Author Topic: Garth Turner - Real Estate in Canada  (Read 430710 times)

sundin

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Re: Garth Turner - Real Estate in Canada
« Reply #1780 on: October 03, 2018, 01:14:38 PM »


Viking

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Re: Garth Turner - Real Estate in Canada
« Reply #1781 on: October 03, 2018, 01:31:15 PM »
The report says “Moody’s Analytics predicts interest rates will rise through 2020, which could push mortgage rates back up to around 6 per cent from the current five-year rate of around 4.4 per cent. But the absence of “significant” house price declines should reduce the risk of mortgage debt “deteriorating” over the period, the report concludes.”

Actual 5 year fixed mortgage rates in Canada currently are 3.25-3.5%. If they rise 1.5% to 5% over the next 18 months (and remain at that level for any length of time) my crystal ball says we will likely see significant price declines. Too many people at the margin are carrying far too much debt and when it has to be refinanced at rates 50% higher they will be toast. Once the turn in prices happens, it could get ugly if it spreads into the broader economy.

50centdollars

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Re: Garth Turner - Real Estate in Canada
« Reply #1782 on: October 10, 2018, 06:10:33 AM »
https://business.financialpost.com/personal-finance/mortgages-real-estate/osfi-to-take-new-measures-to-address-equity-based-mortgage-loans

"A federal regulator says it will have to take further action to address mortgage approvals by Canadian banks that still depend too much on the amount of equity in a home, and not enough on whether loans can actually be paid back."

Like I said, mortgage fraud has been legal in Canada for a long time. OSFi has know about this for years.

Jerome Powell just 2 weeks ago:

"Really, what hurts is if consumers are borrowing heavily and doing so ... against an asset that can fall in value," he said. "That's a really serious matter, when you have a housing bubble and highly leveraged consumers and housing values fall.

"We know that's a really bad situation."

https://www.cbc.ca/news/business/fed-interest-rates-1.4839094
« Last Edit: October 10, 2018, 06:14:34 AM by 50centdollars »
50centdollars

alpha

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Re: Garth Turner - Real Estate in Canada
« Reply #1783 on: October 11, 2018, 05:55:58 AM »

Condo rental rates in Toronto are up 7.6%

Nationally housing starts declined in September, but gained in Toronto

For several years in a row Toronto holds the record for most tower cranes erected in North America.

I would like to find an unbiased forecast for upcoming new build completion over the next few years. It seems like right now supply cannot keep up with demand.


https://www.bnnbloomberg.ca/toronto-condo-rents-jump-7-6-to-2-385-per-month-in-third-quarter-1.1150775

https://economics.td.com/ca-housing-starts

obtuse_investor

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Re: Garth Turner - Real Estate in Canada
« Reply #1784 on: October 11, 2018, 06:45:32 PM »
Very timely update on the Canadian housing landscape from Ben Rabidoux. Podcast: http://www.stitcher.com/s?eid=56553986
Value Investor who manages his personal portfolio with a 25-45 year time horizon | @obtuse_investor

Cigarbutt

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Re: Garth Turner - Real Estate in Canada
« Reply #1785 on: October 13, 2018, 07:57:54 AM »
The following is:
-anecdotal
-regional in nature
and worries about vulnerability have been voiced for many years. Still.

https://www.msn.com/en-ca/video/news/is-toronto-the-new-manhattan/vi-BBOc41p?ocid=spartanntp
checked for reference:
https://www.kijiji.ca/v-1-bedroom-apartments-condos/city-of-toronto/1-bedroom-we-pay-your-utilities-lawrence-ave-e/1376748826?enableSearchNavigationFlag=true

Anecdotally, just renewed the lease on an apartment used by two of my children in Montreal (typical student sector). The rent was increased by 1,5% and when compared to what I was paying for a similar arrangement in the 80's, rent rise has slightly decoupled from inflation but not that much. I inquired to the owner if the building was for sale. I end up with the conclusion that the price asked is quite high but can be rationalized to some degree with long term optimism and if you believe that interest rates will stay low for a very long time.

I find the situation in Toronto puzzling and the short video underlines some concerns about fundamentals. It's always hard to gauge "sentiment" but I wonder if the tone used and complacency shown by the two entertainers may not represent an underlying current (with timmies in our coffees and with sunshine on our faces). It seems to me that market participants assume that prices can move away from fundamentals forever. Who are the buyers? With stocks at least, one could always hope to sell rapidly to the next buyer if things get tight. I'm afraid some Toronto real estate owners may not have this luxury when prices eventually come back to earth (net worth=market value of assets-debt).

Like Ben Rabidoux says, there are "strange risk dynamics".