Real Estate

Merged: GTA RE Bubble Bursting Bearish news and updates

  • Last Updated:
  • May 26th, 2017 6:21 am
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Dec 27, 2013
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I just woke up. World ended yet?
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Jan 26, 2016
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john5170 wrote:
May 18th, 2017 11:22 pm
http://www.theglobeandmail.com/real-est ... e35015919/

This article is not BS. I see it for myself. Tons of unsold properties with price changes!
It's almost as though we didn't see the exact same thing happen in Vancouver... smh. Come back when interest rates rise and unemployment goes up.

Vancouver housing market is rebounding from tax impact, with prices up 5% in three months

The Vancouver market has seen sales decline steadily since the province announced an additional 15 per cent tax on foreign buyers effective Aug. 2, 2016. Ontario followed with its own 15 per cent on foreign buyers, calling it a non-resident tax and extending it to the entire Greater Golden Horseshoe which affects a population of about nine million people in southern Ontario.

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Doug Porter, the chief economist with Bank of Montreal, said the evidence is clear that the tax in British Columbia did cool Vancouver’s single detached home market. “Vancouver was as hot as a fire cracker in 2016,” said Porter. “It looks the shock of the tax is wearing off. But who knows where prices would have been absent the tax?”
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Applesmack wrote:
May 19th, 2017 12:27 am
Looks like "return to normal" to me:

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What are the reasons for the "capitulation" phase? GTA remains the economic power-house of not only Canada, but the nearby region including US. People have jobs, and there are more jobs being created around GTA. 100k immigrants settle down in GTA. Interest rates are rock bottom, and nothing signals a chance of a drastic rise. Rents are increasing every year, so if people sell they will have to rent at a comparable price.

Your prediction makes no sense.

According to you people we were in mania phase in 2008...
Deal Guru
Mar 23, 2009
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This was on ebaumsworld, a US site that posts viral videos, memes, and other such stuff. I believe their main demographic is adolescent and young adult males.

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It says something when even teenage American boys might find humour in references to the Toronto real estate market.
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BiegeToyota wrote:
May 18th, 2017 9:29 pm
I think there should be a forum tax for every stupid post made on the forum.

Certainly it would also benefit society as a whole.
you're gonna need a bankruptcy trustee then Face With Tears Of Joy
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Sep 8, 2007
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WinterSleep wrote:
May 19th, 2017 12:03 am
It's almost as though we didn't see the exact same thing happen in Vancouver... smh. Come back when interest rates rise and unemployment goes up.

Vancouver housing market is rebounding from tax impact, with prices up 5% in three months
Now with the Ontario FBT foreign buyers can just go back to the West Coast and buy where they might have preferred in the first place (ie Vcvr)? If all things equal just buy where they want now. The Cdn dollar has actually weakened from a year ago, negating part of the FBT effects anyways. If the RE engine slows in Ontario hence cooling the economy as a whole, the Cdn$ will take another hit again making the 15% less of an impact. The Cdn$ weakened about 3% or so even from around the time the FBT in Ontario became more of a certainty.

It remains funny to me if it's the case that foreign buyers didn't mind paying the 30% increase of the price of a house year over year, but when there's a 15% tax (that there's multiple ways to get around) they walk away?
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Looks like everyone is polishing their crystal ball.
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EugW wrote:
May 19th, 2017 12:55 am
This was on ebaumsworld, a US site that posts viral videos, memes, and other such stuff. I believe their main demographic is adolescent and young adult males.

Image

It says something when even teenage American boys might find humour in references to the Toronto real estate market.
I find that funny considering how expensive places like San Francisco are in the us.
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cartfan123 wrote:
May 19th, 2017 7:17 am
Now with the Ontario FBT foreign buyers can just go back to the West Coast and buy where they might have preferred in the first place (ie Vcvr)? If all things equal just buy where they want now. The Cdn dollar has actually weakened from a year ago, negating part of the FBT effects anyways. If the RE engine slows in Ontario hence cooling the economy as a whole, the Cdn$ will take another hit again making the 15% less of an impact. The Cdn$ weakened about 3% or so even from around the time the FBT in Ontario became more of a certainty.

