Real Estate

Merged: GTA RE Bubble Bursting Bearish news and updates

  • Last Updated:
  • Jun 8th, 2017 11:39 am
Deal Fanatic
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Apr 9, 2006
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GT-EH
So many salty priced out trolling renters here. :lol:

FYI - Inflation rate is 1.6%... there's no need to increase interest rates (yet).
I just like to collect things! ¯\_(ツ)_/¯
Behold, true glory. #PCMasterRace!
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Apr 21, 2004
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GiOBoY wrote:
May 19th, 2017 1:45 pm
So many salty priced out trolling renters here. :lol:

FYI - Inflation rate is 1.6%... there's no need to increase interest rates (yet).
More like would-be renters. Parents are probably trying to show them out of the door for their excessive negativity.

Pro tip: Your parents might still be liable financially even after you reach the age of majority:
http://www.justice.gc.ca/eng/rp-pr/fl-l ... -paem.html


No wonder, they have time bashing home owners, they are still receiving support to pay for the internet connection and their textbooks while they study the r/e market economics!
http://www.schumanlaw.ca/blog/child-sup ... t-end.html

Unlike several jurisdictions of the United States, child support in Canada does not automatically end for a child when he or she turns 18 years old. In Canada, child support continues for children after their 18th birthday in one of two circumstances:

1. If the child is disabled, such that he or she remains dependent and cannot obtain employment that is adequate to meet his or her needs; or,

2. When a child is enrolled full-time in a program of education. In theory, that program of education must be career-oriented and not just an excuse for the child to remain dependant. There is a debate over whether a “victory lap” in high school, where a child who spends an extra year in high school, qualifies the child to continue receiving child support. Some factors to be considered are if the child is spending that extra year to hang out with friends, or to avoid entering the workforce or postsecondary education, rather than continuing their studies to meet the educational requirements of a particular program. Some judges suggest that a child is only entitled to child support for a “victory lap” if the extra year is related to career or education advancement.

An important difference in child support for children over 18 years of age is that the child support tables no longer presumptively apply (although most judges use the tables as a starting point) and other arrangements can be made for their support to suit their particular circumstances.

For children over 18 years old, who are enrolled in a full-time program of education, their educational expenses may be special or extraordinaryexpenses. This means that the child’s parents must contribute to postsecondary education, tuition, books, residence, and other related expenses in proportion to their incomes.
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May 8, 2017
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Honestly, guys. The name calling is just childish.
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Newbie
Mar 19, 2009
61 posts
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Scarborough
anyone in here that had their firm offers to buy in the last few months fall through now? Reason im asking is that we sold a while back on a firm offer and now the bank for the buyer is appraising our property and there is a high chance that they will not appriase it at the value that we sold it for. Im wondering how commonly this scenario is playing out ...
Sr. Member
Aug 19, 2016
613 posts
181 upvotes
Well, both the bulls and bears have a similar view regarding the interest rate. When it goes up, prices come down, and vise versa.

Well, do not try to predict interest rates. Just invest accordingly.

For instance, if you buy 30-year US treasury, you will get around 3%.

If you buy a 1 million dollar house, you get one or combination of both of the following:
1) rent the whole thing out for ~$2,000/month.
2) live in it, and save ~2,000 a month on rent.
Assuming there is no other expenses associated with buying the house (which is not possible), then we would have a rate of return of $2.40%.

Would you prefer to put your money in a 30-year treasury or a house?

Bull's argument #1: "but sir, the house will appreciate in value on maturity and treasury doesn't".

True, but the appreciation will depend on the Interest rate. However, in the beginning of this post, I have mentioned that we should leave the direction of the interest out of this equation because it is unpredictable.

Bull's argument #2: "but sir, the rent increases each year".

True, that is why house prices will go up due to the increase in earning power (rental income and/or rental saving). Therefore, the investment in a house is not such a bad idea after all even at current price, and low interest rate environment.

