the difference, plus the available of stock on the shelf vs one house+ this is a bidding war, not point of sale purchase of the sticker price.
Also for the dozens that entertained the bidding war, I'm sure there were a lot of realtors that didn't get paid, people's who's time was wasted, hearts broken, etc.
Last month inventory was down about 50% so underpricing by 1 million just for a show seems selfish, greedy and unnecessary. I know realtor's selling are in their hay-day, but come-on. How much is too much?
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Apr 21, 2004
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Great discussion about past returns.

What does the future hold for r/e in and outside of GVA and GTA and US and global equities (especially with US protectionism on the rise)?

Can BoC really distant itself from the US Feds when it comes to raising interest rates?
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May 5, 2013
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Jungle wrote:
Jan 16th, 2017 8:58 pm
Well the price of a t-shirt vs 2.5 million house is the difference, plus the available of stock on the shelf vs one house+ this is a bidding war, not point of sale purchase of the sticker price.
Also for the dozens that entertained the bidding war, I'm sure there were a lot of realtors that didn't get paid, people's who's time was wasted, hearts broken, etc.
Last month inventory was down about 50% so underpricing by 1 million just for a show seems selfish, greedy and unnecessary. I know realtor's selling are in their hay-day, but come-on. How much is too much?
Don't get confused, you are not selling your property to some immediate family member or a close friend in here, there is no reason to go soft, iit is strictly a business transaction when you are selling your property to some Joe blow out there. Do you think the buyer is ever going to repay you if you give him 10℅ off the market price???
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Dec 27, 2011
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Waterloo
Jungle wrote:
Jan 16th, 2017 8:46 pm
Absolutely. It was only a reply to manne3702 because he said the best fund in couch potato has not outperformed GTA housing since the bottom of 2009 crash. Clearly the the s&p500 in CAD did. And I did say it was only response for that, because we know it's very unlikely to predict and very risky to put all your money in one fund you think you can outperform next.

But like you said, if one had 25% split on those funds, total return Jan 1 2009-Dec 31 2016 (not even the bottom of 2009) the portfolio would be up 116% vs 112% for toronto median detached with no costs or taxes. (march 2009-Dec 2016) however After 7 years when you subtract property tax, $14,000, double land transfer tax, $12,000, home insurance, $4200, maintenance $7,000? mortgage Interest$? Re agent& lawyer, buying/closing fees to sell $47,500, now 93% return for detached.

Assuming we are comparing an equal portfolio, not all that bad considering we are comparing the all mighty detached Toronto house.
1) Why compare an equal portfolio? If a person was investing in those funds, they most likely do not have remotely close to the amount invested compared to the value of a house.
2) You keep bringing up all the costs involved with buying/selling/maintaining a house. But what about the capital gains tax on the stock portfolio?
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alanbrenton wrote:
Jan 17th, 2017 10:39 am
Great discussion about past returns.

What does the future hold for r/e in and outside of GVA and GTA and US and global equities (especially with US protectionism on the rise)?

Can BoC really distant itself from the US Feds when it comes to raising interest rates?
GVA has hit the plateau, sales are showing major correction has started, but remember corrections take a long time. (10+ years bear market seems plausible). The gov intervention and support is confusing the market.

GTA listings are seizing up really bad, and prices will continue to go higher over the next year it seems. Nobody wants to move, nobody want's to be in a 50 person bidding war, and pay extreme prices to move up. best to just stay put. This is why Reno's are picking up. However I believe GTA buyers will hit a major price fatigue soon, the market will plateau, especially if we go average like GVA was 1.7 million for detached. Our economy just simply is not supporting house prices at 4-25x income (take your pick).
There are talks again from city counsel of a foreign buyer's tax in GTA, The city is desperately looking for new revenue tools and doesn't want to penalize existing residents with property tax increases.
The BOC can distant it self, but will catch up. Most reports are calling for one hike later this year and more to follow in 1-2 years, now we are seeing some positive job growth and GDP forecast 2%.
However remember fixed rates are base of the bond market and that has already shifted. If the US economy grows, some are saying maybe 3-5% GDP watch out. Trump may slash corporate tax rates to 15% and move jobs back into the USA to do this.

