Author Topic: Garth Turner - Real Estate in Canada  (Read 507060 times)

wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #640 on: March 07, 2016, 09:03:18 PM »
Geneva, Bern, Zurich rank very high as livable cities. I don't see them rising 30% a year. I have been trying to understand for years how the mountains in Vancouver allow one to afford their mortgage as the median household here earns $72,000.
« Last Edit: March 07, 2016, 09:06:25 PM by wisdom »


JBTC

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Re: Garth Turner - Real Estate in Canada
« Reply #641 on: March 07, 2016, 10:24:34 PM »
Was the US attracting thousands of immigrants before 2008?

Is HK attracting thousands of immigrants? What about Singapore?

I believe Delhi attracts more people than Vancouver, yet the prices there are dropping? To the people moving to Delhi, it is a more attractive option than where they lived prior to moving there? According to the logic that thousands of people moving to a city for a better life - prices should keep going up. Why isn't it working in HK, Singapore or Delhi. Please don't tell me because everyone wants to move to TO or Vancouver. For most of the rich in the world a city like Vancouver doesn't even register.

It is great to sit in Canada and imagine that everyone in world wants to live in Canada. The reality is we only take in 250,000 people a year.

First, let me say rising population is a key factor to housing prices. This is so simple because this is demand.

Second, no one was saying rising population is the only factor. Trying to imply what others didn't say is not the way to discuss.

Third, let me leave out Delhi because I know nothing about it.

For the US housing bubble, I think the major cause was low rates and irresponsible lending. But the major bubble cities had huge internal migration - Las Vegas, Phoenix, and Miami. They helped the boom.

In HK and Singapore, both direct immigration and other foreign buying all contributed to the high property prices. As a result, in both markets the government has put in restrictive measures on non-resident buyers. Despite both markets have softened in recent months, those restrictions are still in place.

JBTC

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Re: Garth Turner - Real Estate in Canada
« Reply #642 on: March 07, 2016, 10:43:18 PM »
Geneva, Bern, Zurich rank very high as livable cities. I don't see them rising 30% a year. I have been trying to understand for years how the mountains in Vancouver allow one to afford their mortgage as the median household here earns $72,000.

If you can

1) make English the first language of the Swiss people (perhaps harder than making Montreal adopt English) and

2) change the Swiss law on immigration (probably easier to simply invade the country)

then a 30% rise could be in the cards!  :)

Viking

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Re: Garth Turner - Real Estate in Canada
« Reply #643 on: March 08, 2016, 12:15:02 AM »
I think it is pretty straight forward to identify a bubble. I think it is near impossible to predict when it will pop and what the cause of the 'pop' will be.

It looks to me like Vancouver is in a housing bubble. Living here, it is taking on the feel of a game of monopoly. Prices up 20% over the last year in some neighbourhoods? Prices up 50% in 5 years? My neighbours sound like they are intoxicated when they talk about real estate.

The one caveat I have is China. If demand from China continues at current levels (people wanting to get their money out) then the Vancouver market could stay elevated. It could even continue to go higher. Bizarre....

SharperDingaan

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Re: Garth Turner - Real Estate in Canada
« Reply #644 on: March 08, 2016, 06:29:03 AM »
Mathematics.

The reality in all global cities is that the ‘average’ growth rate on the price of land within the down town of the city, greatly exceeds the ‘average’ wage increase of the local citizen. Compound the difference over an extended time frame, & down town land ownership becomes more and more out of reach of the local citizen. Local citizens live further out (where it is more affordable); & only tourists & the very rich live in the down town. Time & popularity determines affordability.

London, Paris, Rome, etc. have been around for hundreds of years; simple compounding has made their down town living unaffordable. The solution has been separation of land from dwelling, via a lease (UK); to live down town does not mean that you have to own the land – the norm is to rent. If you want to live in a very desirable place, rents are of course - high; no different to any other rental market in the world.

We just don’t want to hear it.

SD
« Last Edit: March 08, 2016, 06:30:51 AM by SharperDingaan »

KCLarkin

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Re: Garth Turner - Real Estate in Canada
« Reply #645 on: March 08, 2016, 06:50:41 AM »
Was the US attracting thousands of immigrants before 2008?

Is HK attracting thousands of immigrants? What about Singapore?