It remains funny to me if it's the case that foreign buyers didn't mind paying the 30% increase of the price of a house year over year, but when there's a 15% tax (that there's multiple ways to get around) they walk away?
The tax is a game to locals who think a crash will happen and they may have a shot at a property 75% off.
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May 8, 2017
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WinterSleep wrote:
May 19th, 2017 12:48 am
What are the reasons for the "capitulation" phase?
Typically a consumer-led recession. Obviously, we're not there yet.
GTA remains the economic power-house of not only Canada, but the nearby region including US. People have jobs, and there are more jobs being created around GTA.
A credit tightening cycle, like the one we're probably about to see is enough to do it. Low prices causes less credit, more loan scrutiny, greater risk aversion, which in turn begets lower prices.
100k immigrants settle down in GTA.
Toronto's growth rate is only about 1%. Those immigrants are backfilling dead people.
Interest rates are rock bottom
Which only serves to make it worse. The Bank of Canada has one less arrow in its quiver to fight a recession. Typically they'd lower interest rates to help stimulate the economy. With interests rates and effectively zero, they have almost no wiggle room except going negative, which has less impact and other consequences.
Rents are increasing every year, so if people sell they will have to rent at a comparable price.
It's nearly impossible to have a cashflow positive property in Toronto. It's dirt cheap to rent in Toronto compared to purchase price.


Although I'm not saying that's the case, it's entirely possible that we were in a manic phase during the 2008 downturn. Canada weathered the Great Recessions awfully well. Perhaps we didn't let the correction take place that should have and we're about to pay for it. Only time will tell, but I wouldn't rule it out as a possibility.
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Sanyo wrote:
May 19th, 2017 7:38 am
I find that funny considering how expensive places like San Francisco are in the us.
Except its a market created by Silicon Valley jobs that pay 20 yr olds 6 figures as a starting point. lol
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Buggy166 wrote:
May 19th, 2017 9:16 am
Except its a market created by Silicon Valley jobs that pay 20 yr olds 6 figures as a starting point. lol
San Francisco median household income= $77,734
San Francisco average real estate price= $1,204,000

Toronto median household income =$72,830
Toronto average re price = 916,000

Hmmmm....
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Jan 26, 2016
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SmugDruggler wrote:
May 19th, 2017 8:03 am

Which only serves to make it worse. The Bank of Canada has one less arrow in its quiver to fight a recession. Typically they'd lower interest rates to help stimulate the economy. With interests rates and effectively zero, they have almost no wiggle room except going negative, which has less impact and other consequences.


It's nearly impossible to have a cashflow positive property in Toronto. It's dirt cheap to rent in Toronto compared to purchase price.


Although I'm not saying that's the case, it's entirely possible that we were in a manic phase during the 2008 downturn. Canada weathered the Great Recessions awfully well. Perhaps we didn't let the correction take place that should have and we're about to pay for it. Only time will tell, but I wouldn't rule it out as a possibility.
Bank of Canada has already signaled it is willing to make rates negative to starve a recession; so if a recession does occur you can bet they will follow through with that. With falling rates, money becomes even cheaper and hard assets will increase in price. It will also make the loan cheaper to pay back with lower-valued money.

So the idea that a far-fetched recession, for which there are no signs at the moment, would precipitate this capitulation doesn't hold water as BoC will just reduce rates further. It doesn't seem likely as you mentioned, and even if it were to happen, BoC has given confidence that it will enact negative rates.


You bet your bottom that if mortgage rates fall to 0.5% prices will not "capitulate". It will be even easier to pay off.

As for rents, they are not dirt cheap. The commonly accepted definition of dirt cheap is something at least 50% off. If you take a typical condo, you actually pay more to rent than you would if you buy given the amount of principle being paid down. So in a low rate environment where your DP is earning peanuts, an investor may be more than happy to put that on a property and capitalize on the ROI made through the difference between the mortgage_interest + taxes + utils and the rent.



And in a low rate environment, hard assets appreciate so his 20% DP will see 5x leverage on the appreciation, which is icing on the cake.

Take a look at comparable condos and their rentals to see this, or here:
He believes that many condo buyers are looking at the amount they would pay in rent for a similar unit and figuring they might as well buy and pay down some principal on a mortgage, he says.

“Money is still cheap on the street,” he says of the low level of interest rates.
https://www.theglobeandmail.com/real-es ... e35015919/
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