Noticed that I didn't factor in the finance cost? Well, the above would be the perfect situation for real estate if people actually paid for their houses in cash (unlikely the case). Therefore, the financing cost (aka debt) is the factor that might kill the bulls.
Sr. Member
Jan 26, 2016
610 posts
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Toronto, ON
Sanyo wrote:
May 19th, 2017 9:35 am
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....
lol @ downvotes to arithmatic and statistics... is the downvote disagreeing with your post or just displeased with the situation in general..?
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May 8, 2017
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squall_13ca wrote:
May 19th, 2017 2:02 pm
anyone in here that had their firm offers to buy in the last few months fall through now?
Anecdotally, and according to Garth Turner, yes. He's blogged about it several times recently (www.greaterfool.ca).
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Sr. Member
Jan 26, 2016
610 posts
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Toronto, ON
CollegeGraduate wrote:
May 19th, 2017 2:06 pm
Well, both the bulls and bears have a similar view regarding the interest rate. When it goes up, prices come down, and vise versa.

Well, do not try to predict interest rates. Just invest accordingly.

For instance, if you buy 30-year US treasury, you will get around 3%.

If you buy a 1 million dollar house, you get one or combination of both of the following:
1) rent the whole thing out for ~$2,000/month.
2) live in it, and save ~2,000 a month on rent.
Assuming there is no other expenses associated with buying the house (which is not possible), then we would have a rate of return of $2.40%.

Would you prefer to put your money in a 30-year treasury or a house?

Bull's argument #1: "but sir, the house will appreciate in value on maturity and treasury doesn't".

True, but the appreciation will depend on the Interest rate. However, in the beginning of this post, I have mentioned that we should leave the direction of the interest out of this equation because it is unpredictable.

Bull's argument #2: "but sir, the rent increases each year".

True, that is why house prices will go up due to the increase in earning power (rental income and/or rental saving). Therefore, the investment in a house is not such a bad idea after all even at current price, and low interest rate environment.

Noticed that I didn't factor in the finance cost? Well, the above would be the perfect situation for real estate if people actually paid for their houses in cash (unlikely the case). Therefore, the financing cost (aka debt) is the factor that might kill the bulls.
Two problems with what you describe:
1) a 1 Million house would rent out considerably higher than 2000. Right now, 2 bed condos, at around 600k rent out at around 2300. So a 1 Mil house would probably go north of that, in 3k range. Someone else can confirm, but I can attest to the condo being around 2.3k which you could buy at around 600k.

2) You are correct to take out interest rate from calculation. But you shouldn't take out inflation. The inflation will eat away at your 1 Mil invested in GICs, as the 3% you receive includes the inflation part (~2% is BoC target). When you buy a house, though, you get the rental income plus the increased value due to inflation.
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Dec 27, 2013
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Toronto
Interests rates are going down
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Jan 26, 2016
610 posts
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Toronto, ON
squall_13ca wrote:
May 19th, 2017 2:02 pm
anyone in here that had their firm offers to buy in the last few months fall through now? Reason im asking is that we sold a while back on a firm offer and now the bank for the buyer is appraising our property and there is a high chance that they will not appriase it at the value that we sold it for. Im wondering how commonly this scenario is playing out ...
Banks not appraising has been a thing for the past few years with fast escalating prices. My realtor said many people expect this and cover the difference with out of pocket cash. It's just what it takes to buy these days.
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WinterSleep wrote:
May 19th, 2017 2:08 pm
lol @ downvotes to arithmatic and statistics... is the downvote disagreeing with your post or just displeased with the situation in general..?
I think the downvoting is because Sanyo has repeatedly said that the price to income calculation for New York vs. Toronto is meaningless (New York is cheaper), and because San Francisco is also likely in a bubble.

Image
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Housing bear who won't be a bear forever.
Follow my journey through the Toronto housing bubble on Twitter: @SoSudsy
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Toronto
WinterSleep wrote:
May 19th, 2017 2:15 pm
Two problems with what you describe:
1) a 1 Million house would rent out considerably higher than 2000. Right now, 2 bed condos, at around 600k rent out at around 2300. So a 1 Mil house would probably go north of that, in 3k range. Someone else can confirm, but I can attest to the condo being around 2.3k which you could buy at around 600k.

