Author Topic: Garth Turner - Real Estate in Canada  (Read 502493 times)

alertmeipp

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Re: Garth Turner - Real Estate in Canada
« Reply #370 on: March 30, 2015, 06:25:38 AM »
The subject of this thread was Garth Turner’s prediction of the imminent collapse of a real estate bubble in Canada.

But this thread and his comments originated over three years ago.

Timing is hard, for sure, but value remains value. I'm sure people thought tech stocks were overvalued in 1997... Didn't make them fairly valued in 1999 because there hadn't been a crash yet.

The problem is I think for the foreigners, houses are cheap here.

A million for them is cheap to have an address in Canada.

Places like Scarborough, a smallish house asks for 500k can be sold for 700k.

And the same house maybe worth mid 40 couple years ago.

Not sustainable if all buyers are local and need employment income to sustain mortgage.

But we are talking about ppl who does not mortgage 


Liberty

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Re: Garth Turner - Real Estate in Canada
« Reply #371 on: March 30, 2015, 07:12:03 AM »
The subject of this thread was Garth Turner’s prediction of the imminent collapse of a real estate bubble in Canada.

But this thread and his comments originated over three years ago.

Timing is hard, for sure, but value remains value. I'm sure people thought tech stocks were overvalued in 1997... Didn't make them fairly valued in 1999 because there hadn't been a crash yet.

The problem is I think for the foreigners, houses are cheap here.

A million for them is cheap to have an address in Canada.

Places like Scarborough, a smallish house asks for 500k can be sold for 700k.

And the same house maybe worth mid 40 couple years ago.

Not sustainable if all buyers are local and need employment income to sustain mortgage.

But we are talking about ppl who does not mortgage

Where is "here"? Just Vancouver or all of Canada?

If houses are cheap here, just imagine how much cheaper they are in the US (about half price) and in other places around the world (Europe) that haven't had this massive, way above inflation, decade long run of debt binging. A few years ago the government allowed 40-year amortizations and 0 percent down, do you think that has had an impact on psychology and that maybe there's a lot of inertia there? Once things go up fast enough for long enough, people become convinced that it'll always be that way (especially if other asset classes get killed in the meantime and people lose confidence in them). I think we're still moving from past decisions, but now with mining in the hole, oil crashed, the canadian dollar clobbered, the US getting better, debt piling up and incomes getting farther and farther away from home prices, something has got to give. Otherwise what, households making 60k will be buying 2 million dollar bungalows in a few years?  Look at any world comparison, and we're one of the most expensive places in the world compared to rents or incomes or replacement costs (behind Hong Kong..) yet Canada's weather sucks and our economy is not doing well... Vancouver and Toronto aren't Paris or New York, that's for damn sure.

Also, blaming it all on foreigners will be shown to be a mistake in due time, I think. Most of what I see is that they are only a small part of the market. There was a survey in victoria where it was less than 1% of the market. But of course, realtors love to keep the illusion going (buy now or never! these rich foreigners will outbid you if you don't give your maximum!), so data is hard to come by for most places. In fact, even numbers on housing coming from realtors are really suspect and the media basically reprints their press releases; there's a total lack of transparency in our market.
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50centdollars

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Re: Garth Turner - Real Estate in Canada
« Reply #372 on: March 30, 2015, 08:53:31 AM »
The subject of this thread was Garth Turner’s prediction of the imminent collapse of a real estate bubble in Canada.

But this thread and his comments originated over three years ago.

Timing is hard, for sure, but value remains value. I'm sure people thought tech stocks were overvalued in 1997... Didn't make them fairly valued in 1999 because there hadn't been a crash yet.

The problem is I think for the foreigners, houses are cheap here.

A million for them is cheap to have an address in Canada.

Places like Scarborough, a smallish house asks for 500k can be sold for 700k.

And the same house maybe worth mid 40 couple years ago.

Not sustainable if all buyers are local and need employment income to sustain mortgage.

But we are talking about ppl who does not mortgage

Where is "here"? Just Vancouver or all of Canada?

If houses are cheap here, just imagine how much cheaper they are in the US (about half price) and in other places around the world (Europe) that haven't had this massive, way above inflation, decade long run of debt binging. A few years ago the government allowed 40-year amortizations and 0 percent down, do you think that has had an impact on psychology and that maybe there's a lot of inertia there? Once things go up fast enough for long enough, people become convinced that it'll always be that way (especially if other asset classes get killed in the meantime and people lose confidence in them). I think we're still moving from past decisions, but now with mining in the hole, oil crashed, the canadian dollar clobbered, the US getting better, debt piling up and incomes getting farther and farther away from home prices, something has got to give. Otherwise what, households making 60k will be buying 2 million dollar bungalows in a few years?  Look at any world comparison, and we're one of the most expensive places in the world compared to rents or incomes or replacement costs (behind Hong Kong..) yet Canada's weather sucks and our economy is not doing well... Vancouver and Toronto aren't Paris or New York, that's for damn sure.

Also, blaming it all on foreigners will be shown to be a mistake in due time, I think. Most of what I see is that they are only a small part of the market. There was a survey in victoria where it was less than 1% of the market. But of course, realtors love to keep the illusion going (buy now or never! these rich foreigners will outbid you if you don't give your maximum!), so data is hard to come by for most places. In fact, even numbers on housing coming from realtors are really suspect and the media basically reprints their press releases; there's a total lack of transparency in our market.

