Real Estate

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

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  • Dec 14th, 2017 3:05 pm
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Dec 17, 2009
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alanbrenton wrote:
Dec 7th, 2017 12:38 pm
So what, auto loans still require monthly payouts, sometimes 30-50% of a typical mortgage payout.

Hey a dollar not spent is a dollar saved. Doesn't matter what you do to save or not to spend, all these things add up.

Just because 2-3x multiplier was the norm back then, it's not guarantee it will revert back to that in the future. Check out China, Hong Kong and other countries were immigrants are from.

If you own the house and don't provide power of attorney to your children, you are not going anywhere. Be careful how your write your will. ;)


I, too, don't mind if the market drops because I'm in a much better position to pick up investment properties but then, many similar households will too.
Honestly, even if I make 6 figures and able to save 5k a month, it will still take me almost 2 years just to save up 100k. In that 2 years, houses will have risen by that much and my down payment won't be enough anymore...
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alanbrenton wrote:
Dec 7th, 2017 12:58 pm
Don't quote me if you cannot provide a valuable response. Thanks.

What a waste of time.
I will quote whomever I want and it is not my fault that you both misquoted me and are deliberately ignoring my responses because you have no rebuttal.
What a waste of time. Not going to respond back to your nonsensical comments. You can have the last word or words. Must be hell to live with a person like yourself wanting people to think you are the brightest
I don't respond to personal attacks, it is meaningless to me. If you can't handle people disagreeing with your thoughts and ideas then perhaps you should be the one to exit the discussion gracefully instead of having an episode.
Last edited by Redmask on Dec 7th, 2017 1:01 pm, edited 1 time in total.
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S52B wrote:
Dec 7th, 2017 1:00 pm
Honestly, even if I make 6 figures and able to save 5k a month, it will still take me almost 2 years just to save up 100k. In that 2 years, houses will have risen by that much and my down payment won't be enough anymore...
If you made $100k and your average tax is $25k, it would be hard to save up $5k a month ($60k a year) unless you are only spending $15k for everything else.

I would have no idea where the r/e market will go but we aren't at 2017's peak at the moment.
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S52B wrote:
Dec 7th, 2017 1:00 pm
Honestly, even if I make 6 figures and able to save 5k a month, it will still take me almost 2 years just to save up 100k. In that 2 years, houses will have risen by that much and my down payment won't be enough anymore...
Exactly the point I was making. I never give millennials (or anyone else) the whole "gotta sacrifice and pull yourself up by your bootstraps" argument because they're facing a lot of obstacles that I did not.

Perhaps the stress test will exert some pressure on the market and make things more affordable, I guess we'll see. 2018 spring will be very interesting to watch.
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Sep 19, 2012
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rjg4235 wrote:
Dec 7th, 2017 11:09 am
That's exactly it, which is especially valuable for young people with a long horizon. Where else would I have been able to get 1 million dollars to invest at 2.5%? Plus have someone live in that investment and give me money to pay down the loan for me. After 25 years I get all the appreciation from the investment and someone else paid off the loan for me. All of this could be done with only $50k if you bought a place as a primary residence, then rented it out and bought another. Rinse and repeat.
Leverage is great I agree but it adds risk that doesn't necessarily need to be taken. I'll park my capital elsewhere (as would millions of other people, "property barons" aren't the only rich people in the world. I made my money outside of real estate (in fact, my real estate investments have been value destroyers compared to other investments because I wasn't lucky enough to live in the GTA over the past 5 years!).
boyohboy wrote:
Dec 7th, 2017 11:21 am
You can't live inside your stock.
I can use the income stream from my investments to pay for rent.
mudd_stuffin wrote:
Dec 7th, 2017 12:44 pm
FTR, the "stock market" since 2009 has not performed the same as AAPL, AMZN and FB. Why don't you mention NFLX while you are at it? The SPX was at the infamous 666 level at the financial crisis bottom.
Also, you are BSing on Cdn banks. The 2009 bottom on BNS was $23+ and it is $82 now. That is not 463% return. Ditto re CIBC where the low in 2009 was around $36.50. It has barely tripled since then, for 200%+ return.
Most importantly, you cannot compare housing vs stock market unless you do it on a risk-adjusted basis. Even a return of 1000% does not look all that great if the outcomes were binary being 99.99% of $0 payoff and 0.01% of 1000% payoff.
You can't compare GTA housing to the "stock market" - it's not a fair comparison. Housing bulls would cherry pick GTA housing so I'm cherry picking AAPL, AMZN and FB. And no I'm not BSing on Cdn banks: add the dividends on CIBC and you get ~450% return from bottom to top. I didn't say which banks either - you ignored RBC and EQB which have an even better return over that time (cherry picking again).

Your last point is what we can both agree on: risk adjusted returns are all that matter. The problem is you will have difficulty measuring "GTA housing" volatility (driven by liquidity concerns, non-homogenous nature of the asset etc). I might be wrong, but I don't know of any objective measure of "GTA housing" volatility so to get to a real apples to apples comparison is nigh on impossible.

