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Baby, we got a bubble!?
- Thread starter simuls
- Start date
ponyboy
Active Member
these last two comments by Kenny and Interested are key I think. Corporate risk takes are rewarded in both good and bad times, but individual risk takers (condo purchasers) face big downside risk right now. I just wish I could buy stock of some of these condo developers. Aren't they all privately held? What does it say when a large and economically important industry is privately held? Are there special benefits to this industry of being less transparent, making privately held entities the preferred model? This also keeps a lid on how profitable this industry really is, something that is a mystery to me.
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klb86
Active Member
interested
Senior Member
From Jamie Johnston at Remax:
SALES COMMENTARY:
We have reached the midpoint of the year with June sales on TREB ahead 21% over June of 2010. On a year-to-date basis, sales are still 4.5% lower than a year ago. Condo sales were also up 23% over June of last year and downtown condo sales were up by 25% over the same month a year ago. On a year-to-date basis, downtown condo sales are actually up 1%. But the real story this year has been a reduction in active listings by 24% over the same time last year. Even in the downtown condo market, active listings are down 3% from June 30th of last year. And that is after we have had several thousand new condo units being registered this year. What is happening is that these units are either being sold as assignments before registration or investors are renting them out.
In a normal year, 55% of all sales take place in the first six months. Last year, with the introduction of the HST on July 1st, that number was 57%. Even the experts have now conceded that 2011 sales will be greater than 2010. They are now forecasting a market correction in 2012. If you recall, these same experts have been calling for a market correction every year since 2007! One year they will be right. But by that time, those who have been renting will have lost too much to ever make it back. The secret to real estate is: don’t try to time the market but be in the market! If prices rise and you are not in the market then you lose. If you are in the market and prices fall, then what you want to buy next has also fallen – in fact falling prices are the best time to trade up as higher priced properties tend to drop more in absolute terms than cheaper properties.
It is summer and everyone wants a property on the water. For Toronto we have Queens Quay and this month we looked at sales at 550 – a very popular 10 year old building with some great lake views. The first unit we looked at has a one bedroom, one bath with parking and locker. At over 600 sf, it sold in June of 2011 for $324,000. The same unit sold in 2005 for $208,500 and in 2002 for $218,000 (See the market has not been going straight up over the last 10 years!). The unit has partial lake view and sold at just under $500 per sf. It has appreciated at 5% per year. The second unit we examined was a two bedroom, two bath unit with parking, locker and balcony. It also sold in June of this year for $520,000. It previously sold in 2004 for $370,000. The unit at over 1100 sf sold for $460 per sf and this is with direct lake view! This unit also has appreciated at 5% per year over the last seven years. What do these two sales tell you about our market? Are we in a speculative market ready for a big price correction, or in a steady, healthy market with good technical support?
RENTAL COMMENTARY:
Vacancy rates for condos continue to be below 1%. Multiple offers exist in the rental market as well! In the Downtown market in June, 29 studio units were leased for $1300-1350 on average. There were just under 400 one bedroom units rented, starting at $1400 per month without parking. The most popular one bedroom units include a den and parking. These are renting for $1650 per month. Over 200 two bedroom units were leased in June. Two bedroom units without parking were averaging $2000 per month. The most popular model included a den and parking, and these were averaging $2350 per month. Total rentals for the month were actually lower than in May and this is solely attributable to a lack of rental supply. We expect rental rates to continue to move slowly higher for the balance of the year.
SALES COMMENTARY:
We have reached the midpoint of the year with June sales on TREB ahead 21% over June of 2010. On a year-to-date basis, sales are still 4.5% lower than a year ago. Condo sales were also up 23% over June of last year and downtown condo sales were up by 25% over the same month a year ago. On a year-to-date basis, downtown condo sales are actually up 1%. But the real story this year has been a reduction in active listings by 24% over the same time last year. Even in the downtown condo market, active listings are down 3% from June 30th of last year. And that is after we have had several thousand new condo units being registered this year. What is happening is that these units are either being sold as assignments before registration or investors are renting them out.
In a normal year, 55% of all sales take place in the first six months. Last year, with the introduction of the HST on July 1st, that number was 57%. Even the experts have now conceded that 2011 sales will be greater than 2010. They are now forecasting a market correction in 2012. If you recall, these same experts have been calling for a market correction every year since 2007! One year they will be right. But by that time, those who have been renting will have lost too much to ever make it back. The secret to real estate is: don’t try to time the market but be in the market! If prices rise and you are not in the market then you lose. If you are in the market and prices fall, then what you want to buy next has also fallen – in fact falling prices are the best time to trade up as higher priced properties tend to drop more in absolute terms than cheaper properties.