I went to a open house/bidding war on Saturday for shits and giggles. Did not see one Asian person there.
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benhacker

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Re: Garth Turner - Real Estate in Canada
« Reply #373 on: March 30, 2015, 09:10:48 AM »
Quote
I went to a open house/bidding war on Saturday for shits and giggles. Did not see one Asian person there.

We are now in the stage of action in CA real estate where there will be one last round of suckers to come in and go down with the ship.  The data does not support external (non CA) money being a significant driver of this boom, it is a red herring to shove away the fact that this boom is Canadian in nature (which in my experience Canadian's find just as uncomfortable as folks in the US did in 2006).

I would also argue (as was done above) that the relative valuation of US major markets are cheaper and/or more attractive relatively to CA, and big money Asians wouldn't on average have a problem switching.

Whether Canada's market is a bubble or not is beside the point.  It is clearly very very pricey.  I think it best to avoid as a buyer right now if possible.  All else is speculation.  An entire housing ecosystem has developed around ever rising prices... change will be uncomfortable for many even if it's not a disaster.

Ironically, I predict that when housing prices up North start printing negative YoY prices, this thread will dry up and no one will care. :)  Always seems to be that way (see China)... we'd rather try to predict the turn than profit from the result.
Ben Hacker
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wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #374 on: March 30, 2015, 09:27:38 AM »
Rules that I use:

Anything not sustainable in the long run has to end.
Low interest rates, high debt, rising unemployment, rising housing prices is not a combination that is sustainable.

You do not have to play if something does not add up.
No one is forcing my hand to invest in real estate. Maybe I need to develop a hobby outside investing or real estate and wait for the opportunity that I have prepared for.

Do not create false expectations that the market will correct in a given amount of time.
You will know when the time is right. It will be obvious went it happens. Life is a marathon.

LongHaul

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Re: Garth Turner - Real Estate in Canada
« Reply #375 on: March 30, 2015, 09:51:30 AM »
Rules that I use:

Anything not sustainable in the long run has to end.
Low interest rates, high debt, rising unemployment, rising housing prices is not a combination that is sustainable.

You do not have to play if something does not add up.
No one is forcing my hand to invest in real estate. Maybe I need to develop a hobby outside investing or real estate and wait for the opportunity that I have prepared for.

Do not create false expectations that the market will correct in a given amount of time.

You will know when the time is right. It will be obvious went it happens. Life is a marathon.

Good stuff Wisdom.  I agree.  During the 1920's Bernard Baruch reminded himself that 2+2 still equals 4 when many got sucked into the stock bubble at the time.   I think these times are relatively easy to identify.   The hard part is having the independence, courage, patience and confidence to not get sucked up into buying the bubble even though you may feel alone.

LongHaul

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Re: Garth Turner - Real Estate in Canada
« Reply #376 on: March 30, 2015, 09:54:52 AM »
Let's look out a few years.  Canadian real estate tanks 30% in real terms, unemployment way up, construction and consumer down, CAD down, etc.  Headlines are terribly pessimistic, the world is doing to end, Everyone is scared,  bla, bla, bla.  Typical bust but it will recover. 

What are some high quality businesses to own in Canada that are likely to get cheap?  I can only think of the 2 railroads that are cyclical but seem great.


50centdollars

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Re: Garth Turner - Real Estate in Canada
« Reply #377 on: March 30, 2015, 10:13:08 AM »
Rules that I use:

Anything not sustainable in the long run has to end.
Low interest rates, high debt, rising unemployment, rising housing prices is not a combination that is sustainable.

You do not have to play if something does not add up.
No one is forcing my hand to invest in real estate. Maybe I need to develop a hobby outside investing or real estate and wait for the opportunity that I have prepared for.

Do not create false expectations that the market will correct in a given amount of time.

You will know when the time is right. It will be obvious went it happens. Life is a marathon.

Good stuff Wisdom.  I agree.  During the 1920's Bernard Baruch reminded himself that 2+2 still equals 4 when many got sucked into the stock bubble at the time.   I think these times are relatively easy to identify.   The hard part is having the independence, courage, patience and confidence to not get sucked up into buying the bubble even though you may feel alone.


+1
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cwericb

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Re: Garth Turner - Real Estate in Canada
« Reply #378 on: March 30, 2015, 10:31:36 AM »
Couple of thoughts.

It’s fine to sit out what is likely a bubble, but since this thread began (Feb 2012) how much have average house prices increased in say, Vancouver. Lets say 30%? So if prices suddenly drop by 25%, wouldn’t you still have been better off to have ignored Turner’s warning and have bought in 2012?

One other thing. A while ago I suggested that one MAY have been better off to investing in a home three years ago rather than in the markets. Some disagreed. However, they may not be taking into account that the “profit” in the market is taxable when you sell. The “profit” in your home is not.
Politicians and diapers must be changed often, and for the same reason. - Mark Twain

mcliu

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Re: Garth Turner - Real Estate in Canada
« Reply #379 on: March 30, 2015, 10:41:10 AM »
What if mortgage rates ever turn negative and you're paid to borrow? How will home prices (or asset prices in general) behave then?