Real Estate

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

  • Last Updated:
  • Oct 22nd, 2017 12:21 pm
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Member
Mar 20, 2017
209 posts
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Ceryx wrote:
Oct 12th, 2017 10:21 pm
The problem with September data is that volume shrinks by 40%, which probably means that the price will have to drop sooner or later, especially with rising rate and ofsi rule.
A year ago I heard pretty much same about mortgage stress test tightening and 4.54% rule. Surprisingly, for all future-forecasters it had completely opposite immediate effect of panic buying. Moreover, I saw it by my own eyes, while I received extra hurdles to afford the house I want and sellers received extra reasons to reject my offers and prices.
At the end, I guess I should be happy not to buy in October 2016, simply because I found much much better location on January 2017 and got it.

The summary is: don't be so sure how stress test will play out. The unreasonable demand for condos that we see is caused by that 1 year ago stress test - no doubts it started that time. But immediate effect was very bullish and by January 2017 noone doubted it. By May 2017 even 3 idiots in government realized it.
Last edited by GalvToronto on Oct 12th, 2017 10:56 pm, edited 1 time in total.
Jr. Member
Jun 19, 2017
161 posts
305 upvotes
rjg4235 wrote:
Oct 12th, 2017 10:35 pm
You said "Prices look like they're holding up on the surface, but the second you look under the hood, it looks pretty bad."

That doesn't even make sense. The prices are not holding up. they are up, period. There is no under the surface for prices. If anything a deeper look with a weighted average shows they are up even more than 8%.
Ok, more explicitly said:
Prices of sold houses look like thy're holding up - meaning this makes the market look good and strong - no need to get hung up on up vs. Holding up. However when you look under the hood, i.e look a little deeper, for example examine another market metric, in this case, I ran total $spent through the spreadsheet, you can see that there has been about 34% less dollars spent on the detached RE market, which looks pretty bad.

34% seems significant to me for such a large market.
Member
Mar 20, 2017
209 posts
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Qrewpt wrote:
Oct 12th, 2017 10:57 pm
You can see that there has been about 34% less dollars spent on the detached RE market, which looks pretty bad.

34% seems significant to me for such a large market.
The significance of it should be estimated by average price changes, not by your personal point of view and future fears.
I don't see any problem in the fact that hidden inflation moved from house prices into rental prices for a while. It is what in best interest of Liberals to declare they won the affordability battle before elections. Plebs will eat this idea and when rents become too high it will already be too late to blame Liberals.
People will just be gradually forced to realize that renting is no longer the cheapest option to live.
Its good that many people here and in mass media are helping to Liberals to keep this idea that affordability is achieved. I am really impressed actually how it goes, people believe in falling even having positive numbers.

Also, no need to blame 6bedroom sales, 6M houses sales etc. People started to choose more expensive houses for a reason, not by a temporary coincidence that will disappear after 30 days. Everything that happened in Sept is only becoming more bullish. Even your low sales are becoming higher and your can watch in on Zolo. The complete absence of spillover effect into GTA only proves that people don't have any affordability issues. All they have is money and fears. And money are burning down by inflation.
Jr. Member
Jun 19, 2017
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GalvToronto wrote:
Oct 12th, 2017 11:04 pm
The significance of it should be estimated by average price changes, not by your personal point of view and future fears.
I don't see any problem in the fact that hidden inflation moved from house prices into rental prices for a while. It is what in best interest of Liberals to declare they won the affordability battle before elections. Plebs will eat this idea and when rents become too high it will already be too late to blame Liberals.
People will just be gradually forced to realize that renting is no longer the cheapest option to live.

Also, no need to blame 6bedroom sales, 6M houses sales etc. People started to choose more expensive houses for a reason, not by a temporary coincidence that will disappear after 30 days. Everything that happened in Sept is only becoming more bullish. Even your low sales are becoming higher and your can watch in on Zolo. The complete absence of spillover effect into GTA only proves that people don't have any affordability issues. All they have is money and fears. And money are burning down by inflation.
Sounds like you are an efficient market theorist with regard to prices. I agree price changes will eventually accurately reflect the market, but we re still going through a period of accurate price discovery, prices don't just adjust instantly and correctly without a little oscillation. This will take time to play out and unless availability of credit loosens it appears that there are significantly less buyers willing or more likely able to pay the going rate. That puts us at risk of a decent sized price correction if sellers ever get motivated.

Wrt to your 6 BDRM comments, I don't see how this relates to anything that I posted.
Member
Mar 20, 2017
209 posts
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Qrewpt wrote:
Oct 12th, 2017 11:37 pm
This will take time to play out and unless availability of credit loosens it appears that there are significantly less buyers willing or more likely able to pay the going rate. That puts us at risk of a decent sized price correction if sellers ever get motivated.
I say it again - the absence of spillover effect proves that availability of credit is not an issue right now. When something is unaffordable - people run into suburbs.
Moreover - stress tests never try to lower the price, they only try to decrease future risks.
Did you forget softening rules to 0% downpayment after last unstable times?
The only time when people were too stupid to understand what Central Banks are doing was a great depression, when Feds did not soften the rules at crisis. It would be very hard to repeat that world class robbery again while people understand how monetary policy works.

