Real Estate

GTA housing pricing argument in 20 years

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Oct 2nd, 2020 9:35 am
ediasn [OP]
Jr. Member
Feb 2, 2011
197 posts
24 upvotes

Oct 2nd, 2020 9:35 am

GTA housing pricing argument in 20 years

I've been pretty silent on the bear bull debate of greater toronto housing, but what has bothered me for the Last 10 years of bull arguments and historic data has been its future target price.

So we all know housing and condos in some gta areas has seen over 20% annualized gains in last 20 years.
From 2007 to now...a small housing in pickering was 200k...is now 1 mill. 500% gain. Same in markham Richmond hill etc

People think housing can go up 5%+ a year for next 20 years because immigration and no land..

That would mean a 3 bedroom junk old house with small lot would cost 2 mill...

That would mean a 4 bedroom big detached house in the suburbs that is 1.4 million now would be 3.5 million.

Do we think most suburb houses are going to be 3.5 million?

Incomes for computer engineers in 2007 at big banks was 50k starting from uft and waterloo. Now its 75k

In 20 years it may be 120k starting. How will they afford a 1m+ house in the shittiest areas and a 3.5m in a decent area. Of course good areas will be at least 5 m.

2% annualized gains I get....but people think 5 to 10% annualized gains in 20 20 years...

Thoughts?
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Oct 2nd, 2020 9:52 am
erexa
Sr. Member
Sep 18, 2008
689 posts
124 upvotes
Woodbridge

Oct 2nd, 2020 9:52 am

ediasn wrote: ↑ I've been pretty silent on the bear bull debate of greater toronto housing, but what has bothered me for the Last 10 years of bull arguments and historic data has been its future target price.

So we all know housing and condos in some gta areas has seen over 20% annualized gains in last 20 years.
From 2007 to now...a small housing in pickering was 200k...is now 1 mill. 500% gain. Same in markham Richmond hill etc

People think housing can go up 5%+ a year for next 20 years because immigration and no land..

That would mean a 3 bedroom junk old house with small lot would cost 2 mill...

That would mean a 4 bedroom big detached house in the suburbs that is 1.4 million now would be 3.5 million.

Do we think most suburb houses are going to be 3.5 million?

Incomes for computer engineers in 2007 at big banks was 50k starting from uft and waterloo. Now its 75k

In 20 years it may be 120k starting. How will they afford a 1m+ house in the shittiest areas and a 3.5m in a decent area. Of course good areas will be at least 5 m.

2% annualized gains I get....but people think 5 to 10% annualized gains in 20 20 years...

Thoughts?
complete loser computer engineers work for 75K...
+2
Oct 2nd, 2020 10:09 am
FARMERBLANCHE
Deal Addict
Jul 3, 2002
1298 posts
3029 upvotes

Oct 2nd, 2020 10:09 am

erexa wrote: ↑ complete loser computer engineers work for 75K...
That's great insight

Back to the original post
Of course they can go up that much
And that wouldn't even be considered a great investment especially with all the costs associated with real estate
If you invest $1.4mil with the historical rate of return let's say in the s&p 500 index for the last 20 years, you would have would have $8.2 million without fees and roughly $7.5 mil with fees in an ETF. Taxes would have to be paid but still way more than the $3.5 mil for the real estate
Oct 2nd, 2020 10:11 am
Hp4041
Jr. Member
May 10, 2020
178 posts
137 upvotes

Oct 2nd, 2020 10:11 am

erexa wrote: ↑ complete loser computer engineers work for 75K...
yes, because everyone can get hired at facebook and google for their first job.
Oct 2nd, 2020 10:14 am
Hp4041
Jr. Member
May 10, 2020
178 posts
137 upvotes

Oct 2nd, 2020 10:14 am

FARMERBLANCHE wrote: ↑ That's great insight

Back to the original post
Of course they can go up that much
And that wouldn't even be considered a great investment especially with all the costs associated with real estate
If you invest $1.4mil with the historical rate of return let's say in the s&p 500 index for the last 20 years, you would have would have $8.2 million without fees and roughly $7.5 mil with fees in an ETF. Taxes would have to be paid but still way more than the $3.5 mil for the real estate
Where did you get those numbers from? They are incorrect. Since Sep/Oct 2000, S&P is up 130%. So 1.4 would be worth 3.2 or so
Oct 2nd, 2020 10:22 am
FARMERBLANCHE
Deal Addict
Jul 3, 2002
1298 posts
3029 upvotes

