Real Estate

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

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  • Mar 9th, 2018 12:24 pm
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Deal Fanatic
Feb 9, 2009
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cartfan123 wrote:
Aug 11th, 2017 4:05 pm
Rosenberg is wrong so often but if he keeps talking... Maybe eventually he will get one right. Maybe
In the last paragraph talks about all the potential increased immigration - I guess they will all magically live in caves --- this will be positive for real estate
Sr. Member
Feb 16, 2013
748 posts
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Toronto
thediamondshopper wrote:
Aug 10th, 2017 6:26 am
This seems to be the new norm detached nose diving, and attached/condos rising, in golden horse shoe and Van. I would take that as meaning that local buyers ca no longer afford detached houses so they are piling into condos and towns and foreign buyers have exited the picture. I overheard some one on the subway the other day say that a huge majority of Torontonians wouldn't be able to afford their own house (detached) if they had to buy it in today's market. That would be a great statistic. I'd guess less that 3%.
The average mortgage is 200K?
So who knows, I suspect way more than 3%
Member
Sep 7, 2009
435 posts
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cowbunpants wrote:
Aug 11th, 2017 7:34 pm
The average mortgage is 200K?
So who knows, I suspect way more than 3%
You're assuming they get to bank their current equity. I think OP meant if you took their house away from them with no compensation, would they be able to buy it for the full purchase price (downpayment from their current savings and full mortgage based on the their income).
[OP]
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Dec 5, 2009
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holden wrote:
Aug 11th, 2017 8:33 pm
You're assuming they get to bank their current equity. I think OP meant if you took their house away from them with no compensation, would they be able to buy it for the full purchase price (downpayment from their current savings and full mortgage based on the their income).
But that's a ridiculous premise. It took me years to work, save, and buy my first house. Then many more years to pay down that mortgage before moving up and climbing the property ladder. So now you take it all away and say I can't afford my current home? Well, no shit.
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Feb 9, 2009
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thediamondshopper wrote:
Aug 10th, 2017 6:26 am
This seems to be the new norm detached nose diving, and attached/condos rising, in golden horse shoe and Van. I would take that as meaning that local buyers ca no longer afford detached houses so they are piling into condos and towns and foreign buyers have exited the picture. I overheard some one on the subway the other day say that a huge majority of Torontonians wouldn't be able to afford their own house (detached) if they had to buy it in today's market. That would be a great statistic. I'd guess less that 3%.
Detached are generally expensive... not very many major cities in the world where detached is affordable. And from time frame would it be unaffordable? People who bought 5 years ago? 10 years ago? 25 years ago? I mean yes in general people who have owned their homes for a long time in any period of time will say the same thing.

Toronto has changed a great deal since 1989 -- a great deal... go look at pics of toronto in 1989 and compare it to day.. much more of a metropolis today then in the past. All there was were parking lots everywhere in 1989, especially by Rogers Centre, which now has a whole community (CityPlace).

What was known as a blue collar city is now a clear white collar city...wealth is more prominent in Toronto day then ever before....
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fdl wrote:
Aug 11th, 2017 8:41 pm
But that's a ridiculous premise. It took me years to work, save, and buy my first house. Then many more years to pay down that mortgage before moving up and climbing the property ladder. So now you take it all away and say I can't afford my current home? Well, no shit.
Guaranteed a millennial came up with that premise.
Member
Jun 19, 2017
374 posts
570 upvotes
holden wrote:
Aug 11th, 2017 8:33 pm
You're assuming they get to bank their current equity. I think OP meant if you took their house away from them with no compensation, would they be able to buy it for the full purchase price (downpayment from their current savings and full mortgage based on the their income).
fdl wrote:
Aug 11th, 2017 8:41 pm
But that's a ridiculous premise. It took me years to work, save, and buy my first house. Then many more years to pay down that mortgage before moving up and climbing the property ladder. So now you take it all away and say I can't afford my current home? Well, no shit.
Sanyo wrote:
Aug 11th, 2017 9:09 pm
Detached are generally expensive... not very many major cities in the world where detached is affordable. And from time frame would it be unaffordable? People who bought 5 years ago? 10 years ago? 25 years ago? I mean yes in general people who have owned their homes for a long time in any period of time will say the same thing.

Toronto has changed a great deal since 1989 -- a great deal... go look at pics of toronto in 1989 and compare it to day.. much more of a metropolis today then in the past. All there was were parking lots everywhere in 1989, especially by Rogers Centre, which now has a whole community (CityPlace).