We had a massive government intervention 4.5 months ago. Do you really believe it is important now what buyers are wiling to do? Lol. What is important - marked digested the hardest times of that intervention successfully.
Member
Jul 25, 2005
433 posts
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GalvToronto wrote:
Oct 12th, 2017 11:45 pm
I say it again - the absence of spillover effect proves that availability of credit is not an issue right now. When something is unaffordable - people run into suburbs.
Moreover - stress tests never try to lower the price, they only try to decrease future risks.
Did you forget softening rules to 0% downpayment after last unstable times?
The only time when people were too stupid to understand what Central Banks are doing was a great depression, when Feds did not soften the rules at crisis. It would be very hard to repeat that world class robbery again while people understand how monetary policy works.

We had a massive government intervention 4.5 months ago. Do you really believe it is important now what buyers are wiling to do? Lol. What is important - marked digested the hardest times of that intervention successfully.
Lets completely ignore the fact that average prices can be largely impacted by sales makeup, ignore the fact that sales are way down and inventory is still high, and that average prices today probably can't be used to predict future prices (because at this point some people will probably never grasp these concepts). Ignoring all of that, for entertainment purposes lets assume the market has "digested the hardest times".

What intervention do you guys suspect is more meaningful, the minor rule changes 4.5 months ago which left large loopholes for foreign investors/big borrowers or the potential upcoming OSFI rules that will make it much more challenging for them?
Assuming OSFI actually releases the rules as they were proposed, my guess is that the OSFI rules will have a larger impact. That's just my opinion.

I'm genuinely Interested to hear the opinion of the other more knowledgeable folks in this thread. OSFI rules vs. the rules 4.5 months ago, which one will have a larger impact and why?
Member
Mar 20, 2017
209 posts
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Avi44 wrote:
Oct 13th, 2017 12:39 am
I'm genuinely Interested to hear the opinion of the other more knowledgeable folks in this thread. OSFI rules vs. the rules 4.5 months ago, which one will have a larger impact and why?
A year ago stress test was tightened to 4.64% rule. Current OSFI tightening is just a second step of that action.
Why impact should not be big? Because a year ago it wasn't. The impact was actually quite opposite - bullish.
Member
Jul 25, 2005
433 posts
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GalvToronto wrote:
Oct 13th, 2017 5:43 am
A year ago stress test was tightened to 4.64% rule. Current OSFI tightening is just a second step of that action.
Why impact should not be big? Because a year ago it wasn't. The impact was actually quite opposite - bullish.
Typical bull response. Because x happened in the past it's bound to happen again. Let's ignore all differences in the rules, situation and economy. RE to the Moon, lol!
Do you understand the differences in the new proposed rules or do you think it's the same as the last stress test?
Deal Addict
Feb 22, 2011
1676 posts
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Toronto
Qrewpt wrote:
Oct 12th, 2017 10:57 pm
Ok, more explicitly said:
Prices of sold houses look like thy're holding up - meaning this makes the market look good and strong - no need to get hung up on up vs. Holding up. However when you look under the hood, i.e look a little deeper, for example examine another market metric, in this case, I ran total $spent through the spreadsheet, you can see that there has been about 34% less dollars spent on the detached RE market, which looks pretty bad.

34% seems significant to me for such a large market.
I mean if sales of detached are down 40% obviously the total spent is down. That doesn't mean anything for prices though. Months of inventory for detached in Toronto is at 2.8. This could be an ongoing trend in Toronto where less houses sell. It doesn't make the price any less high.
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Oct 21, 2004
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rjg4235 wrote:
Oct 13th, 2017 7:56 am
I mean if sales of detached are down 40% obviously the total spent is down. That doesn't mean anything for prices though. Months of inventory for detached in Toronto is at 2.8. This could be an ongoing trend in Toronto where less houses sell. It doesn't make the price any less high.
what is your day job? apart from pumping up real estate on an online forum 24/7.
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Feb 22, 2011
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codemonkey wrote:
Oct 13th, 2017 7:58 am
what is your day job? apart from pumping up real estate on an online forum 24/7.
I'm an accountant. I like real estate and get bored at work, what can I say. Kind of funny you'd complain about someone pumping RE when this thread is basically 600 pages of what ifs that will crash it.
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Apr 8, 2017
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Avi44 wrote:
Oct 13th, 2017 12:39 am
Lets completely ignore the fact that average prices can be largely impacted by sales makeup, ignore the fact that sales are way down and inventory is still high, and that average prices today probably can't be used to predict future prices (because at this point some people will probably never grasp these concepts). Ignoring all of that, for entertainment purposes lets assume the market has "digested the hardest times".

What intervention do you guys suspect is more meaningful, the minor rule changes 4.5 months ago which left large loopholes for foreign investors/big borrowers or the potential upcoming OSFI rules that will make it much more challenging for them?
Assuming OSFI actually releases the rules as they were proposed, my guess is that the OSFI rules will have a larger impact. That's just my opinion.

