Author Topic: Garth Turner - Real Estate in Canada  (Read 486525 times)

Ham Hockers

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Re: Garth Turner - Real Estate in Canada
« Reply #130 on: July 11, 2014, 06:12:14 AM »
As the article states at the end, the key is what happens to interest rates. The five year rate currently sits at a generational low of 3%; if it normalizes to 5% (as the author expects) then, yes, we likely will see a decline in prices. The higher interest rates go the bigger the price decline.

That's only true holding everything else constant.


Liberty

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Re: Garth Turner - Real Estate in Canada
« Reply #131 on: August 08, 2014, 09:39:51 AM »
17% of condo owners in Toronto, Vancouver bought for investment

http://www.cbc.ca/news/business/17-of-condo-owners-in-toronto-vancouver-bought-for-investment-1.2731289

This won't end well...
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ukvalueinvestment

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Re: Garth Turner - Real Estate in Canada
« Reply #132 on: August 08, 2014, 10:18:44 AM »
17% is probably low compared to London  ;)
@ukvalueinv

leftcoast

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Re: Garth Turner - Real Estate in Canada
« Reply #133 on: August 08, 2014, 10:35:35 AM »
It's actually "17% of condo owners who live in a condo also own a secondary condo for investment."

That's very, very different from saying that 17% of condos are investment properties.

From the CMHC report:
The survey did not cover Canadian households that own condominium units in Toronto or Vancouver but do not reside in these CMAs. Foreign investors, and corporate investors are also not covered by the survey.


Not sure what one is supposed to conclude from a stat like this.

blainehodder

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Re: Garth Turner - Real Estate in Canada
« Reply #134 on: August 08, 2014, 10:38:31 AM »
This somewhat obnoxiously ad filled site has some great charts on Canadian housing and income.

http://www.chpc.biz/6-canadian-metros.html

Liberty

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Re: Garth Turner - Real Estate in Canada
« Reply #135 on: August 08, 2014, 10:40:29 AM »
Yeah, the very restrictive definition means that this is a floor. The real number is probably much higher, especially for all those pre-construction condos that people like Brad Lamb are flogging to the unsophisticated masses, claiming they can make triple-digit returns in a few years...

I think it's said well here: https://twitter.com/benrabidoux/status/497780348299018241
« Last Edit: August 08, 2014, 10:54:59 AM by Liberty »
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SharperDingaan

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Re: Garth Turner - Real Estate in Canada
« Reply #136 on: August 08, 2014, 12:40:13 PM »
There is a wide range of condo size & location within each city. The term 'average' is pretty meaningless here.

Most shoebox investment condo's are bought because PIT & condo fees after tax - are significantly less than renting; & little suzy does not have to fight others to get the place. Mom/pop invest by putting up the DP - & suzy rents the condo from them while going to school. Suzy's rent = mom/pops net monthly after-tax cost. Mom/pop will often also be the agent buying/selling the place, & selling directly to other families with sons/daughters in similar positions. Minimal MLS involvement, & a good chunk of the commission $ stays within the family.

Raise rates 500bp & the value of all real estate declines, not just condos.

SD

Liberty

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Re: Garth Turner - Real Estate in Canada
« Reply #137 on: August 26, 2014, 06:40:31 AM »

Question: What will cause the bubble in real estate to burst or put another way, what will cause sentiment to change in the CDN housing market? Will it be interest rates? Will the government lower the amortization period again? Is it a collapse in commodity prices?

Cheers

No idea, but it's always something. "When something can't keep going, it will stop," as they say.
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leftcoast

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Re: Garth Turner - Real Estate in Canada
« Reply #138 on: August 27, 2014, 03:54:04 PM »
I was sitting with a bunch of people around a campfire recently, and while chatting with the fellow next to me, I learned he was the VP of Credit for a prominent mid-size credit union in the Vancouver area... basically overseeing their residential mortgage business. So of course I started peppering him with questions about his thoughts on the Vancouver real estate market, credit quality, mortgage regulations for credit unions vs. banks, etc.

He through me for a loop. He told me that several years ago, he firmly believed that Vancouver real estate was due for a major correction, but after watching prices continue to rise and rise, he's since changed his mind and joined the camp that thinks it will just keep going up because borrowing is so cheap and "everyone wants to live here." I asked what did he think would happen when interest rates rise? He said that he doesn't think they ever will now, because they've been so low for so long that raising them would be hurt too many people, so "it's too late... they can't do it." I asked, but what if they do? He laughed and said, "then I'll be out of a job."

It was eye-opening... these are kind the sentiments you've heard from average home-owners and speculators in Vancouver for years. Hearing them from a mortgage lending exec -- an otherwise smart guy -- really drove home how pervasive the irrational exuberance really is.


Liberty

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Re: Garth Turner - Real Estate in Canada
« Reply #139 on: August 27, 2014, 05:52:00 PM »
Thanks for sharing. This is what capitulation near the top smells like, I think.

Reminds me of the Citigroup exec: "As long as the music is playing, you’ve got to get up and dance."
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen