Author Topic: Garth Turner - Real Estate in Canada  (Read 532242 times)

alpha

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Re: Garth Turner - Real Estate in Canada
« Reply #1910 on: September 14, 2019, 01:21:26 PM »
Trudeau announced this week that the government would subsidize 800k house purchases if re-elected. What a mess.


scorpioncapital

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Re: Garth Turner - Real Estate in Canada
« Reply #1911 on: September 14, 2019, 02:12:33 PM »
"Navin Seepaul is a 29-year-old single dad who makes $30,000 a year as a barber. He owns a $1-million house in Brampton, a sprawling suburb northwest of Toronto. Each month, the payments on his roughly $700,000 mortgage are $4,300. On top of that, he has $24,000 in credit card debt.
To help pay the bills – even just the monthly interest charges are staggering – he rents out his basement to three or four students, and two truck drivers rent bedrooms on his second floor. At any given time, the young father has six vehicles parked on his property."

Another perspective...The guy is cutting hair leisurely while some very poor renters are paying off his mortgage. At the end he will have a very pricey asset free and clear and he'll probably be in the top 20% richest people in the world. And the renters are probably getting pretty cheap rent for renting a room in canada. win-win?






clutch

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Re: Garth Turner - Real Estate in Canada
« Reply #1912 on: September 14, 2019, 02:53:27 PM »
"Navin Seepaul is a 29-year-old single dad who makes $30,000 a year as a barber. He owns a $1-million house in Brampton, a sprawling suburb northwest of Toronto. Each month, the payments on his roughly $700,000 mortgage are $4,300. On top of that, he has $24,000 in credit card debt.
To help pay the bills – even just the monthly interest charges are staggering – he rents out his basement to three or four students, and two truck drivers rent bedrooms on his second floor. At any given time, the young father has six vehicles parked on his property."

Another perspective...The guy is cutting hair leisurely while some very poor renters are paying off his mortgage. At the end he will have a very pricey asset free and clear and he'll probably be in the top 20% richest people in the world. And the renters are probably getting pretty cheap rent for renting a room in canada. win-win?

In fact, this kind of rental income won't often be reported and therefore don't show up in the debt-income ratios... Also consider that many house owners in Toronto/Vancouver can have foreign income sources that also don't get reflected in the ratio.

frank87

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Re: Garth Turner - Real Estate in Canada
« Reply #1913 on: September 14, 2019, 03:33:49 PM »
https://www.theglobeandmail.com/business/economy/article-how-canadas-suburban-dream-became-a-debt-filled-nightmare/

Opens with a bombshell example:
Navin Seepaul is a 29-year-old single dad who makes $30,000 a year as a barber. He owns a $1-million house in Brampton, a sprawling suburb northwest of Toronto. Each month, the payments on his roughly $700,000 mortgage are $4,300. On top of that, he has $24,000 in credit card debt.
To help pay the bills – even just the monthly interest charges are staggering – he rents out his basement to three or four students, and two truck drivers rent bedrooms on his second floor. At any given time, the young father has six vehicles parked on his property.

What are the circumstances behind this example? Because no bank or federally regulated financial institution, not to mention credit union, will underwrite a $700k mortgage for a guy making $30k as a barber regardless if he's using it largely as a rental. And if $4,300 is his payment and assuming a 35-year amortization, his interest rate is 6.7% which is private lender territory.
« Last Edit: September 14, 2019, 03:39:07 PM by frank87 »

spartan

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Re: Garth Turner - Real Estate in Canada
« Reply #1914 on: October 28, 2019, 06:27:50 PM »
For anyone who hasn’t been reading Garth’s blog recently, he has been warning Canadians of an increase in the capital gains inclusion (50% to 75%). Seems like a very real threat to me.

Viking

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Re: Garth Turner - Real Estate in Canada
« Reply #1915 on: April 15, 2020, 06:53:24 PM »
Where is Garth Turner? I think his prediction of a real estate meltdown in Canada just might come true in the next year or two. Canada is facing a potential three headed horseman: coronavirus, oil meltdown and housing bubble popping. Our housing bubble today is more bubbly than the US in 2007; the main difference being it is much harder in Canada to walk away from a mortgage.

Government spending the past few years has been increasing rapidly (resulting in growing deficits) and taxes have been increasing. Regulation has been increasing. Traditional sectors of growth (resources) is no longer a priority for government; quite the opposite in fact (most parts of Canada hate resources as they polute the earth, are evil and are the work of the devil). Canada’s level of competitiveness might be at an all time low versus the US.

Any ideas of a way to hedge the potential for a housing crash in Canada? (Selling my house is not an option :-) No credit default swaps to purchase. Short Canadian Banks? They are so protected by the government this might not pay out as expected. Is there a way to short property developers?

One strategy i am using is to be quite cautious with my financial portfolio (mostly cash). A second is to hold US$: 65% of my financial portfolio is in US$. My guess is if Canada has a real estate crisis the Canadian $ will go much lower (and $0.71 is already low).