Oct 2nd, 2020 10:22 am

Hp4041 wrote: ↑ Where did you get those numbers from? They are incorrect. Since Sep/Oct 2000, S&P is up 130%. So 1.4 would be worth 3.2 or so
S&p has a compound rate of return of 8.78% since 2000
It's the beauty of compound interest
Oct 2nd, 2020 10:23 am
Hp4041
Jr. Member
May 10, 2020
178 posts
137 upvotes

Oct 2nd, 2020 10:23 am

FARMERBLANCHE wrote: ↑ S&p has a compound interest rate of 8.78 since 2000
It's the beauty of compound interest
No it doesnt..thats just factually incorrect.
Oct 2nd, 2020 10:50 am
Hp4041
Jr. Member
May 10, 2020
178 posts
137 upvotes

Oct 2nd, 2020 10:50 am

FARMERBLANCHE wrote: ↑ Sorry I was off, did it quickly
1.4 mil would be about $4.5 mil in the last 20 years
http://www.moneychimp.com/features/market_cagr.htm
Ok so it went down by almost 50% (not 8.5). Now compare that to real estate. What would 1.4 M in 2000 be today in Toronto Real estate. 1,4 M in GTA real estate would probably be 7-8M if one had to loosely approximate! What did 1.4 M even mean back then?

Anyway, I am personally a believer in long term RE appreciation - but one has to be a bit over optimistic to say it mildly to feel that what happened in last 5-6 yrs will happen in the next 5-6.
Oct 2nd, 2020 10:58 am
mazerbeaner
Deal Fanatic
Feb 22, 2011
8846 posts
10695 upvotes
Toronto

Oct 2nd, 2020 10:58 am

When all is said and done and they add $1 trillion CAD to supply all asset prices will go up. Inflation doesn't include house prices so they will let it run up.

How is that possible? More people rent. People live in smaller spaces. People have more room mates. Poor people are displaced. etc etc.

When houses were $20k do you really think they expected it to go to $1.5 million? That's the problem with paper currency they just print a ton when they are in trouble. Why do you think some countries have currency that is a fraction of a USD and everything costs 10x more? The currency is devalued when they print their way out of trouble. This also reduces the real value of their debt.
Last edited by mazerbeaner on Oct 2nd, 2020 11:01 am, edited 1 time in total.
+2
Oct 2nd, 2020 11:00 am
FARMERBLANCHE
Deal Addict
Jul 3, 2002
1298 posts
3029 upvotes

Oct 2nd, 2020 11:00 am

Hp4041 wrote: ↑ Ok so it went down by almost 50% (not 8.5). Now compare that to real estate. What would 1.4 M in 2000 be today in Toronto Real estate. 1,4 M in GTA real estate would probably be 7-8M if one had to loosely approximate! What did 1.4 M even mean back then?

Anyway, I am personally a believer in long term RE appreciation - but one has to be a bit over optimistic to say it mildly to feel that what happened in last 5-6 yrs will happen in the next 5-6.
Don't get me wrong, so am I
I was just trying to show that there are much easier ways to double your money in 20 years than real estate, especially with all the costs associated with it and time. I was referring to the original post of a 1.4m house being $3.4m in 20 years. And that a 1.4m house could easily be 3.4m in 20 years or more.
Oct 2nd, 2020 11:05 am
RichmondCA
Sr. Member
Mar 2, 2017
814 posts
1441 upvotes
Toronto

Oct 2nd, 2020 11:05 am

This thread will be great!
Realtor, Investor, CPA
+2
Oct 2nd, 2020 11:08 am
1LoveToronto
Newbie
Feb 10, 2017
90 posts
79 upvotes

Oct 2nd, 2020 11:08 am

I have no view on future growth, whether it can match historical or dip as low as inflation, but I do believe there is much more room on the upside.

