Author Topic: Garth Turner - Real Estate in Canada  (Read 488285 times)

hardcorevalue

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Re: Garth Turner - Real Estate in Canada
« Reply #420 on: April 08, 2015, 09:19:26 AM »
All I can say is I have seen this in countless friends (late 20s early 30s age group) in Toronto. Yes, the most common belief is if you don't buy now you will never be able to afford a house in the city. There is zero belief (and I say this not over exaggerating) that house prices can go down. They are a 'one way' asset to most Torontonians. Any time you mention the US, Ireland, or other markets where housing broke, they say Canada isn't like that or the government would never let that happen. This spring is likely to see material price appreciation in Toronto, the interest rate cuts (although small) make it seem to the public that rising prices are even more permanent now.
« Last Edit: April 08, 2015, 11:07:45 AM by hardcorevalue »


alertmeipp

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Re: Garth Turner - Real Estate in Canada
« Reply #421 on: April 08, 2015, 10:16:52 AM »
You don't need to wait for spring summer time.

House prices already up at least 15 20 percent in some suburb areas yoy. Scarborough

Inside Toronto, even way over built condos have caused bidding war.

The new finance minister  and bank governer so far is saying  soft landing.  Ie. Wait and pray.




Uccmal

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Re: Garth Turner - Real Estate in Canada
« Reply #422 on: April 09, 2015, 05:14:53 AM »
There seems to be a general sense that nothing huge can occur in the housing market.  This itself is a risk.

In a severe global downturn, risk aversion will take over and funds will run from risky assets.  The proverbial tide will go out and so many things will get clobbered simultaneously (junk bonds, EM bonds, stocks and currencies).  It has taken years to inflate global assets and it will take much less time for all of them to come back down to earth.

It is getting harder to sit back and watch everyone else making money in this environment, and that is exactly why those that can resist being drawn into the markets, will be well positioned when the inevitable will eventually occur.  Remember how Buffet was ridiculed because he would not board the tech wreck of the 90s?

I agreed - although I think real estate in Canada is probably not quite the same as the tech bubble where some assets were priced at avg of 165x p/e multiples - and the market participants bought using margin -

I believe the high end real estates in Canada are bought with cash... 
and many 'average' condos were bought with more stringent downpayment and insurance requirements. 

That's not to say a bubble is not here and won't burst... but I have a hard time seeing that's the same as the tech bubble. 

Gary

During the tech wreck, even the Queen of England was trading stocks.  Everyone was doing it, except for a few notables WB, Prem, etc..

We are seeing global inflation of all assets simultaneously.  There is a possibility that all assets will reverse simultaneously and very quickly.  Long tail events occur when people are not expecting them.  BLACK SWAN!!

Today everyone is convinced that a 50% drop in Canadian RE is not possible.  Is a 50% drop reasonable in light of the global asset inflation over the past 7 years?  What if everything drops at the same time?  Will global funds pour into Canada for refuge?  Who knows???

BLACK SWANS are possible and very few are prepared to deal with such an outcome.  Personally it looks like pick up quarters in front of a steam roller.  Not worth the risk.

 

Okay, we had a generational macro event in 2008/09.  As a result the financial system is in better shape than it has been in decades. 

What asset prices are inflated, exactly?  You keep saying this but provide no evidence.  Commodities are generally depressed.  Europe Inc is generally depressed.  Japan Inc. is depressed.  By far the most important asset of all is running at 40% of its peak.

I agree with you that CDn. real estate is frothy.  However, as I have asserted above it is a subsector of the economy restricted to mortgage lenders.  Will something take it down eventually.  Of course, but 50%.  When did this last happen?
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Uccmal

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Re: Garth Turner - Real Estate in Canada
« Reply #423 on: April 09, 2015, 05:36:55 AM »
There seems to be a general sense that nothing huge can occur in the housing market.  This itself is a risk.

In a severe global downturn, risk aversion will take over and funds will run from risky assets.  The proverbial tide will go out and so many things will get clobbered simultaneously (junk bonds, EM bonds, stocks and currencies).  It has taken years to inflate global assets and it will take much less time for all of them to come back down to earth.

