Author Topic: Garth Turner - Real Estate in Canada  (Read 512397 times)

Uccmal

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3728
Re: Garth Turner - Real Estate in Canada
« Reply #620 on: March 07, 2016, 09:40:21 AM »
Never really been a fan of Mr. Turner’s, but let’s go back to the start of this thread.

Mr. Turner confidently stated... 

“The risk of a long and slow real estate decline has never been more acute. The certainty of a long and slow ascent in interest rates never more assured.

Smart people will follow the advice set out here often. Sell assets at the top. With real estate, that’s probably now.”


That was over FOUR years ago. I wonder what Mr. Turner might say today should he meet one of those “smart people” in a dark alley?

Four years later it makes for interesting reading   http://www.greaterfool.ca/

eb

I guess he would say we are in a bubble and prices will go down soon.  Turner is generally a decent guy but he makes most of his living as a financial shill, hence the sensationalism. 
GARP tending toward value


Liberty

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 11549
  • twitter.com/libertyRPF
    • twitter.com/libertyRPF
Re: Garth Turner - Real Estate in Canada
« Reply #621 on: March 07, 2016, 09:50:22 AM »
Never really been a fan of Mr. Turner’s, but let’s go back to the start of this thread.

Mr. Turner confidently stated... 

“The risk of a long and slow real estate decline has never been more acute. The certainty of a long and slow ascent in interest rates never more assured.

Smart people will follow the advice set out here often. Sell assets at the top. With real estate, that’s probably now.”


That was over FOUR years ago. I wonder what Mr. Turner might say today should he meet one of those “smart people” in a dark alley?

Four years later it makes for interesting reading   http://www.greaterfool.ca/

eb

I don't think he foresaw interest rates stay near zero for this long, as most didn't.

That doesn't mean that his argument about canadian RE being disconnected from fundamentals isn't right, just that he got the timing wrong (that's always the hardest thing to get -- ask Burry). In fact, the longer this goes on, the worse it's probably going to be in the end.

I'm happy to keep renting, in the meantime. I don't know about elsewhere in the country, but in my area, I've definitely felt a plateauing and softening in the past year. I know people who've tried selling a house for months and given up, there's a million condos for sale in a 10 km radius, we've tracked many houses that have been for sale for a very long time and aren't moving. I don't know what will make sentiment change further, maybe interest rates at some point, maybe prolonged low oil prices, maybe just RE-fatigue or something else. But I know that when house prices disconnect from incomes for this long, the difference is debt, and that can't pile on forever. Same for something that everyone knows can't fall -- it has to fall. Stability creates instability because it drives people to go too far and do things they shouldn't do.

edit: BTW, to make things clear, the part in bold in the cwericb quote above is written in a way that makes it appear like it's from four years ago, but it's from today's post:

http://www.greaterfool.ca/2016/03/06/suck-it-up-3/

He might have said similar things four years ago, though.
« Last Edit: March 07, 2016, 11:29:38 AM by Liberty »
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

wisdom

  • Hero Member
  • *****
  • Posts: 745
Re: Garth Turner - Real Estate in Canada
« Reply #622 on: March 07, 2016, 10:33:25 AM »
At least people have stopped including Calgary in the grouping of global cities.


Studesy

  • Jr. Member
  • **
  • Posts: 99
Re: Garth Turner - Real Estate in Canada
« Reply #623 on: March 07, 2016, 10:37:37 AM »
We have had very similar anecdotal experience (Mississauga), and for much of the GTA - it is largely the norm; not the exception.

We have a new development, close to us, where every new build was a large detached (2300+sq. feet) + yard, starting at 700K. Most were built for around 850K after upgrades, all are < 5 yrs old, & its roughly a 40 minute one-way commute to down town Toronto via Go Train. These developments are fairly common, and widely available across the 'burbs.

We know many of the folks who moved in.
It is almost always the grand parents living on the ground floor, parents on the upper floor, & kids in the (very nice) walk-in basement. Typically as the kids move away, the family helps with the buying of an apartment fairly close. There are many sources of income (kids, mom/dad, grand parents), multiple and sizeable equity stakes, & relatively little at risk. For the most part, this is a very common practice in the Middle East, Near East, and Far East; and it works very well - at a variety of levels.

This would be very difficult to do if you were not living in a very cosmopolitan city, hence V & T are dominant beneficiaries. It is also why it is so alien to the average US based investor - it is just not the common US practice.

If you published this, it would not sell papers - or attract advertising $.
So instead .... one publishes the sensational stuff instead, with an aim to herding panicked buyers, & feeding the news cycle.
It works very well.

SD

By no means am I smart enough nor interested in attempting to predict the path of Canadian real estate over the next several years.  As value investors though, it is quite obvious that Greater Toronto Area real estate is far from what would be considered a "value" proposition. 

Sd...your example of the Mississauga development with 2300sq. ft. houses in the $700 - 850k range provide a great comparison to the properties in my neighborhood (roughly 110km west of Mississauga).

My property is about 10km west of Woodstock and about 10km South of the 401 in a small village consisting of roughly 100 homes.  In 2009 I purchased a new 2100sq. ft brick house, 2 car garage, w/deck, and concrete driveway for $270k.  Many of the standard features in this home are what would be considered "upgrades" in big city subdivisions.  The house sits on about a 1/4 acre lot.
The lot component of the purchase was roughly $50k.  This implies a retail price on the house itself of $220K.  Compared against your Mississauga example (and assuming a similar retail house price....say $250K....this implies a $600K pricetag  for the tiny lot.  This is crazy!! To top that off...I have talked to several people who are still investing in TO real estate trying to cash in on quick gains.  They really believe this is a safe proposition! 