Bottom line: housing is not the holy grail of investing (ie: always goes up, you have to buy, you need to get in on housing etc etc) nor is renting the equivalent of seeing value go "poof". I'm pretty sure any two rational people can agree on that.
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ahlaker wrote:
Dec 7th, 2017 2:36 pm
Leverage is great I agree but it adds risk that doesn't necessarily need to be taken. I'll park my capital elsewhere (as would millions of other people, "property barons" aren't the only rich people in the world. I made my money outside of real estate (in fact, my real estate investments have been value destroyers compared to other investments because I wasn't lucky enough to live in the GTA over the past 5 years!).
I agree there are many ways to generate wealth. The richest people I know rent and move city to city climbing the corporate ladder. It's all a matter of preference, risk tolerance and luck.

The thing that boggles my mind is how many users here have no stake in RE. I talk about it a lot because I am heavily invested and deciding what to do. I don't spend my days in a Bitcoin forum saying how stupid it is, how it's going to crash and I can't wait till every investor losers their money.
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ahlaker wrote:
Dec 7th, 2017 2:36 pm
You can't compare GTA housing to the "stock market" - it's not a fair comparison. Housing bulls would cherry pick GTA housing so I'm cherry picking AAPL, AMZN and FB. And no I'm not BSing on Cdn banks: add the dividends on CIBC and you get ~450% return from bottom to top. I didn't say which banks either - you ignored RBC and EQB which have an even better return over that time (cherry picking again).

Your last point is what we can both agree on: risk adjusted returns are all that matter. The problem is you will have difficulty measuring "GTA housing" volatility (driven by liquidity concerns, non-homogenous nature of the asset etc). I might be wrong, but I don't know of any objective measure of "GTA housing" volatility so to get to a real apples to apples comparison is nigh on impossible.

Bottom line: housing is not the holy grail of investing (ie: always goes up, you have to buy, you need to get in on housing etc etc) nor is renting the equivalent of seeing value go "poof". I'm pretty sure any two rational people can agree on that.
Again, just focusing on the stock market and I am not opining on which housing metric is appropriate to use:

Are you sure the dividends make up the rest of the 250% deficiency? To be exact and using $120 as CIBC's stock price, that gives you "only" 229% return. Did 8 years worth of dividends account for 221% return? Say CIBC averaged $4 of dividends per year, that is only $32 of dividends. Say that gives you another 100% return. That is still only a 329% return. All of this assumes you were sooooooooooo good to buy CIBC at under $37.

Just for the heck of it, CIBC in theory should be most correlated to GTA housing out of all big banks.

Yes, I was cherry picking. But it was cherry picking to refute your claim of "I could have bought any bank", while that could not have been further from the truth.

You said "any bank", did you not? So that would include all banks. If your statement is not true, I call you out for BSing.
Last edited by mudd_stuffin on Dec 7th, 2017 3:11 pm, edited 4 times in total.
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ahlaker wrote:
Dec 7th, 2017 2:36 pm

I can use the income stream from my investments to pay for rent.
Big words.

How big of an investment is needed, especially at the beginning, to provide an income "stream" that can support rent at easily $1500-$2000 per month in GTA these days?
And if you're siphoning that much out from your investment to pay rent, the investment is losing the compounding gain or you just have a gigantic investment to begin with.
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boyohboy wrote:
Dec 7th, 2017 3:12 pm
Big words.

How big of an investment is needed, especially at the beginning, to provide an income "stream" that can support rent at easily $1500-$2000 per month in GTA these days?
And if you're siphoning that much out from your investment to pay rent, the investment is losing the compounding gain or you just have a gigantic investment to begin with.
And assuming you're earlier in your career, ignoring the fact you somehow got a large investment portfolio, how will it cover rent increases for the next 20-40 years of your life?
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Sep 9, 2014
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There is a big difference between "cherry picking" the GTA or GVA for the real estate market and cherry picking the 3 highest performing stocks... It really isn't a fair analogy.
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Jul 3, 2007
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boyohboy wrote:
Dec 7th, 2017 3:12 pm
Big words.

How big of an investment is needed, especially at the beginning, to provide an income "stream" that can support rent at easily $1500-$2000 per month in GTA these days?
And if you're siphoning that much out from your investment to pay rent, the investment is losing the compounding gain or you just have a gigantic investment to begin with.
you need about $400k in investments yielding 5-6% from dividends , which is very do-able from solid ETFs or blue chip stocks like BCE , etc.....

you still make the capital gains on price gains, you are spending the dividends on rent. If the stocks move no where in a year, you still have $400k
and you got dividends every month..

Its a smart move if your not ready to buy.....

look at ZWU ZWC ZWB BMO ETFs covered call for less risk , they all yield quite nice around 6% ..
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joepipe wrote:
Dec 7th, 2017 4:15 pm
you need about $400k in investments yielding 5-6% from dividends , which is very do-able from solid ETFs or blue chip stocks like BCE , etc.....

you still make the capital gains on price gains, you are spending the dividends on rent. If the stocks move no where in a year, you still have $400k
and you got dividends every month..

