Author Topic: Garth Turner - Real Estate in Canada  (Read 502562 times)

rukawa

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Re: Garth Turner - Real Estate in Canada
« Reply #1900 on: August 19, 2019, 10:52:30 AM »
There is a simple way to determine whether supply is a problem...rental rates. In a situation with lots of speculation there should be high prices and low rental rates. From what I've heard Vancouver did have this situation at one point. But Toronto never did. Toronto has high real estate prices and high rental rates. There may be a case to be made though for houses in the suburbs like Mississauga where rental rates are very low and house prices very high.


Rod

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Re: Garth Turner - Real Estate in Canada
« Reply #1901 on: August 19, 2019, 11:24:12 AM »
There is a simple way to determine whether supply is a problem...rental rates. In a situation with lots of speculation there should be high prices and low rental rates. From what I've heard Vancouver did have this situation at one point. But Toronto never did. Toronto has high real estate prices and high rental rates. There may be a case to be made though for houses in the suburbs like Mississauga where rental rates are very low and house prices very high.

I guess the question is what does "restrained supply" actually mean? If there is a mad rush to buy homes as fast as possible and the owners of raw land are slow to sell then you will have restrained supply regardless of the regulatory environment. You could also ask what is the capacity of the homebuilding industry to build new homes in the Toronto market? There is always going to be some kind of bottleneck somewhere in the production process. There is a limit to how many homes can be built in one year given the amount of construction labour you can draw on and other constraints. My understanding is that there is close to a record number of homes being built in the GTA now.




cwericb

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Re: Garth Turner - Real Estate in Canada
« Reply #1902 on: August 19, 2019, 11:29:04 AM »
There is another factor that may have an effect on the housing prices in Canada's major cities.

At one time a lot of people were tied to living in the large congested metropolitan areas. But today that is no longer the case for many. Many jobs are portable today and a lot of people no longer have to suffer living in the dense, urban, crime infested cities and are free to relocate to more desirable areas of the country.

As they say, “water seeks its own level”. As more and more people realize that they don’t have to live in Vancouver, Toronto, Calgary, etc, it is pushing up prices in the more desirable areas of the country and this will not stop until prices tend to level off somewhat.

Here, we have a high level of immigration. When I moved to a new city here last year I asked my insurance agent if he was seeing a lot of immigrants moving. He said yes, they were seeing a lot of new comers. I asked where most were coming from, expecting China, Pakistan, Phillippines, etc. He said “Ontario”.
Politicians and diapers must be changed often, and for the same reason. - Mark Twain

Rod

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Re: Garth Turner - Real Estate in Canada
« Reply #1903 on: August 19, 2019, 11:43:30 AM »
There is another factor that may have an effect on the housing prices in Canada's major cities.

At one time a lot of people were tied to living in the large congested metropolitan areas. But today that is no longer the case for many. Many jobs are portable today and a lot of people no longer have to suffer living in the dense, urban, crime infested cities and are free to relocate to more desirable areas of the country.

As they say, “water seeks its own level”. As more and more people realize that they don’t have to live in Vancouver, Toronto, Calgary, etc, it is pushing up prices in the more desirable areas of the country and this will not stop until prices tend to level off somewhat.

Here, we have a high level of immigration. When I moved to a new city here last year I asked my insurance agent if he was seeing a lot of immigrants moving. He said yes, they were seeing a lot of new comers. I asked where most were coming from, expecting China, Pakistan, Phillippines, etc. He said “Ontario”.

The idea that telecommuting thanks to the internet will cause large relocations out of cities has been around for many years. I wonder whether it's actually happening? It seems that many companies are actually moving jobs downtown. And young people increasingly want to live and work downtown as well. The urbanization trend seems only to be getting stronger. And the biggest cities seem to be the ones gaining the most new jobs.

rukawa

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Re: Garth Turner - Real Estate in Canada
« Reply #1904 on: August 19, 2019, 01:26:59 PM »
There is a simple way to determine whether supply is a problem...rental rates. In a situation with lots of speculation there should be high prices and low rental rates. From what I've heard Vancouver did have this situation at one point. But Toronto never did. Toronto has high real estate prices and high rental rates. There may be a case to be made though for houses in the suburbs like Mississauga where rental rates are very low and house prices very high.

