Author Topic: Garth Turner - Real Estate in Canada  (Read 335233 times)

rukawa

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Re: Garth Turner - Real Estate in Canada
« Reply #1710 on: October 29, 2017, 02:20:58 PM »
Quote
House buying is not rational. All the metrics in the world are meaningless as soon as your significant other informs you that 'this is the one'; you will pay whatever it takes, and twist the financial logic until it supports your decision.

If its not rational than its doubtful it will retain value over time. Everyone assumes that the tastes of today will be the tastes people will have in 20 years (e.g. tatoos). Now everyone wants to live in a detached house in the city. In 20 years everyone may decide that they want to spend their lives endlessly travelling from city to city worldwide while telecommuting to work. You may find people spending 6 months in temporary accommodations in one city and then another and then another. The idea being stuck in a house in one place may at that time may seem ridiculous and incredibly limiting. Even the idea of raising children in a single location may seem like something only poor bad parents do.

In the 1960's people thought that cities were horrible and suburbs were the dream. None of them would be able to understand what is going on today.


Rod

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Re: Garth Turner - Real Estate in Canada
« Reply #1711 on: October 29, 2017, 02:49:39 PM »
I always wonder why should a house in Toronto cost roughly triple the price of a house in Ottawa? Average income in Ottawa is much higher too. Either Toronto is grossly overpriced, or Ottawa is a fantastic bargain.

ICUMD

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Re: Garth Turner - Real Estate in Canada
« Reply #1712 on: October 29, 2017, 10:29:34 PM »
The CDN realestate market will correct, given the proper conditions.  It is not unlike the stock market, both of which are propelled by 'investors' utilizing low interest rates to borrow.  In 2002, I purchased a 780 sq ft Toronto Condo for 200K (to rent was $1600/mo).  This was less than its new construction price of ~350K in 1988.  The price of this condo continues to rise and similar units are listed today at ~420K (to rent, still only ~1700/mo.).  Maintenance fees increased from ~$325/mo to $700/mo over the same time.  Interestingly, during the financial crisis of 2008, prices came down suddenly to about $250K, then continued their upward trajectory afterwards.  New condos command an even higher premium of ~ $400 - 500K for 550 sq ft.

Things that may cause a correction:
1. Increase in interest rates. (certainly).
2. Tighter regulation on mortgages.
3. Foreign buyer taxes.
4. Creditors get tapped out - leading to higher default rates.

When will this happen?   It should have happened 5 years ago. Aside from this, it could happen at any time I suspect, but it WILL happen.  To have rent/ purchase price disparity of this sort with ongoing maintenance fee and tax increases means that something has to give.  I don't think rent prices will increase which leaves a deflation of house prices.  Wages have not increased significantly during this time. 
FIH.U TCEHY, IFFNY, BRK.B

clutch

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Re: Garth Turner - Real Estate in Canada
« Reply #1713 on: October 30, 2017, 08:22:31 AM »
I don't think rent prices will increase which leaves a deflation of house prices.  Wages have not increased significantly during this time.

Source?

ICUMD

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Re: Garth Turner - Real Estate in Canada
« Reply #1714 on: October 30, 2017, 08:35:13 AM »
I don't think rent prices will increase which leaves a deflation of house prices.  Wages have not increased significantly during this time.

Source?

Based on my personal observations - in 2002 - when Condo 1 bedroom rent prices were $1600/mo and 2017 rental prices where I can get no more than $1700/mo. today.  Of course I cannot predict the future, but I don't see rental prices increasing anytime soon.  Inventory has at least tripled I would say since 2002.  Wages haven't increased significantly.  Ergo,  the frothiness in condo prices I think is due to cheap credit.  Convince me otherwise...
FIH.U TCEHY, IFFNY, BRK.B

alertmeipp

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Re: Garth Turner - Real Estate in Canada
« Reply #1715 on: November 05, 2017, 06:43:12 PM »
Couple of thoughts after talking to some property brokers.

House buying is not rational. All the metrics in the world are meaningless as soon as your significant other informs you that 'this is the one'; you will pay whatever it takes, and twist the financial logic until it supports your decision.

I don't believe that's correct. There are definitely non-economic factors at play, just like with buying a car (what brand projects the type of image that I want to show? Will it attract a mate? etc), but money is still a big factor and not everyone is driving a Tesla or Maserati just because that's what they'd really want deep down.

Right now what pushes people to overpay for real estate is the belief that prices can't go down for any period (so FOMO + fear of being priced out + we'll just take the equity out later to pay for consumption). If that psychology changes, or if lots of people start being unable to make ends meet as interest rates keep raising and RE rules are tightened, things will change... If you adjust for inflation, most generations in the past didn't buy the equivalent of million+ dollar houses (especially not ones that are just regular houses and not luxury mansions).

If you understand Mandarin, listen to those Chinese radio station in Toronto, its commercials are mostly ask ppl to buy houses.

gurpaul88

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Re: Garth Turner - Real Estate in Canada
« Reply #1716 on: November 06, 2017, 05:44:02 AM »
It is the same thing if you listen to any south Asian station, probably worse. Not only commercials but programs dedicated to real estate. The euphoria is real and has been for several years.

alertmeipp

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Re: Garth Turner - Real Estate in Canada
« Reply #1717 on: November 06, 2017, 05:59:51 AM »
The general thinking or misunderstanding is real estate is risk free always go up or can't come down too much and is best way to save up for retirement. The return is huge tho. 20% down and house up 30% yoy... Thats 150% return.

And most just flip assignment so capital cost is even lower.

Get in before it's too late.

Unfortunately those ppl have been right for last two decades.

We will see what next decade brings.


wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #1718 on: December 06, 2017, 12:40:59 PM »
https://www.bnn.ca/do-the-right-thing-laurentian-bank-s-ceo-urges-honesty-on-mortgage-applications-1.936257

First Home capital and now Laurentian uncovers misrepresentation on mortgage applications. Lying on mortgage application is systemic in Canada.

obtuse_investor

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Re: Garth Turner - Real Estate in Canada
« Reply #1719 on: December 06, 2017, 01:07:44 PM »
We all heard it. He said “everything’s fine”.
Value Investor who manages his personal portfolio with a 25-45 year time horizon | @obtuse_investor