I am by no means predicting a GTA real estate crash...but under a scenario where they did I assume the decline would mostly be in the price of the physical land.  I mean the same house would still cost roughly $250k to purchase.  In other words, if land prices Ontario wide declined by 50% (not likely...but just as an illustration)....the Toronto property owner would take a $300K haircut.  My property....1 hour to the west would take a $25k haircut ($50k - 50%). Enough said!

How things actually play out in the short run and long run are beyond me but the warning signs are pretty obvious as far as I'm concerned.

bizaro86

  • Hero Member
  • *****
  • Posts: 1083
Re: Garth Turner - Real Estate in Canada
« Reply #624 on: March 07, 2016, 11:36:55 AM »
At least people have stopped including Calgary in the grouping of global cities.

I love Calgary, live here, and own investment RE here. (Sold >50% of it in 2014, so that worked out)

Anyone who tells you 1MM people on the prairies is a global city is either 1) an idiot or 2) trying to sell you overpriced real estate there. (Or possibly both).

Calgary is wonderful. Great access to mountains, rivers, outdoorsy stuff. Good parks, restaurants (best Vietnamese food outside Vietnam, IMO), healthcare and schools. But it's not going to attract the super-rich looking for a place to personally live. The arts and culture and selection of high end dining are insufficient for that, and the climate hurts us. (Although this winter has been great).

Rents here are declining (I took a call from a tenant today who wanted a reduction, which I granted), and I expect them to continue to do so. Interestingly, my highest priced rental unit is rented to two students from China who took high school here and are now taking post secondary.

cwericb

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 987
Re: Garth Turner - Real Estate in Canada
« Reply #625 on: March 07, 2016, 12:22:51 PM »
Liberty, talk about coincidence. I clicked on your original link posted on page one of this thread back in 2012 and it took me to what is apparently today’s rant on the same subject.

I guess if you keep re-hashing the same column year after year it might come true. But after four years of crying wolf Turner might have a bit of a credibility issue.
Politicians and diapers must be changed often, and for the same reason. - Mark Twain

SharperDingaan

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3326
Re: Garth Turner - Real Estate in Canada
« Reply #626 on: March 07, 2016, 12:57:35 PM »
Agreed, separate the land from the serviced lot.

The scarce commodity is land within easy walking distance of a subway. It’s a local, finite resource; and with inflation and increasing demand from immigration – it can only continue to rise in value over time. The dwelling you put on it, is just a place to live.

Simple 2% inflation will double the cost of the land in roughly 36 years (72/2), and quintuple it in 72 years. 72 years of city growth (immigration) have also put what used to be farmland – firmly within the city boundary. At 3.25% average growth, that 75K house purchase in 1944 - is worth 750K today. No speculation involved, just mathematics.

Pokey, refurbished 72 year old house in a great location; or a way more functional house < 5 years old, 45 minutes away. It’s a life style decision.

SD

Liberty

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 11549
  • twitter.com/libertyRPF
    • twitter.com/libertyRPF
Re: Garth Turner - Real Estate in Canada
« Reply #627 on: March 07, 2016, 01:03:53 PM »
Liberty, talk about coincidence. I clicked on your original link posted on page one of this thread back in 2012 and it took me to what is apparently today’s rant on the same subject.

I guess if you keep re-hashing the same column year after year it might come true. But after four years of crying wolf Turner might have a bit of a credibility issue.

Talking about something for a long time doesn't mean you don't have a point, and being wrong about one aspect of something doesn't mean you're wrong about all of it, just like people who started warning about the dot com bubble in 1997 or 1998 weren't necessarily completely wrong. Timing's always hard, but we all have to do what we feel makes sense.

I just don't believe that Canada is some Shangri-la that isn't bound by the RE logic of the rest of the world, where families making $50k/year can carry mortgages of over half a million and live in ugly old bungalows from the 1970s selling for $800k+, etc.
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

Studesy

  • Jr. Member
  • **
  • Posts: 99
Re: Garth Turner - Real Estate in Canada
« Reply #628 on: March 07, 2016, 01:38:41 PM »
Liberty, talk about coincidence. I clicked on your original link posted on page one of this thread back in 2012 and it took me to what is apparently today’s rant on the same subject.

I guess if you keep re-hashing the same column year after year it might come true. But after four years of crying wolf Turner might have a bit of a credibility issue.

Talking about something for a long time doesn't mean you don't have a point, and being wrong about one aspect of something doesn't mean you're wrong about all of it, just like people who started warning about the dot com bubble in 1997 or 1998 weren't necessarily completely wrong. Timing's always hard, but we all have to do what we feel makes sense.

I just don't believe that Canada is some Shangri-la that isn't bound by the RE logic of the rest of the world, where families making $50k/year can carry mortgages of over half a million and live in ugly old bungalows from the 1970s selling for $800k+, etc.

+1
Toronto Real Estate = A pitch I won't be swinging at.

Studesy

  • Jr. Member
  • **
  • Posts: 99
Re: Garth Turner - Real Estate in Canada
« Reply #629 on: March 07, 2016, 01:53:57 PM »
I wonder if any of the Toronto Real Estate bulls out there would put there money where their mouth is and sell/write cheap insurance contracts to those with equity in Toronto real estate.
I bet if they looked at things this way....ie. from a risk standpoint as an insurer would, things would start to look different.
The "Greater Fool Theory" seems to be a stronger force than risk aversion and rationality though.  What else is new...to each their own...lol.