What was known as a blue collar city is now a clear white collar city...wealth is more prominent in Toronto day then ever before....
Of course the premise that everyone starts off with a clean slate is ridiculous, but i think the valid point that it implies is that price appreciation has primarily been supported by the retained equity derived from the price appreciation itself....so now that on average $170k of equity has been lost within a couple of months, if the observation is true, it would seem unlikely that the 3% who can afford current prices will step in and reinflate average market prices to their previous levels.

The implication is that when prices were increasing, prices were likely being driven in large part by the retained equity in the housing assets. Now that prices are declining, incomes are now playing a larger component in defining price.

That's why the historic mortgage service affordability levels are still important and shouldn't be ignored/dismissed regardless of how the city has changed. It is a fundamental. Anyway thats just what I think.
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Jul 29, 2013
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Qrewpt wrote:
Aug 12th, 2017 12:00 am
Of course the premise that everyone starts off with a clean slate is ridiculous, but i think the valid point that it implies is that price appreciation has primarily been supported by the retained equity derived from the price appreciation itself....so now that on average $170k of equity has been lost within a couple of months, if the observation is true, it would seem unlikely that the 3% who can afford current prices will step in and reinflate average market prices to their previous levels.

The implication is that when prices were increasing, prices were likely being driven in large part by the retained equity in the housing assets. Now that prices are declining, incomes are now playing a larger component in defining price.

That's why the historic mortgage service affordability levels are still important and shouldn't be ignored/dismissed regardless of how the city has changed. It is a fundamental. Anyway thats just what I think.
The exact point was to point out that realestate pricing is no longer tied to incomes or affordability, whether this will become the new norm for Canada's two major centers is what we will see in the coming years.

Many home owners had to scrimp and save to buy their first house, but if levels of 15-20 times average income to get into the detached market were present when that first purchased was made who could say they could have afforded to get into the market, very few. Rather in many current owners cases they got into the market at 3-5 times average income.

Again I'm not a proponent to either up or down for RE it just seems to me that prices this out of wack with incomes isn't a healthy market. As well I am a firm believer that we need significantly more transparency into RE in GTA and GVA so we can understand why we are at where we are at. And even to rephrase the premise that most owners couldn't afford their own homes if starting from scratch to most couldn't have afforded to enter the market if prices were 15-20 times average income when they did, delivers the same point. I absolutely don't believe that owning a detached house in a major city is a right, but when even high income earners like say the average doctor ($225000/ year) just qualifies for the average home at 1.3m (300k down, 1m borrow) I don't see who will enter the market.
Last edited by thediamondshopper on Aug 12th, 2017 1:04 am, edited 1 time in total.
Deal Fanatic
Feb 9, 2009
5833 posts
3103 upvotes
Qrewpt wrote:
Aug 12th, 2017 12:00 am
Of course the premise that everyone starts off with a clean slate is ridiculous, but i think the valid point that it implies is that price appreciation has primarily been supported by the retained equity derived from the price appreciation itself....so now that on average $170k of equity has been lost within a couple of months, if the observation is true, it would seem unlikely that the 3% who can afford current prices will step in and reinflate average market prices to their previous levels.

The implication is that when prices were increasing, prices were likely being driven in large part by the retained equity in the housing assets. Now that prices are declining, incomes are now playing a larger component in defining price.

That's why the historic mortgage service affordability levels are still important and shouldn't be ignored/dismissed regardless of how the city has changed. It is a fundamental. Anyway thats just what I think.
Where is this 3% figure coming in?!

Secondly this market has been based on income - no bank was going to lend someone say -- one million mortgage with a 50k income.

People undermine the wealth again in Toronto -- think its still a 1989 blue collar town, not knowing how much it's grown and the money out there. Again if income was used in every major city, we would have much much lower RE prices... but fact is there is so much wealth that is is easy to keep prices up.

This Toronto slow down is a temporary thing (in my eyes) based on the abnormally low listings in 2016 and then the spike because of Father Tory and Mother Wynne in April.
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Feb 9, 2009
5833 posts
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thediamondshopper wrote:
Aug 12th, 2017 1:04 am
The exact point was to point out that realestate pricing is no longer tied to incomes or affordability, whether this will become the new norm for Canada's two major centers is what we will see in the coming years.

Many home owners had to scrimp and save to buy their first house, but if levels of 15-20 times average income to get into the detached market were present when that first purchased was made who could say they could have afforded to get into the market, very few. Rather in many current owners cases they got into the market at 3-5 times average income.