Once Safer Than Gold, Canadian Real Estate Braces for Reckoning
- https://www.bloomberg.com/news/articles/2020-04-15/once-safer-than-gold-canadian-real-estate-meets-its-match

Canadian housing once seemed so infallible that the head of the world’s biggest asset manager in 2015 described Vancouver condos as a better store of wealth than gold. The coronavirus is putting that theory to the test.

While lockdowns, job losses and uncertainty are roiling property markets from the U.K. to Australia to Hong Kong, Canada’s situation is more precarious than most. As its oil sector shriveled in recent years, Canada’s economy became ever more driven by real estate, an industry now in a state of paralysis. Nearly one in three workers have applied for income support.

What’s more, its households are among the world’s most indebted, poorly placed to weather the storm.

...The country may not have much of a choice but to prop up housing. Real estate has become Canada’s largest sector. Including residential construction, it accounted for 15% of economic output last year; energy accounted for 9%.

...Recessions tend to be deeper and last longer when households are mired in debt -- an alarming prospect for a nation that may already be experiencing its sharpest contraction on record. Canadians owe C$2.3 trillion in mortgages, credit card, and other consumer debt, about equal to the country’s GDP, which is an even higher ratio than the U.S. had before its housing bust.

“You have all of these flammable items that just need a spark, some external shock,” says Anthony Scilipoti, president of Toronto-based Veritas Investment Research Corp. “And this virus is a worst-case scenario none of us would have predicted.”
« Last Edit: April 15, 2020, 06:59:51 PM by Viking »

opihiman2

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Re: Garth Turner - Real Estate in Canada
« Reply #1916 on: April 15, 2020, 08:31:15 PM »
I'm not sure if this has been posted on here before, but I just found out that strata fees / costs in Canada against large building apartment / condos, especially in BC, is getting a HUGE increase these next year or so.  I'm reading anywhere from 50% to 300+% increases.  So, my MIL in Kelowna lives in a large multi-building complex in a 55+ community.  They were just notified their strata is going to double soon from $360 to over $600 a MONTH!  They are so fuming mad, and everyone is mad as hell in her condo complex.  They want to immediately sell.

It's happening all over B.C.  I think large high rise condos in Vancouver and Victoria are going to take a big hit in prices from this.

RichardGibbons

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Re: Garth Turner - Real Estate in Canada
« Reply #1917 on: April 15, 2020, 08:36:28 PM »
Yeah, I think the increase is a result of insurance rates skyrocketing.

Viking

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Re: Garth Turner - Real Estate in Canada
« Reply #1918 on: April 15, 2020, 08:43:48 PM »
I'm not sure if this has been posted on here before, but I just found out that strata fees / costs in Canada against large building apartment / condos, especially in BC, is getting a HUGE increase these next year or so.  I'm reading anywhere from 50% to 300+% increases.  So, my MIL in Kelowna lives in a large multi-building complex in a 55+ community.  They were just notified their strata is going to double soon from $360 to over $600 a MONTH!  They are so fuming mad, and everyone is mad as hell in her condo complex.  They want to immediately sell.

It's happening all over B.C.  I think large high rise condos in Vancouver and Victoria are going to take a big hit in prices from this.

Yes, the increases in insurance rates and deductables are are crazy. The increases are large enough they will certainly affect resale values at some point down the road.

How do strata corporations and owners manage the dramatic increase in Insurance Rates?
- https://www.choa.bc.ca/wp-content/uploads/300-869-05122019-How-do-Strata-Corporations-and-Owners-Manage-the-Dramatic-Increase-in-Insurance-Rates.pdf

Over the past few months across BC, there has been an industry struggle to renew strata corporation insurance polices. With renewals, the cost of the insurance has increased anywhere from 50‐300% and the deductibles to cover claims have also increased substantially, from manageable rates of $25,000 per claim to as high as $250,000 and $500,000. While not all regions of the province have been affected in the same manner, there have been targeted building types or large strata communities across BC that have seen the dramatic increase.

RichardGibbons

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Re: Garth Turner - Real Estate in Canada
« Reply #1919 on: April 15, 2020, 10:03:52 PM »
Over the past few months across BC, there has been an industry struggle to renew strata corporation insurance polices. With renewals, the cost of the insurance has increased anywhere from 50‐300% and the deductibles to cover claims have also increased substantially, from manageable rates of $25,000 per claim to as high as $250,000 and $500,000. While not all regions of the province have been affected in the same manner, there have been targeted building types or large strata communities across BC that have seen the dramatic increase.

Have either of you heard a plausible explanations for the increase in insurance rates? That sort of jump seems very strange to me. Like, were these things priced to make a huge loss five years ago, or are the new high prices just to make a massive profit?

I would've guessed that the insurance markets are close enough to efficient that a 100-300% increase in premiums without an extreme event would never happen. But I'm clearly wrong, so what's the deal here?