The wild card for Canada now is taxing our exports, and ripping up nafta.
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manne3702 wrote:
Jan 17th, 2017 11:58 am
Don't get confused, you are not selling your property to some immediate family member or a close friend in here, there is no reason to go soft, iit is strictly a business transaction when you are selling your property to some Joe blow out there. Do you think the buyer is ever going to repay you if you give him 10℅ off the market price???
This was just one example of what is already been going on the market for a while now. You are saying go balls out, let the market fight for it and come to price, they list 1 million under to start it.
There was another example in the news were realtor entertained 800 people in that Vaughan house over 3 days, people lost their shoes!
I don't know if this is the best way and necessary seems really over staged by the realtors, a lot of time wasting and unproductive for those entertaining this.
There is a whole discussion on the Oakley show about this, you can listen to agent being questioned by Oakley on starting listing 1 million under market price, the agent calls "normal and acceptable" Still there on demand live just have to scroll down.

http://www.640toronto.com/podcasts/
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crystallight wrote:
Jan 17th, 2017 12:44 pm
1) Why compare an equal portfolio? If a person was investing in those funds, they most likely do not have remotely close to the amount invested compared to the value of a house.
2) You keep bringing up all the costs involved with buying/selling/maintaining a house. But what about the capital gains tax on the stock portfolio?
Apples to apples those are comparable returns. leverage also has downside, housing is usually illiquid, and large equity gains are completely unproductive, while house provides the same utility.
Yes you are right, capital gains takes a hit, but you only pay capital gain on 50 % of the gain and you can control when to do this.
Deal Fanatic
Nov 24, 2013
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Kingston, ON
CMHC premium changes go in effect March 17th this year, meaning it's going to have a cooling effect on the spring market.

90%-95% LTV is going from 3.6% to 4.0%. Modest
85%-90% LTV is going from 2.4% to 3.1%
80%-85% LTV is going from 1.8% to 2.8%

So the couple selling the $600K property with $100K equity and buying a $900K property is going to have to add an extra 0.7% of the $800K mortgage ($5,600), on top of having to qualify it at 4.64%. Heck, even if they put down an extra $50K to lower the mortgage they're seeking to $750K, their premium will be 1.0% of $750K higher than it would have been ($7,500).

I think '17 may be the year price growth slows down a bit.
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Dec 1, 2015
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Etobicoke, ON
Keep in mind that those folks with less than 20% down payment (and therefore with CMHC/Genworth insurance) have already been approved for their mortgages using a harsh qualifying rate of 4.64% (the now called "stress test" rate - simply the BoC 5y reference rate). In essence, for a while now (even before the new rules were announced last year) insured mortgages for clients getting terms shorter than 5y fixed (or those getting variable mortgages) had their debt ratios calculated using the 4.64% rate, while they were actually getting mortgages at 2%, 2.50%, etc. Until rates go past 4.64%, those folks (using the standard calculation for affordability) their debt ratios will not change at all.

The recent increase in insurance premiums will help CMHC "buffer" their coffers, but I question what impact it will have on the market at all. The only initial conclusion is that first time buyers/starters will be the ones affected most. The cost of that mandatory insurance will increase, but no one will stop buying houses simply because of the insurance premium increase.
jdu0ng wrote:
Jan 18th, 2017 1:00 pm
This is actually good for the market. Too many people are putting less than 15% down only. Their mortgage is huge, and they will not be able to keep up once interest rates increase. As a result, they'll need to sell their property at a lower price, leading to start of a housing crash. With less than 15% down, they shouldn't have business owning a property due to the risks at stake.
Andre Oliveira - Mortgage Agent at Valuemortgage
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