interested
Senior Member
Well one or the other of you will be right......or not. LOL
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Baby, we got a bubble!?
- Thread starter simuls
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Well one or the other of you will be right......or not. LOL
Condo George
Active Member
Greece is causing nervousness, US fed's comments, strong Cdn $, inflation in chk, look for fixed to trend lower 2nd half of 2011.
CN Tower
Banned
Interest rate commentary from a local real estate agent.
What's next? Predictions on the price of oil from the CTV weatherman?
Btw, in case anyone is interested, the Chinese real estate bubble is about to pop:
The Great Property Bubble of China May Be Popping
http://online.wsj.com/article/SB10001424052702304906004576367121835831168.html
Eug
Senior Member
So, I take it you're a PhD in economics and have written several books on the subject?
Disclosure: Eug is not a banker or an economist, and didn't even take a single economics or business class in university. I did read The Wealthy Barber though way back when... although I must admit I've forgotten most of it.
KA1
Senior Member
For the record, let me make one thing clear. You have been wrong, so far. Dead wrong.
KA1
Senior Member
One can read the full WSJ article in the print edition of today's The Globe and Mail. I tried, unsuccessfully, to locate this article on line. Perhaps, it will be posted a bit later.
KA1
Senior Member
http://www.theglobeandmail.com/repo...n-renters-lowers-vacancy-rate/article2053264/
The latest about rental vacancy in Toronto -- only 1.6%. This should cut down any talk of possible bubble burst.
The latest about rental vacancy in Toronto -- only 1.6%. This should cut down any talk of possible bubble burst.
daveto
Active Member
KA1, I don't understand how your first sentence leads to the your second sentence.
First, this is an apples to oranges comparison. The rental stock in question is from rental buildings, and not from the renting of condo's etc. Note that the avg rent quoted for Toronto is $1124..
Second, if rental vacancies are decreasing, then I presume that means that renters are increasing? So if more people are renting, then how is that good news for home resales? Also, we know that home ownership is increasing, so how can the renter segment have similarly increased at the same time. I think the article is missing some pieces of the puzzle.
KA1
Senior Member
My logic is very simple -- straight from the hip.
Tight vacancy means investors will not be in a hurry to 'unload' their units. They might have a small negative cash flow for a short peiod. Less inventory means less downward pressure on the prices and, of course, no bubble to burst.
Is that the way it crumbles, the cookie?
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daveto
Active Member
I think you should reread my post. The units in question are not investor units. They are rental stock (ie pure rental buildings, not privately owned units).
This is further evidenced by the average rental rate of $1124 for Toronto. Note that this average includes all multiple bedroom units.
To repeat - the article has nothing to do with investor units, and to the contrary it suggests that because more people are moving into rental stock, then the must be moving out of non-rental stock (ie moving out of privately held units), and this bodes poorly for privately owned units looking for renters.
KA1
Senior Member
On the contrary, if there is a 'tight' low vacncy in the rental stock, then, individuals will have to look for privately owned condos to rent. You need a place to live. Further, have you considered 'net' migration into GTA and its impact on the privately held rental stock -- that is condos?
Strangely, Interested has not made usual thoughtful posts on this topic. Redfirm owns a few 'private' rental units. He is absent from this discussions also. Something is not right somewhere.
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daveto
Active Member
The change in the GTA numbers were the same as the nationwide figures, and the rate of nationwide migration has not increased. Therefore it seems a stretch to suggest that migration is the cause for the decrease in the vacancy rate.
If I can be clear in understanding your thinking...
...your conclusion is that a lower vacancy rate in $1124/avg price rental units in the GTA demonstrates that there will now be an increase in demand for $2000+/avg price condos?
As far as Interested and Redfirm not posting, it has been only three hours since you posted the article. What is strange about them not having posted??
KA1
Senior Member
No. The conclusion is that there will be a constant demand for the 'private' rental stock, at lower prices though. Investors will still be able to rent their unit but there, most likely, will be a negative cash flow -- for a while. This negative loss will depend upon the downpayment made.
Individuals who have the financial strength will ride out the 'storm' caused by an increase in the mortgage rates. There will be no panic selling by them. And that, in turn, will not precipitate 25% decline predicted by others.
Simple enough?
CN Tower
Banned
Vacancy Rate
Absent some major change in legislation, a lower vacancy rate for purpose-built apartment buildings means a couple things:
1. There is additional demand for purpose-built rental housing
2. There is a reduction in supply for purpose-built rental housing
Clearly the answer is 1. So where is the demand coming from? Either:
1. More immigration (over last year) into the City of Toronto
2. Higher housing prices in Toronto raising the barrier for new entrants keeping them in rental housing longer or pushing more new immigrants into rental housing as they enter the City.
3. The "sell and rent" crowd, a small but probably growing minority of renters by choice so to speak.
I tend to believe that #2 is the most likely scenario although I haven't seen any immigration stats for Toronto year over year if they are even available. Let's assume the primary explanation is #2. It is probably:
-neutral for condo owners who occupy their units and don't intend to move anytime soon
-neutral/negative for condo owners who rent out their units and have the intention of selling their units in the near future (higher rents but likely lower resale prices)
-negative for condo speculators who bought pre-construction units looking to flip on completion
-negative for condo developers hoping for continued increases in new condo prices
There you have my (humble) opinion.
BTW, the Bank of Canada doesn't set fixed interest or mortgage rates- they are a derivative of the bond market.
Absent some major change in legislation, a lower vacancy rate for purpose-built apartment buildings means a couple things:
1. There is additional demand for purpose-built rental housing
2. There is a reduction in supply for purpose-built rental housing
Clearly the answer is 1. So where is the demand coming from? Either:
1. More immigration (over last year) into the City of Toronto
2. Higher housing prices in Toronto raising the barrier for new entrants keeping them in rental housing longer or pushing more new immigrants into rental housing as they enter the City.
3. The "sell and rent" crowd, a small but probably growing minority of renters by choice so to speak.
I tend to believe that #2 is the most likely scenario although I haven't seen any immigration stats for Toronto year over year if they are even available. Let's assume the primary explanation is #2. It is probably:
-neutral for condo owners who occupy their units and don't intend to move anytime soon
-neutral/negative for condo owners who rent out their units and have the intention of selling their units in the near future (higher rents but likely lower resale prices)
-negative for condo speculators who bought pre-construction units looking to flip on completion
-negative for condo developers hoping for continued increases in new condo prices
There you have my (humble) opinion.
BTW, the Bank of Canada doesn't set fixed interest or mortgage rates- they are a derivative of the bond market.
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KA1
Senior Member
CN Tower, what took you so long to come to my rescue?
I would like to add a few more points:
No 'Bubble bust' for condo owners who intend to stay put,
No 'Bubble bust' for investors who have made a substantial down payment on their units and are renting their unit generating a positive cash flow -- small or large is irrelevant and
Definitely a 'bust' for flippers.