I guess the question is what does "restrained supply" actually mean? If there is a mad rush to buy homes as fast as possible and the owners of raw land are slow to sell then you will have restrained supply regardless of the regulatory environment. You could also ask what is the capacity of the homebuilding industry to build new homes in the Toronto market? There is always going to be some kind of bottleneck somewhere in the production process. There is a limit to how many homes can be built in one year given the amount of construction labour you can draw on and other constraints. My understanding is that there is close to a record number of homes being built in the GTA now.

Restrained supply is fully explained in the following article:
https://business.financialpost.com/real-estate/regulatory-overkill-is-driving-biggest-canada-homebuilder-south

Why would a developer complain about regulations and threaten to move if his real problem is a lack of labour. Why would developers fund Ontario Proud:
https://www.cbc.ca/news/canada/toronto/ontario-proud-election-advertising-spending-1.4941210

I think its extremely odd that its easier to make money in Florida, North Carolina and Arizona when home prices are less than half what they are in the GTA. But its easy to explain if the problem is excessive red-tape. Developers are complaining because the regulatory burden is high. And if the burden is high than it is definitely supply-constraining.

Rod

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Re: Garth Turner - Real Estate in Canada
« Reply #1905 on: August 19, 2019, 02:04:46 PM »
I think the biggest problem with supply in Toronto are the restrictive zoning policies in the urban neighbourhoods. So much of the older parts of the city are zoned for single family homes, which is outdated given how much the city has grown. What's needed is low-rise apartment buildings and townhouses. It's been called the "missing middle". A lot of people are pushing for change so maybe something will happen.

Mark Jr.

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Re: Garth Turner - Real Estate in Canada
« Reply #1906 on: August 28, 2019, 04:49:13 PM »
The idea that telecommuting thanks to the internet will cause large relocations out of cities has been around for many years. I wonder whether it's actually happening? It seems that many companies are actually moving jobs downtown. And young people increasingly want to live and work downtown as well. The urbanization trend seems only to be getting stronger. And the biggest cities seem to be the ones gaining the most new jobs.

Anecdotally, we shut down our business office in June, we’re 21 years old and were in that office for about 14 years. Nobody was using the space, more and more of the staff have moved out of Toronto to places like Cambridge, Kitchener, even New Brunswick, Nova Scotia, etc.

We’re an internet company, and we do everything online. We were already doing everything virtually, phones, email, video conferencing, project tracking.

The savings were substantial and go directly to the bottom line. It was a no-brainer. It turns out we’re not alone and this is becoming more the norm within the industry.

I’d be wary of commercial real estate (office rentals), even the temp/space on-demand unicorns like WeWork are fighting an uphill battle I think.

In a few years we may buy our own building, but it’ll be a mixed use: office downstairs, with multi-tenant rentals on top. We’ll see.



SharperDingaan

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Re: Garth Turner - Real Estate in Canada
« Reply #1907 on: August 29, 2019, 07:15:19 AM »
The idea that telecommuting thanks to the internet will cause large relocations out of cities has been around for many years. I wonder whether it's actually happening? It seems that many companies are actually moving jobs downtown. And young people increasingly want to live and work downtown as well. The urbanization trend seems only to be getting stronger. And the biggest cities seem to be the ones gaining the most new jobs.

Anecdotally, we shut down our business office in June, we’re 21 years old and were in that office for about 14 years. Nobody was using the space, more and more of the staff have moved out of Toronto to places like Cambridge, Kitchener, even New Brunswick, Nova Scotia, etc.

We’re an internet company, and we do everything online. We were already doing everything virtually, phones, email, video conferencing, project tracking.

The savings were substantial and go directly to the bottom line. It was a no-brainer. It turns out we’re not alone and this is becoming more the norm within the industry.

I’d be wary of commercial real estate (office rentals), even the temp/space on-demand unicorns like WeWork are fighting an uphill battle I think.

In a few years we may buy our own building, but it’ll be a mixed use: office downstairs, with multi-tenant rentals on top. We’ll see.

I have had a similar experience with a GTA start-up ...

The traditional reason for partners buying the real-estate the office is in, is because it's the partners pension plan.
The business continues to pay rent every month, but after 20 years the partners real-estate is owned outright.

