are we going to follow the US RE trending in toronto

[patrick]

Toronto's economy is pretty diverse. Some people mentioned the collapse of the British and American financial sectors affecting real estate prices in New York and London. Although the financial sector isn't as prevalent in Toronto, the Canadian banks headquartered here are doing quite well. Some people here also fear that interest rate increases in the coming years will negatively affect real estate prices. I too believe interest rates will increase, but this will be hand in hand with rising inflation. Real estate is generally considered safe from inflation.

 

[TrickyRicky]

Property tends to maintain it's inflation adjusted value... over time. This statement cannot be extended to all types of real estate as for instance there is no evidence that condos hold their inflation adjusted value in this city over time. Furthermore, inflation matters in the sense that real estate values have never been so heavily indebted to low interest rates because a vast majority of present buyers are marginal buyers, people utterly dependent on the rate. As such any central bank decision to raise rates to combat inflation stands to devastate prices in some asset classes. Fortunately, it looks like the economy is so depressed that we won't have to worry about inflation for some time. Put simply the political pressure is now so great that in essence interest rates are locked in low, they are impossible to raise fast no matter what, except slowly incrementally over time.

 

[Seesus]

there is no evidence that condos hold their inflation adjusted value in this city over time.

i would agree here but being devils advocate, would it be correct to say then that investing in condos would be rather stupid as if it does not hold value, and actually depreciates over the time, then it would rather not be an investment purchasing a condo at all then ?

 

[ponyboy]

I think TrickyRicky's comments are incisive and should be read carefully. However, despite political pressure to keep interest rates low, I think that the Central Bank will respond primarily to market forces in the bond market. If investors are unwilling to buy treasury bonds at low rates, then those rates will have to increase to keep the market functioning.