I'm genuinely Interested to hear the opinion of the other more knowledgeable folks in this thread. OSFI rules vs. the rules 4.5 months ago, which one will have a larger impact and why?
Why do you keep calling them "minor" changes? The changes took all of the steam out of the market. Irrespective of what we or the policy makers thought the impact would be, it ended up turning the market upside down. So even if we thought it would be a "minor" thing, it ended up have a major impact.

I would imagine that the OFSI rule will have some impact, but at the end of the day, I don't know. Why am I responding then? Well, twice I have been surprised by how the market reacted this year. The first time was a major surprise when the 16 rule changes came out to quell the market. I didn't think they would have the impact it immediately did, but I think it highlighted how much speculation was out there. The second time I was surprised was with regards to the considerably lower amount of listings that are currently "active" in this Fall season. I thought after so many listings were terminated in the spring and early summer that people would go nuts and try and re-list in the fall, but they haven't. Of course, the listings are up over last Fall's numbers, but wasn't last year a historically low year for number of listings?

The sellers now aren't ready to give in to the buyers as they were in the spring. I think that is what some people who are more experienced in terms of real estate were referring to when they said the market can be "sticky" or "reselient".

What is being forgotten (or maybe not explicitly stated) is that there may still be a rather large psychological impact from all the rule changes, and rise in the interest rates etc. This sentiment plays a big role in how people act. Last year and earlier this year it was the "fear of missing out" and "prices will always rise". Then it turned to "the market is crashing, let's wait it out". Now it seems to be more stable than it was. I think someone referred to it is a "stalemate" between buyers and sellers. What will the psychological impact be of the OSFI mortgage changes? That may be another question worth pondering other than obvious financial questions. One thing is certain, the policy makers are making it harder to buy real estate, by making the rules more stringent.

The other thing to remember is that Toronto and Vancouver regularly come very close to the top of the charts when it comes to "best cities" or "most liveable" cities in the world. I feel that people forget what an awesome place the GTA is to live in and sometimes people can take it for granted. For those that don't like it, why don't you? The other question is why don't you move? Is it your salary? The varied job opportunities? Your family and friends are here? The diversity? The education system? The general safety? The nightlife? You can't discount those factors, because they are exactly the reasons why the GTA is so desirable worldwide. You can't say "traffic is horrendous" and then compare it to Paris and call it a day. Transit system alone doesn't make a city world class. This last part has nothing to do with what was quoted, just merely posted to enhance the discussion.
Member
Mar 20, 2017
209 posts
221 upvotes
Avi44 wrote:
Oct 13th, 2017 7:51 am
Typical bull response. Because x happened in the past it's bound to happen again. Let's ignore all differences in the rules, situation and economy. RE to the Moon, lol!
Do you understand the differences in the new proposed rules or do you think it's the same as the last stress test?
Ok let's assume I'm wrong. Then what?
Unemployment is record low. GDP is highest among G7 countries.
BoC rate hikes are caused by economy growth.
Do you really think stress tests really depreciate the value of houses? It only creates some obstacles on people's way and do not make houses less desirable to own.
Same as Fair Housing Plan, it is artificial intruding into the free market that values Toronto Real Estate like hell.
Don't treat artificial changes like real market estimation of the true value. If you start doing it - you will lose everything you can trust. You will find a great asset and next day government will come to you saying "this asset is a BS" and you will believe it without any resistance. You will start telling people that this asset is really BS and don't worth the money and you will use some scared people as a proof. Until common sense wins. It always wins.

What is more interesting here - even government does not believe this asset is a BS, they say it on public. Watch Tory's opinions etc. They only want to force some of you to start believing in false idea.
Last edited by GalvToronto on Oct 13th, 2017 8:54 am, edited 1 time in total.
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Jan 16, 2009
3623 posts
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GalvToronto wrote:
Oct 13th, 2017 8:54 am
Ok let's assume I'm wrong. Then what?
Unemployment is record low. GDP is highest among G7 countries.
BoC rate hikes are caused by economy growth.
Do you really think stress tests really depreciate the value of houses? It only creates some obstacles on people's way and do not make houses less desirable to own.
Same as Fair Housing Plan, it is artificial intruding into the free market that values Toronto Real Estate like hell.
Don't treat artificial changes like real market estimation of the true value. If you start doing it - you will lose everything you can trust. You will find a great asset and next day government will come to you saying "this asset is a BS" and you will believe it without any resistance. You will start telling people that this asset is really BS and don't worth the money and you will use some scared people as a proof. Until common sense wins. It always wins.
Common sense is that Ottawa people makes 20% more than Toronto while having a discount of 50% in housing.

That's why rent is comparable when they is so much speculation in Toronto, it is bound to correct hard like your common sense suggests.
Member
Mar 20, 2017
209 posts
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Ceryx wrote:
Oct 13th, 2017 8:59 am
Common sense is that Ottawa people makes 20% more than Toronto while having a discount of 50% in housing.

That's why rent is comparable when they is so much speculation in Toronto, it is bound to correct hard like your common sense suggests.
Ottawa has large territory and fewer people who compete there for a housing.
And annual people influx into Ottawa is much lower.
And by the way, Ottawa's appreciation is pretty high this year.

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