I believe Delhi attracts more people than Vancouver, yet the prices there are dropping? To the people moving to Delhi, it is a more attractive option than where they lived prior to moving there? According to the logic that thousands of people moving to a city for a better life - prices should keep going up. Why isn't it working in HK, Singapore or Delhi. Please don't tell me because everyone wants to move to TO or Vancouver. For most of the rich in the world a city like Vancouver doesn't even register.

It is great to sit in Canada and imagine that everyone in world wants to live in Canada. The reality is we only take in 250,000 people a year.

"The most affordable major metropolitan markets in 2015 were in the United States, which had a moderately unaffordable rating of 3.7.followed by Japan, with a Median Multiple of 3.9. Major metropolitan markets were rated "seriously unaffordable," in Canada (4.2), Ireland (4.5), the United Kingdom (4.6) and Singapore (5.0). The major markets of Australia (6.4), New Zealand (9.7) and Hong Kong (19.0) were severely unaffordable."

Vancouver is a notable exception. But Toronto certainly seems reasonable, at least relative to other major global cities.

scorpioncapital

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Re: Garth Turner - Real Estate in Canada
« Reply #646 on: March 08, 2016, 07:41:58 AM »
What currency are they using for that study? With US dollars, the major cities of Canada are relatively cheaper.

mcliu

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Re: Garth Turner - Real Estate in Canada
« Reply #647 on: March 08, 2016, 07:49:02 AM »
I guess another question is: at what prices would make you believe that a bubble has formed? Would it considered a bubble if median prices were $3 million, $5 million, $10 million or is there no limit?

Are there some similarities between what's happening in Toronto/Vancouver and Sydney/Auckland/Melbourne. (Would they be considered global cities too?) It seems like Australian prices were fuelled by a combination of foreign demand and lax lending. Thoughts?
http://www.bloomberg.com/news/articles/2016-02-22/one-sign-australia-s-housing-market-is-due-for-a-2008-moment

What about major cities like Chicago, Houston, why aren't they experiencing such elevated home prices.

Apparently, prices in Milton, Ontario(?) Increased by 42% yoy.. Is that even part of the GTA? http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/torontos-hot-housing-market-drives-big-bidding-wars-in-suburbs/article29053048/&ved=0ahUKEwihx4K8s7HLAhWHhywKHTKZA-oQqQIIGigAMAA&usg=AFQjCNHWv6ncMw0Mqn5oVkISEeBae2NXuQ&sig2=ajPFoh6gjTEmrtEBapiJpQ

Studesy

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Re: Garth Turner - Real Estate in Canada
« Reply #648 on: March 08, 2016, 07:50:01 AM »
1.  I'm not sure we can classify this so called "bubble" as a Canada wide issue.  Correct we if I'm wrong, but I believe it is mostly a Toronto, Montreal, Vancouver issue.

2.  Justifying why prices will go up or down in these markets over the next couple years is a waste of time.  The obvious thing is that real estate in these markets is not
     a value proposition.  From a "safety of principle" standpoint, I believe a real estate investor would be better protected looking in a more value oriented market (Windsor??...or out side the country).

3.  Assigning values to real estate in general is extremely difficult.  Since the "rents" (cash flows) that derive these values are essentially a commodity, how can one predict these with any certainty            going forward? Somewhat similar to why Buffett avoids commodity companies (with the exception of those with some sort of comp. advantage..ie low cost producer).  One could attempt to use such a "Buffet approach" identifying properties with some type of competitive advantage over the rest of the market, determine the future cash flows, and compute a value based on these factors (the max price one would be willing to pay in order to compound at a given rate over a period of time).

On the other hand, a Graham type approach to RE would be much simpler, principle protecting, and would provide a market beating return over a period of time.  Imagine if you could buy a basket of residential properties at 0.75x tangible book value.  In other words, tangible book = replacement cost or physical value of the home ("the bricks and mortar") +  $0 for the land + say $20,000 for the services to the property.  I suspect this would be an extremely safe long term investment (even if no cash flow was produced early on).  Also, I'm sure such deals exist....especially in 08/09 in certain US cities.

Thoughts?

KCLarkin

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Re: Garth Turner - Real Estate in Canada
« Reply #649 on: March 08, 2016, 08:12:17 AM »
What currency are they using for that study? With US dollars, the major cities of Canada are relatively cheaper.

These are just multiples to median income, so currency is not a factor.

Chicago is an interesting case. One obvious difference is that chicago population has actually shrunk over the past couple decades. The us median multiple is really helped by rust belt cities like Detroit.

http://www.demographia.com/dhi.pdf