Baby, we got a bubble!?

[KA1]

A few words of gossip.

R/E agents who had sold units in AURA were invited for a get together on Tuesday, November 15 to pick up 2nd installment of their commission cheque.

My R/E agent tells me that 3 1bedroom units and 1 bachelor unit in DNA3 are still available for sale.

In AURA, a few sub-penthouse units are still for sale.

Top floor penthouse is still for sale at the same old, March 2008, asking price of $ 17.5 millions.

Since March 2008, units in core downtown have gone up by appx 50 - 60%. Units in upscale development of Shangri-la have gone up even more. By trying to sell penthouse at March 2008 price, Canderel, in effect, is trying to sell penthouse at discounted price. Still no takers so far.

My R/E agent tells me that there were approximately 150 agents at this gathering. A great majority of agents seem to be of Chinese origin and a sprinkling of agents from various other ethnic backgrounds.

Bears should take note of the mix of agents at this gathering representing purchasers/investors of different background, including perhaps from overseas. Possibilities of bubble bursting in the future, especially in core downtown, seem to be remote.

It is now your turn to throw darts at me. And you are welcome.

 

[Ric]

A few words of gossip.


A great majority of agents seem to be of Chinese origin and a sprinkling of agents from various other ethnic backgrounds.Bears should take note of the mix of agents at this gathering representing purchasers/investors of different background, including perhaps from overseas. Possibilities of bubble bursting in the future, especially in core downtown, seem to be remote.

Wow, this information has renewed my confidence in the market especially since this is the same mix of "investors" that I see taking weekly bus trips to the casino to try and "hit the Jackpot". I guess I should be buying some of the remaining units in Aura (and DNA) since this is where the "smart" money is heading.

 

[Kenny]

Wow, this information has renewed my confidence in the market especially since this is the same mix of "investors" that I see taking weekly bus trips to the casino to try and "hit the Jackpot". I guess I should be buying some of the remaining units in Aura (and DNA) since this is where the "smart" money is heading.

Just because they like gambling doesn't make them bad investors. I might even argue the opposite: good investors are dispassionate about their money.

 

[Ric]

Just because they like gambling doesn't make them bad investors. I might even argue the opposite: good investors are dispassionate about their money.

I did not say they were "bad investors". My point was that people should not make investment decisions based on the actions of others that are known to be "huge risk takers".

 

[Kenny]

I did not say they were "bad investors". My point was that people should not make investment decisions based on the actions of others that are known to be "huge risk takers".

Ah. I can dig that.

 

[daveto]

Since March 2008, units in core downtown have gone up by appx 50 - 60%.

Bears should take note of the mix of agents at this gathering representing purchasers/investors of different background, including perhaps from overseas.

Possibilities of bubble bursting in the future, especially in core downtown, seem to be remote.

It is now your turn to throw darts at me. And you are welcome.

KA1

Throwing darts? Why do you see it like that? I see it has an intelligent discussion on a complex and critical segment of our economy and lifestyles.

1. Do you have a data source showing C1 prices increased by 50-60% since March 2008? TREB quotes average/mean prices for C1 from March 2008 as $380k/$330k, and in Oct 2011 as $460/$390. That is a 20%/18% nominal increase, and a 13%/11% net of inflation increase.
2. I don't understand your comment about the cultural background of the agents. Was it noticibly different than the cultural background of Torontonians?
3. Can you justify your conclusion abou the bubble not bursting in the future? (...and I'm glad to hear you now acknowledge we have a bubble!)

Finally, any real estate "investment" in which the costs of ownership are not sustainable by rents is not an investment, it is speculation predicated on ongoing price increases. It is been mathematically demonstrated time and time again on this thread that rents do not sustain current prices. There's nothing wrong with speculating in a market, just so long as the speculator understands that there is a time to exit the market and lock in gains. Anyone who thinks that a real estate speculative market (aka a bubble) will continue indefinately, is in for a painful surprise.

 

[interested]

Daveto; As always your comments are well thought out and balanced.

In defense of Ka1, I believe perhaps people continue to invest in R/E because all we hear is bad news on the European/USA fronts. Concerns being raised about China as well and slowing of the economy. TSX is down about 10% on the year. Bonds yield next to nothing. Bank accounts....zilch. USD returns small(but interestingly the USD is gaining despite it's downgrade proving how ridiculous the downgrade was). To date, rightly or wrongly, R/E has held up well. And as long as foreigners add to the market, it may sustain it longer. However should they decide as most "investors" do that the money may be applied better elsewhere, look for it to leave and local fundamentals do not support current pricing and especially "future build pricing".

That said, Dave, you and I are in the same camp. In the
"long run" whatever that is; I wholeheartedly agree that eventually economic fundamentals and rental rates/ income earned to amount spent on housing will come back to the norm. However, as I have said many times in the past, "irrationality" can continue for protracted periods of time and it is difficult to know how we will get out of the current world situation in the near future, hence keeping bond rates and therefore mortgage rates artificially low for the forseeable (read 2012 anyhow) future.

