Real Estate

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

  • Last Updated:
  • Aug 17th, 2017 5:32 pm
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Jr. Member
May 9, 2017
121 posts
137 upvotes
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.
Sr. Member
Feb 22, 2011
936 posts
920 upvotes
Toronto
joepipe wrote:
Aug 12th, 2017 8:51 am
August is getting worse in some 905 areas... its about time some of these manure pastures got slammed for what they are really worth....

https://www.zolo.ca/whitchurch-stouffvi ... ate/trends

https://www.zolo.ca/aurora-real-estate/trends
Why do you care what prices there are if you think it's just a manure pasture? You sound really bitter about something.
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Sep 8, 2007
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Way Out of GTA
joepipe wrote:
Aug 12th, 2017 8:51 am
August is getting worse in some 905 areas... its about time some of these manure pastures got slammed for what they are really worth....

https://www.zolo.ca/whitchurch-stouffvi ... ate/trends

https://www.zolo.ca/aurora-real-estate/trends
While yes, prices are down....this Zolo stuff looks like nonsense. So a year ago a 3 bed detached was $1.2 mln and now $675k. If there's a point to made its better to vet the data. In this case the data looks of poor quality. You could use this ridiculous data to say King township is on fire! To the moon!
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Sr. Member
Feb 22, 2011
936 posts
920 upvotes
Toronto
cartfan123 wrote:
Aug 12th, 2017 10:17 am
While yes, prices are down....this Zolo stuff looks like nonsense. So a year ago a 3 bed detached was $1.2 mln and now $675k. If there's a point to made its better to be vet the data. In this case the data looks of poor quality.
Lol at 3 bedrooms being $200k cheaper than 2 bedrooms and $500k cheaper than 4 bedrooms. That makes tons of sense /s also really funny everyone wants to talk about Stoufville all of a sudden. 21 houses sold. Who is trying to gain any insight from the sale of 21 houses. Some of those are even farms that can have obscene different prices based on land size.
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Sep 12, 2006
1038 posts
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Sanyo wrote:
Aug 12th, 2017 1:12 am
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.
You're right to an extent. But this city has become so overleveraged with mortgage debt due to cheap money, the levels are unprecedented. And the banks are truly tightening up lending criteria (which is good).

A middle class household will have a much more difficult time with financing these days compared to 5 years back. The cheap money is significantly less accessible now, and getting less cheap. This is why I think the slowdown will persist.
Deal Addict
Dec 27, 2006
1040 posts
194 upvotes
A family with an annual income of $100,000 with a 20 per cent down payment can currently afford a home worth $792,813 (based on a 2.64 per cent mortgage rate and accounting for property tax and utility costs).
If stress-tested to qualify at 4.64 per cent, that same family would afford $146,579 less home.
Yikes

http://www.bnn.ca/realtors-brace-for-ne ... r-1.827890
Sr. Member
Aug 19, 2016
617 posts
182 upvotes
Motoss wrote:
Aug 12th, 2017 3:11 pm
A family with an annual income of $100,000 with a 20 per cent down payment can currently afford a home worth $792,813 (based on a 2.64 per cent mortgage rate and accounting for property tax and utility costs).
If stress-tested to qualify at 4.64 per cent, that same family would afford $146,579 less home.
Yikes

http://www.bnn.ca/realtors-brace-for-ne ... r-1.827890
Is the real estate market that bad out there (GTA)? I certainly don't feel a thing.

Property owners are still super optimistic. If prices fall more, they will buy more. My brother in-law just bought 2 more houses, and 2 more pre-con. He is liquidating his business and try to shift it into the real estate market. His business wasn't doing well anyways, so he sold while it is still worth some money.
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Aug 25, 2009
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CollegeGraduate wrote:
Aug 12th, 2017 3:25 pm
Is the real estate market that bad out there (GTA)? I certainly don't feel a thing.

Property owners are still super optimistic. If prices fall more, they will buy more. My brother in-law just bought 2 more houses, and 2 more pre-con. He is liquidating his business and try to shift it into the real estate market. His business wasn't doing well anyways, so he sold while it is still worth some money.
I guess it depends a lot on location and individual circumstance?

I currently own 2 condos that are ~50% paid and am looking for a semi (have been scanning a few listings here and there for the last 6 months but recently started looking in earnest) and I have to say by my subjective experience things have gotten less crazy. Still multiple offers on desirable houses and bidding wars but nothing like what I was seeing earlier this year. Offers with conditions of home inspection and even a few places that were sold conditional and are now back on the market.

All in all I'm not entirely sure what to do at the moment but sure is fascinating to watch and hear different perspectives
Newbie
Jun 19, 2017
66 posts
103 upvotes
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.

A $50k income is not representative of the assets owned, said person could very well have $750k of home equity given the amplitude and duration of the run up in real estate., They would have qualified for a $250k mortgage, putting them in the bidding for a $1 million dollar home.

They wouldn't have been able to get into the market if they weren't already in it. That is the situation that many homeowners are in, and would be hard to argue against that premise given the number of people that I know and probably you know that are in that situation.

To then say that the market is driven by income is not correct if it is true that mostpeople couldn't afford the homes they live in if they started from scratch. i.e. as illustrated by the $50k earner can afford a $1 million home.

If the 50k earner had 750k of equity in April, they may only have 600k in August, if they could borrow 250k in April for an uninsured mortgage, they may only be able to borrow $210k in October. They may only be able to come up with $810k now.

If there are many people in this situation, which I think there are, it will be a long while before prices bounce back up. Is there a lot of money sitting on the sidelines? I wouldnt take that bet, I think it is more likely that most people have gone all in on their homes.

Secondly, while earnings have increased since 89 and the city a has changed, the measure of mortgage service affordability mostly accounts for that as it is also adjusted for the inflation of incomes. All of the same arguments could have been made for and against affordability measures in 1988 compared to the preceding 30 years and its bubble bellwether rung true then as I believe it will surely ring true again today.
Last edited by Qrewpt on Aug 12th, 2017 5:19 pm, edited 2 times in total.
Sr. Member
Aug 19, 2016
617 posts
182 upvotes
These 50k salary people have hidden income sources. That is why they were able to afford $1m mortgage.
Deal Addict
Sep 5, 2009
2362 posts
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The recovery is complete, we are back at monthly 3000% increases

I think zolo is having some issues: https://www.zolo.ca/vaughan-real-estate/trends
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Sep 8, 2007
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Way Out of GTA
CollegeGraduate wrote:
Aug 12th, 2017 3:25 pm
Is the real estate market that bad out there (GTA)? I certainly don't feel a thing.

Property owners are still super optimistic. If prices fall more, they will buy more. My brother in-law just bought 2 more houses, and 2 more pre-con. He is liquidating his business and try to shift it into the real estate market. His business wasn't doing well anyways, so he sold while it is still worth some money.
Nothing like diversifying eh?
Member
Jan 19, 2015
365 posts
389 upvotes
Scarborough, ON
GTA, the Greater Toronto Area, is the most populous metropolitan area in Canada covering 7,124 square kilometres with a population of 6.4 million people. It includes the central city of Toronto along with four regional municipalities surrounding it: York, Peel, Durham and Halton. From 2006 to 2017, GTA witnessed the greatest housing bubble in Canadian history and here is a brief history of it.

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