We also found that we were primarily an internet company that was essentially outsourcing everything.
Generally, partners/staff were having a face/face meeting once/week at best, the rest of the time it was mostly Skype/Phone. When we did the numbers; continuing with the combined cost of telecom+temp space-on-demand+lunches - came in at well under the costs of a permanent 'office'. Lower break-evens, and tax deductability, were also material 'additional' considerations.

Amongst our takeaways; was the realization that to rent space (DT Toronto/GTA hubs) efficiently - all the renters in that location, had to have a similar need (place to bring clients) - and be actually using the space for that purpose. As rent is a fixed cost, and 'usage' doesn't show up as a variance each month, there was no incentive to manage it. Make usage semi-variable, and the dynamics change quite a bit.

If you're a large company, a permanent office space is pretty much expected; but if you're a small/medium company, space-on-demand is becoming increasingly the norm. A 'common-use' lounge, a room of your own, and a 'conference' room bookable as needed. It's also the office set-up 'of choice' for a growing number of junior staff.

SD



 
 

« Last Edit: August 31, 2019, 07:26:55 PM by SharperDingaan »

Cigarbutt

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Re: Garth Turner - Real Estate in Canada
« Reply #1908 on: September 14, 2019, 06:41:18 AM »
Thesis: housing prices is Canada are influenced by many factors but the level of interest rates remains the most important factor.
This post: Supply factors are important and regional dynamics apply but the above thesis is maintained.
Potential outcome: The recent trend (last 20 years) is assumed to continue if interest rates stay low or go lower. IMO, the potential for non-linear changes are inadequately discounted.
If you have time to waste:
https://bankunderground.co.uk/2019/09/05/houses-are-assets-not-goods:-what-the-difference-between-bulbs-and-flowers-tells-us-about-the-housing-market/
https://bankunderground.co.uk/2019/09/06/houses-are-assets-not-goods-taking-the-theory-to-the-uk-data/
https://housingevidence.ac.uk/wp-content/uploads/2019/08/20190820b-CaCHE-Housing-Supply-FINAL.pdf
https://www.nbc.ca/content/dam/bnc/en/rates-and-analysis/economic-analysis/hot-charts-190913.pdf

Since the year 2000, when Nortel peaked, Canada's household debt to GDP and disposable income has been multiplied by 1.7, interest rates (10-yr government bonds) went from 5.9% to 1.5% now (1.1% a few weeks ago), 'investments' have been diverted to housing and household debt services burden is worsening and reaching a new high.

Nobody knows the future but I guess it may be worthwhile to look into potential side effects from non-linear developments.
« Last Edit: September 14, 2019, 06:44:39 AM by Cigarbutt »

wisowis

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Re: Garth Turner - Real Estate in Canada
« Reply #1909 on: September 14, 2019, 07:30:11 AM »
https://www.theglobeandmail.com/business/economy/article-how-canadas-suburban-dream-became-a-debt-filled-nightmare/

Opens with a bombshell example:
Quote
Navin Seepaul is a 29-year-old single dad who makes $30,000 a year as a barber. He owns a $1-million house in Brampton, a sprawling suburb northwest of Toronto. Each month, the payments on his roughly $700,000 mortgage are $4,300. On top of that, he has $24,000 in credit card debt.
To help pay the bills – even just the monthly interest charges are staggering – he rents out his basement to three or four students, and two truck drivers rent bedrooms on his second floor. At any given time, the young father has six vehicles parked on his property.

Credit cycle is turning:
Quote
Worried about household debt, the nation’s bank regulator is forcing the big banks to hold more capital to guard against potential loan losses. At the same time, the banks are becoming increasingly stringent about loans, making it harder for customers to refinance and consolidate their debts. Others are seeing interest rates on their lines of credit or credit cards increase with no explanation.

“I can’t go to my bank now and shift my Visa balance onto my line of credit,” says Scott Terrio, manager of consumer insolvency for Hoyes, Michalos Licensed Insolvency Trustees in Ontario. “That is a big deal. It doesn’t sound like much. But that’s what people were doing for the last five years.”

When people start running out of options, that’s when you’ve got trouble coming, according to Mr. Terrio, adding that insolvencies in Ontario are increasing at a pace not seen since 2009. “When those doors start to close," he says, “I think the next insolvency peak will blow 2009 away.”