Its a smart move if your not ready to buy.....

look at ZWU ZWC ZWB BMO ETFs covered call for less risk , they all yield quite nice around 6% ..
Right but that would be the extent of it. With RE you get the rent and longterm appreciation. If I have a paid off property worth $400k I get the $1700 cash monthly plus appreciation which for the last 70 years in Toronto has an annualized return of over 7%. Actually its' much higher than 7%, that's based on a simple average and over the last 20 years alone the shift from houses to condos has been drastic.
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Sep 19, 2012
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BryanBreguet wrote:
Dec 7th, 2017 4:09 pm
There is a big difference between "cherry picking" the GTA or GVA for the real estate market and cherry picking the 3 highest performing stocks... It really isn't a fair analogy.
What would be a fair analogy then? I've already handicapped my selections by showing the return on an unlevered basis. All I'm trying to show is that there are investments out there that outperform GTA/GVA housing.
mudd_stuffin wrote:
Dec 7th, 2017 3:11 pm
Yes, I was cherry picking. But it was cherry picking to refute your claim of "I could have bought any bank", while that could not have been further from the truth.
Good call - shouldn't have said "any bank" (I was being flippant).
boyohboy wrote:
Dec 7th, 2017 3:12 pm
How big of an investment is needed, especially at the beginning, to provide an income "stream" that can support rent at easily $1500-$2000 per month in GTA these days?
And if you're siphoning that much out from your investment to pay rent, the investment is losing the compounding gain or you just have a gigantic investment to begin with.
Super_Chicken wrote:
Dec 7th, 2017 3:19 pm
And assuming you're earlier in your career, ignoring the fact you somehow got a large investment portfolio, how will it cover rent increases for the next 20-40 years of your life?
Ok boys - I know I'm being blasphemous to suggest that renting isn't a waste of money, but hear me out. In 2011, I put down a $180k down payment on a $900k house in Calgary. Over the past 7 years I've been living there and have been averaging ~$3000 in housing costs which is ~$2500 in mortgage+interest along with ~$550 in property tax, house insurance and maintenance costs (averaged). I could've been renting a similar house for about $3,250 (on average for the past 7 years, rentfaster.ca will show you what you can expect for $3,250). Last piece of information: my house is now worth about $950k (sadly I didn't hit the lottery like you folks in the GTA). So, to be in the same place financially (renting versus buying) I would've had to have earned, after-tax, about 9% annualized on my $180k. Could I have realistically done that? The bottom line is that even after levering my initial $180k by 5x, and even after accounting for the fact that any principal residence gains are tax free, I still haven't blown "renting and investing" out of the water. The moral of my story is that renting is not "lighting money on fire" and you can indeed come out ahead.
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The fair comparison is GTA versus the stock market. Cherry picking the real estate market would be picking the best neighborhood. But the entire GTA? Or GVA? That's what you should use. Maybe add another big metropolitan area in there if you want.

Why? Because it's obvious those markets are the ones going up. It doesn't require gambling or doing a lot of research. On the other hand, identifying the few stocks that will over perform the stock market (and the real estate one) is really, really hard. It's more a lottery than anything else. In that case, you might as well mention Bitcoin then.

Also, for your 9% return (didn't double check your calculations, I trust you)... Will I think you are making a great example of why real estate is great. Even though your house barely increased in value, you'd have needed the stock market to go up by significantly more than the long run average (6%). So sure you could have got 9% since 2011, but you should never bet on 9% after tax for the stock market.

So personally I see your situation as: even if your house doesn't increase much, you can still come out ahead unless the stock market goes up by crazy. For renting to be better, you need a house to barely go up and a stock market on fire... So renting and coming out ahead is really not a sure thing.
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BryanBreguet wrote:
Dec 7th, 2017 4:49 pm
The fair comparison is GTA versus the stock market. Cherry picking the real estate market would be picking the best neighborhood. But the entire GTA? Or GVA? That's what you should use. Maybe add another big metropolitan area in there if you want.

Why? Because it's obvious those markets are the ones going up. It doesn't require gambling or doing a lot of research. On the other hand, identifying the few stocks that will over perform the stock market (and the real estate one) is really, really hard. It's more a lottery than anything else. In that case, you might as well mention Bitcoin then.

Also, for your 9% return (didn't double check your calculations, I trust you)... Will I think you are making a great example of why real estate is great. Even though your house barely increased in value, you'd have needed the stock market to go up by significantly more than the long run average (6%). So sure you could have got 9% since 2011, but you should never bet on 9% after tax for the stock market.

So personally I see your situation as: even if your house doesn't increase much, you can still come out ahead unless the stock market goes up by crazy. For renting to be better, you need a house to barely go up and a stock market on fire... So renting and coming out ahead is really not a sure thing.
Not sure when this thread turned into a renting vs. buying debate but the best answer is entirely situational/personal.

Yes renting seems like money going "poof" in theory but when you consider the amount and effort you put into maintaining a home along with the opportunity cost of what you could have done with the money otherwise, it isn't all that clear cut in each case.

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