Barring a global catastrophe (COVID hasn't been at catastrophe levels yet since it's shown so far that home-buyers have been disproportionally UNaffected compared to non-home buyers), it is more likely that the middle class disappears and life just becomes more difficult for the average person. Home ownership just won't be the "entitlement" many people feel that they have; that instead of 5x-10x gross salary, it'll 15x and multi-generational. This isn't a new concept in some parts of the world already.
+3
Oct 2nd, 2020 11:11 am
Hp4041
Jr. Member
May 10, 2020
178 posts
137 upvotes

Oct 2nd, 2020 11:11 am

RichmondCA wrote: ↑ This thread will be great!
It will be like all the others lol. 20 yrs from now prices will be higher - i dont know how someone could think they wont be. The pace of increase is anyone's guess and the path even more so. But there can be periods of decline for sure. You can look at many places south of the border for some disastrous #s but locally you can look at Calgary as an example. Things can certainly go wrong. But thats with any investment.

I think the issue lies in the fact that current price points even with the low rates, debt is barely serviceable through rent and in majority of the cases its not. Thats the troubling part which makes it less of an investment and more of a speculation. If however, you can leverage up while being able to service debt through rent and maybe even be Cash flow neutral - i think the chances of coming out ahead in the long term are very very high.
+1
Oct 2nd, 2020 11:14 am
DisneyKruze
Member
Jun 15, 2015
356 posts
397 upvotes
Thornhill, ON

Oct 2nd, 2020 11:14 am

Interesting discussion. Looking at my situation, I bought my house in York region for $400K in 1995. It's now worth $1.8 M. So, it's gone up 4.5 times in 25 years. No way it will go up 4.5 times in another 25 years.
Oct 2nd, 2020 11:15 am
Hp4041
Jr. Member
May 10, 2020
178 posts
137 upvotes

Oct 2nd, 2020 11:15 am

1LoveToronto wrote: ↑ I have no view on future growth, whether it can match historical or dip as low as inflation, but I do believe there is much more room on the upside.

Barring a global catastrophe (COVID hasn't been at catastrophe levels yet since it's shown so far that home-buyers have been disproportionally UNaffected compared to non-home buyers), it is more likely that the middle class disappears and life just becomes more difficult for the average person. Home ownership just won't be the "entitlement" many people feel that they have; that instead of 5x-10x gross salary, it'll 15x and multi-generational. This isn't a new concept in some parts of the world already.
Unfortunately this might quite possibly happen. But it needs general expansion in the background - and thats not always a given. If they keep immigration levels up - then it probably will though. We are importing people, their money, and latent inflation of assets while making it significantly harder for the next generation.
Oct 2nd, 2020 11:25 am
FARMERBLANCHE
Deal Addict
Jul 3, 2002
1298 posts
3029 upvotes

Oct 2nd, 2020 11:25 am

DisneyKruze wrote: ↑ Interesting discussion. Looking at my situation, I bought my house in York region for $400K in 1995. It's now worth $1.8 M. So, it's gone up 4.5 times in 25 years. No way it will go up 4.5 times in another 25 years.
That's a great example
$400000 invested in 1995 would equate to roughly $4.5 mil at the end of last year in the s&p 500. Now for sh!ts&giggles let's assume that fees are offset by RE carrying costs and you would have more $$ now if you invested but no place to live for the last 25 years. Grinning Face
Used the same CAGR calculator
http://www.moneychimp.com/features/market_cagr.htm
Ps I know that's not how real estate works
Last edited by FARMERBLANCHE on Oct 2nd, 2020 11:28 am, edited 1 time in total.
Oct 2nd, 2020 11:27 am
Hp4041
Jr. Member
May 10, 2020
178 posts
137 upvotes

Oct 2nd, 2020 11:27 am

FARMERBLANCHE wrote: ↑ That's a great example
$400000 invested in 1995 would equate to roughly $4.5 mil at the end of last year in the s&p 500. Now for sh!ts&giggles let's assume that fees are offset by RE carrying costs and you would have more $$ now if you invested but no place to live for the last 25 years. Grinning Face
Used the same CAGR calculator
http://www.moneychimp.com/features/market_cagr.htm
The only but very big issue I have with this comparsion is that you are comparing equity risk with real estate risk. They are not the same and are not supposed to have the same return. Stocks are supposed to far outperform and they do over longer periods.

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