2) You are correct to take out interest rate from calculation. But you shouldn't take out inflation. The inflation will eat away at your 1 Mil invested in GICs, as the 3% you receive includes the inflation part (~2% is BoC target). When you buy a house, though, you get the rental income plus the increased value due to inflation.
Exactly. Where do people come up with these rent prices? Go find a decent house for rent at $2k in Toronto. Decent home decent area.

2 bed 2 bath condo 850 sqft selling for 700k is going for $2700 a month. In some areas it goes for more.
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Apr 21, 2004
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I think you take the middle ground but have some comments/questions.

1 Where in the GTA can I find a 1-million dollar house renting out for just $2k a month and if there are any, how many are available?

2. You also forgot to include taxation because many rationale investment decisions are also driven by tax rules/avoidance. Last time I checked, an unused TFSA only has a $52k contribution limit. If it's a principal residence, it's cap gains free (if partially rented, then partially have to pay income tax on it).

3. If you leave interest rates out, it would almost seem disservice to the bears because interest rates have no where to go but up and leaving something that is at the very bottom historically out of an equation doesn't seem right. If you insist in taking out interest rates and pegging it at the current rates infinitely, then I would turn from neutral to bullish because demand for r/e will only go up with immigration and migration from the periphery to the center of the job market.

4. argument #2 is where rent control applies

5. Even at $2k/rental a month (which I think is below market value especially with the rent control), that pretty much covers the interest cost of 2.4% and so that wipes out the debt factor you were talking about -- interest free mortgage on the rental property.

If BoC promises this low a rate for the next 10 years and if all government levels raised debt via non-CAD issuance (thereby not impacting the Canadian bond yields), I will go out after work and start investment property hunting. :)
Last edited by alanbrenton on May 19th, 2017 2:18 pm, edited 2 times in total.
Deal Fanatic
Dec 27, 2013
5817 posts
1913 upvotes
Toronto
CollegeGraduate wrote:
May 19th, 2017 2:06 pm
Well, both the bulls and bears have a similar view regarding the interest rate. When it goes up, prices come down, and vise versa.

Well, do not try to predict interest rates. Just invest accordingly.

For instance, if you buy 30-year US treasury, you will get around 3%.

If you buy a 1 million dollar house, you get one or combination of both of the following:
1) rent the whole thing out for ~$2,000/month.
2) live in it, and save ~2,000 a month on rent.
Assuming there is no other expenses associated with buying the house (which is not possible), then we would have a rate of return of $2.40%.

Would you prefer to put your money in a 30-year treasury or a house?

Bull's argument #1: "but sir, the house will appreciate in value on maturity and treasury doesn't".

True, but the appreciation will depend on the Interest rate. However, in the beginning of this post, I have mentioned that we should leave the direction of the interest out of this equation because it is unpredictable.

Bull's argument #2: "but sir, the rent increases each year".

True, that is why house prices will go up due to the increase in earning power (rental income and/or rental saving). Therefore, the investment in a house is not such a bad idea after all even at current price, and low interest rate environment.

Noticed that I didn't factor in the finance cost? Well, the above would be the perfect situation for real estate if people actually paid for their houses in cash (unlikely the case). Therefore, the financing cost (aka debt) is the factor that might kill the bulls.
This is like the worst investment and RE analytics in all of RErfd threads

If I had to guess I would say you are 21 years old and live at home.
Jr. Member
Mar 20, 2017
168 posts
176 upvotes
Look how it was in Vancouver, regarding active listings.
Image
The foreign tax happened in early August 2016.

1)You can see that two months prior to foreign tax listing grew significantly. Toronto had same picture in March and April.
2)You can see that the month of the foreign tax had the biggest number of listings. We also have it this month (May)
3)You can see that two months following after foreign buyer tax listings are decreasing, but still remain relatively high...It is what we are gonna see in June & July
4)In August 2017 and after buyers will compete for fewer listings with wild bidding wars again and no more bad news will happen

Just be calm and wait until the market plays its pre-programmed scenario.

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