It is getting harder to sit back and watch everyone else making money in this environment, and that is exactly why those that can resist being drawn into the markets, will be well positioned when the inevitable will eventually occur.  Remember how Buffet was ridiculed because he would not board the tech wreck of the 90s?

I agreed - although I think real estate in Canada is probably not quite the same as the tech bubble where some assets were priced at avg of 165x p/e multiples - and the market participants bought using margin -

I believe the high end real estates in Canada are bought with cash... 
and many 'average' condos were bought with more stringent downpayment and insurance requirements. 

That's not to say a bubble is not here and won't burst... but I have a hard time seeing that's the same as the tech bubble. 

Gary

During the tech wreck, even the Queen of England was trading stocks.  Everyone was doing it, except for a few notables WB, Prem, etc..

We are seeing global inflation of all assets simultaneously.  There is a possibility that all assets will reverse simultaneously and very quickly.  Long tail events occur when people are not expecting them.  BLACK SWAN!!

Today everyone is convinced that a 50% drop in Canadian RE is not possible.  Is a 50% drop reasonable in light of the global asset inflation over the past 7 years?  What if everything drops at the same time?  Will global funds pour into Canada for refuge?  Who knows???

BLACK SWANS are possible and very few are prepared to deal with such an outcome.  Personally it looks like pick up quarters in front of a steam roller.  Not worth the risk.

 

Okay, we had a generational macro event in 2008/09.  As a result the financial system is in better shape than it has been in decades. 

What asset prices are inflated, exactly?  You keep saying this but provide no evidence.  Commodities are generally depressed.  Europe Inc is generally depressed.  Japan Inc. is depressed.  By far the most important asset of all is running at 40% of its peak.

I agree with you that CDn. real estate is frothy.  However, as I have asserted above it is a subsector of the economy restricted to mortgage lenders.  Will something take it down eventually.  Of course, but 50%.  When did this last happen?

1989. House prices dropped 50% in TOR

You are correct.  It was, however, not universally that dramatic across Canada. 
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Uccmal

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Re: Garth Turner - Real Estate in Canada
« Reply #424 on: April 09, 2015, 06:02:25 AM »
No it was VAN and TOR were they dropped

What data are you using.  I found one data set that suggested a roughly 30% drop for Canada.
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Uccmal

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Uccmal

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Re: Garth Turner - Real Estate in Canada
« Reply #426 on: April 09, 2015, 06:53:34 AM »
Toronto Real house prices from TREB:

http://www.wheretrustbegins.com/4a_custpage_9237.html

~ 30 % drop in 89/90

Anecdotally, I recall headlines of 50% drops in some areas such as the Beaches. 
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Phoenix01

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Re: Garth Turner - Real Estate in Canada
« Reply #427 on: April 09, 2015, 08:49:10 AM »
Hi Al,

The Central Banks have created a major global stretching for yield that has affected everything (Sovereign debt, Corporate Bonds, Junk Bonds, Real Estate, Stocks, ...).  When the elastic snaps back (don't know when & don't know how) it has the potential to be colossal.

Do you have plan for this possible long tail event?  What if RE is down 50% and stock are down even more and the Cdn $ is crushed?  Will you be OK?  Will you be able to take advantage of the amazing bargains that will be offered up?  Do you have some sort of insurance policy against this scenario?

wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #428 on: April 09, 2015, 09:38:52 AM »
From what I recall, in the US an argument that was often used was that they have never had a nation wide drop in housing prices. That real estate was local. But, after a long run up in RE prices across the country prices dropped on average 34%.

RE prices have been a one way bet in Canada since 1999 - 15+ years. What are the odds that this continues? If this does stop and Canadians realize they have taken on too much debt and sucked up future demand, what happens?

The norm in recessions is for immigration to drop as the locals struggle to get jobs and do not like additional competition for jobs. Investments coming into the country drop because money coming from outside can find a better home.

What happens, if after a 15 year run up in housing prices it comes to halt and 7% of our GDP is housing. In the US it was 6% at peak and currenlty it is running at 3%. Personal debts are going to be tough to pay back unless commodities rebound in a big way or the loonie drops a lot to bring back manufacturing.

I am unable to figure out how this can continue. Though it has for longer than I would have expected.

50centdollars

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