It is summer and everyone wants a property on the water. For Toronto we have Queens Quay and this month we looked at sales at 550 – a very popular 10 year old building with some great lake views. The first unit we looked at has a one bedroom, one bath with parking and locker. At over 600 sf, it sold in June of 2011 for $324,000. The same unit sold in 2005 for $208,500 and in 2002 for $218,000 (See the market has not been going straight up over the last 10 years!). The unit has partial lake view and sold at just under $500 per sf. It has appreciated at 5% per year. The second unit we examined was a two bedroom, two bath unit with parking, locker and balcony. It also sold in June of this year for $520,000. It previously sold in 2004 for $370,000. The unit at over 1100 sf sold for $460 per sf and this is with direct lake view! This unit also has appreciated at 5% per year over the last seven years. What do these two sales tell you about our market? Are we in a speculative market ready for a big price correction, or in a steady, healthy market with good technical support?
RENTAL COMMENTARY:
Vacancy rates for condos continue to be below 1%. Multiple offers exist in the rental market as well! In the Downtown market in June, 29 studio units were leased for $1300-1350 on average. There were just under 400 one bedroom units rented, starting at $1400 per month without parking. The most popular one bedroom units include a den and parking. These are renting for $1650 per month. Over 200 two bedroom units were leased in June. Two bedroom units without parking were averaging $2000 per month. The most popular model included a den and parking, and these were averaging $2350 per month. Total rentals for the month were actually lower than in May and this is solely attributable to a lack of rental supply. We expect rental rates to continue to move slowly higher for the balance of the year.
Eug
Senior Member
carpediem
New Member
How do you think China's control/raising of their interest rates will affect the Toronto market? (if any at all?)
Eug
Senior Member
If anything it would help keep foreign investment stable.
interested
Senior Member
carpediem
New Member
^ wouldn't it slow down the foreign investment into Toronto/Canada and therefore hurt all the new developments going up that are counting for a significant number of foreign buyers?
cdr108
Senior Member
are you considering The People's Bank of China's increased reserve requirements by 50 basis points in June this year to 21.5%?
the gov't is dedicated to keeping excessive liquidity out of the market.
unfortunately, its' one-year deposit rate is only 3.50%, not really a match for the speculative local R/E bubble.
the gov't may also try to recoup the $120 billion stolen by 10,000 corrupt Chinese officials as reported by the People’s Bank of China
http://www.eyedrd.org/2011/07/120-billion-was-embezzled-by-corrupted-chinese-officials.html
http://www.theaustralian.com.au/new...inese-corruption/story-e6frg6so-1226076938605
The research, whose revelations of corruption are breathtaking even by Chinese standards, estimates that between 16,000 and 18,000 officials may have fled the country with monumental hoards of ill-gotten money between the mid-1990s and 2008.
The most elite officials, said the report, would aim for Western countries such as Canada and the Netherlands, possibly moving through a small African or Eastern European country while documents were forged and time elapsed after their escape.
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carpediem
New Member
I used to live in West Vancouver and we recently sold our house. Our agent was known for dealing with Asian clients (she was Asian and one of the top agents in the area) and she said that 90% of the recent buyers were from Mainland China and some would come for a week and pay for houses in cash.
redfirm
Active Member
Gold last 6 months 20%+, last year 37%, last 5 years 150%. Are you not devastated that you picked r/e instead of gold?
My point: perception, personal circumstances and risk aversion, my friend ... Hopefully most people here did something smart with their money, whatever asset class they decided they feel comfortable with.
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Eug
Senior Member
Higher local interest rates and slower inflation are incentives for Chinese to keep some money within China. Chinese like cash, but not when interest rates are at unreasonably low levels with high inflation.
This may slow cash flow increases to Canadian destinations to a small extent, which in turn would slow price increases in places like Vancouver and perhaps Toronto. That would make for a more stable market.
Although both are at risk for price declines too, Vancouver is at more of a risk for price declines than Toronto. However, mild price declines also can add stability to the market. This is in contrast to incentives to promote unbridled price growth in Canada, which would set the market up for a big crash.
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Eug
Senior Member
Brad Lamb sold his penthouse at Tip Top.
http://www.theglobeandmail.com/life...side-brad-lambs-tip-top-condo/article2112744/
Dunno the size, but it sounds like over 2000 sq. ft. List price was $1.595 million, but it sold for over that. I wonder what that means. $650-750 per square foot, with all his custom upgrades?
http://www.theglobeandmail.com/life...side-brad-lambs-tip-top-condo/article2112744/
Dunno the size, but it sounds like over 2000 sq. ft. List price was $1.595 million, but it sold for over that. I wonder what that means. $650-750 per square foot, with all his custom upgrades?