Again I'm not a proponent to either up or down for RE it just seems to me that prices this out of wack with incomes isn't a healthy market. As well I am a firm believer that we need significantly more transparency into RE in GTA and GVA so we can understand why we are at where we are at. And even to rephrase the premise that most owners couldn't afford their own homes if starting from scratch to most couldn't have afforded to enter the market if prices were 15-20 times average income when they did, delivers the same point. I absolutely don't believe that owning a detached house in a major city is a right, but when even high income earners like say the average doctor ($225000/ year) just qualifies for the average home at 1.3m (300k down, 1m borrow) I don't see who will enter the market.
Have you seen the record of the world? Comment on why its hard to find affordable detached homes in almost any major world class city?
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Jul 29, 2013
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Sanyo wrote:
Aug 12th, 2017 1:12 am
Where is this 3% figure coming in?!

Secondly this market has been based on income - no bank was going to lend someone say -- one million mortgage with a 50k income.

People undermine the wealth again in Toronto -- think its still a 1989 blue collar town, not knowing how much it's grown and the money out there. Again if income was used in every major city, we would have much much lower RE prices... but fact is there is so much wealth that is is easy to keep prices up.

This Toronto slow down is a temporary thing (in my eyes) based on the abnormally low listings in 2016 and then the spike because of Father Tory and Mother Wynne in April.
3% was just a complete haymaker hahahahha a total unsupported guess. I've never come across any stats showing a massive piling of wealth in Canada, were not minting millionaires, China on the other hand yes, but in line with all the major popular cities on Juwai declining I don't think they are buying any more post new regulations. Open to debate on that one as it's too soon to tell. But if the only thing that truly slowed our market was restrictions on money leaving China that is a scary ideal
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Jul 14, 2002
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Sanyo wrote:
Aug 12th, 2017 1:12 am
Where is this 3% figure coming in?!

Secondly this market has been based on income - no bank was going to lend someone say -- one million mortgage with a 50k income.

People undermine the wealth again in Toronto -- think its still a 1989 blue collar town, not knowing how much it's grown and the money out there. Again if income was used in every major city, we would have much much lower RE prices... but fact is there is so much wealth that is is easy to keep prices up.

This Toronto slow down is a temporary thing (in my eyes) based on the abnormally low listings in 2016 and then the spike because of Father Tory and Mother Wynne in April.
agreed, but that "wealth" is mostly composed of credit. the majority driver for the last decade in driving up prices worldwide.
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User avatar
Jul 29, 2013
879 posts
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Toronto
Sanyo wrote:
Aug 12th, 2017 1:13 am
Have you seen the record of the world? Comment on why its hard to find affordable detached homes in almost any major world class city?
IMO the world class city and population growth explainations for our RE prices lack support as we have lower affordability than many cities that possess more qualities of a world class city, and have much higher population density than we we do. Plus there has been no linear relationship between GTA prices and population growth, nore is their a linear relationship to us becoming more of a world class city. When we reach densities like HK, São Paulo, Tokyo, Seoul ect then maybe that will mak sense but unless we're pricing in our growth 10-20 years in advance that's just not the case. Rather the world wide trend is currently the least affordability in areas most popular with Mainland China buyers, Hong Kong, Sydney, Awkland, Vancouver, LA, San Jose, San Fran etc. and again as current stats show a lot of these markets flattened out recently with tighter restrictions on Chinese capital outflows.
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May 9, 2017
584 posts
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thediamondshopper wrote:
Aug 12th, 2017 1:04 am
The exact point was to point out that realestate pricing is no longer tied to incomes or affordability, whether this will become the new norm for Canada's two major centers is what we will see in the coming years.

Many home owners had to scrimp and save to buy their first house, but if levels of 15-20 times average income to get into the detached market were present when that first purchased was made who could say they could have afforded to get into the market, very few. Rather in many current owners cases they got into the market at 3-5 times average income.

Again I'm not a proponent to either up or down for RE it just seems to me that prices this out of wack with incomes isn't a healthy market. As well I am a firm believer that we need significantly more transparency into RE in GTA and GVA so we can understand why we are at where we are at. And even to rephrase the premise that most owners couldn't afford their own homes if starting from scratch to most couldn't have afforded to enter the market if prices were 15-20 times average income when they did, delivers the same point. I absolutely don't believe that owning a detached house in a major city is a right, but when even high income earners like say the average doctor ($225000/ year) just qualifies for the average home at 1.3m (300k down, 1m borrow) I don't see who will enter the market.
I agree with your main point (if I understand it).

If you took the average person who bought their first house in Toronto 20 years and grew their salary at the average wage growth rate for 20 years they would unlikely be able to afford a similar house (with the same standard of living).

I am not saying the average person in Toronto 20 years ago has the same income and wealth profile as the average person in Toronto today.

Of course it's hypothetical but I don't see it as controversial at all.

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