 

[Eug]

Many older Canadians say mortgage freedom still years away

Three-quarters of Canadians surveyed for the poll released Thursday said they want to be mortgage-free by age 65. About 40 per cent said they want to see mortgage freedom at 55.

But 57 per cent said they expect to carry mortgage debt after the age of 55, with nearly one-third expecting to carry debt after age 65.

Another one-third of Canadians who are 55 or older have at least 16 years left on their mortgage term, the bank found.

 

[CN Tower]

20 units currently for sale on MLS in the Ritz Carlton. Many asking way below $900psf.

This does not bode well for the other luxury condo/hotel buildings in the city.

 

[Eug]

20 units currently for sale on MLS in the Ritz Carlton. Many asking way below $900psf.

This does not bode well for the other luxury condo/hotel buildings in the city.

$900 psf is still a lot of money.

Are these bigger units? The trend is the bigger the unit, the lower the psf cost on average (esp. if we exclude penthouses etc.).

 

[interested]

20 units currently for sale on MLS in the Ritz Carlton. Many asking way below $900psf.

This does not bode well for the other luxury condo/hotel buildings in the city.

I agree with you CN Tower. However, now that the Ritz is built, I think some of the problems(at least that I would call design flaws are coming out). Early buyers bought at $500/sq.ft. The building has no opening windows. No outdoor space (other than the common area at floor 22). You have to take 2 elevators to get to your suite. The suites are quite large and hence $1+ million price tags.
The above said, I do believe that prices have got a little ahead of themselves. I hear that in our suburb, expensive housing (over $2million is not moving. One reason I have read that makes sense is that the global turmoil is affecting stock markets and higher end paying jobs and therefore the extra caution.
It will be interesting to see what happens next year when Trump/4S and SL come on line. Maybe there will be a big drop if a lot decide to dump. I do believe though that the Ritz (in my view) is turning out to be a bit of a disappointment and hence the desire to unload.

 

[KA1]

KA1

Throwing darts? Why do you see it like that? I see it has an intelligent discussion on a complex and critical segment of our economy and lifestyles.

1. Do you have a data source showing C1 prices increased by 50-60% since March 2008? TREB quotes average/mean prices for C1 from March 2008 as $380k/$330k, and in Oct 2011 as $460/$390. That is a 20%/18% nominal increase, and a 13%/11% net of inflation increase.
2. I don't understand your comment about the cultural background of the agents. Was it noticibly different than the cultural background of Torontonians?
3. Can you justify your conclusion abou the bubble not bursting in the future? (...and I'm glad to hear you now acknowledge we have a bubble!)

Finally, any real estate "investment" in which the costs of ownership are not sustainable by rents is not an investment, it is speculation predicated on ongoing price increases. It is been mathematically demonstrated time and time again on this thread that rents do not sustain current prices. There's nothing wrong with speculating in a market, just so long as the speculator understands that there is a time to exit the market and lock in gains. Anyone who thinks that a real estate speculative market (aka a bubble) will continue indefinately, is in for a painful surprise.

Daveto,

It is a pleasure to respond to your questions. If I can, I would like to see you get out of 'Bear' outlook and come to the reality.

I live in RoCP1 -- smack in the middle of C1. A unit comparable to my unit -- just 1 floor above -- was sold in August 2011 at a price 50% higher than the similar size unit sold in March 2008. In its October/November market report, Remax Condos Plus has stated that units in RoCP in September were sold at even higher price psf. I have pasted the link below.

http://www.remaxcondosplus.com/blog/octobernovember-market-report-2011/

In March 2008, depending upon the floor, Canderel was selling units, in AURA, to the public -- and that includes me -- between $ 500-550 psf. 10% increase in the price to the public as compared to the price for VIP agents -- as I was told by an agent standing in line just behind me.Recently there was a post in the AURA thread that Canderel is selling units on floors 35, 36 & 37 at $ 725 psf. Depending upon your base, prices in AURA seem to have gone up sharply as well.

I presume prices in other buildings in C1 area have gone up similarly. But then, without sounding like a 'snob', I own a unit in College Park. Owing a unit in College Park is not like owning a unit in Shangri-la though.

As regards cultural background, I have repeated just what was said to me. Generally, as they say, birds of a feather flock together. (By the way, this is a saying that is used in England where I spent the very precious years of my youth before I was lured to come to 'sunny' Canada)

It is my assumption, perhaps wrong, that investors from China, who would know nothing about Toronto would want to deal and rely on the services of their own kind.

That would lead me to answer your 3rd question. Bubble. Here, I have used the term 'bubble' as described by various intelligent and analytical posters, for example, Interested and the likes.

Bubble is in the minds of weak hearted only -- especially those who earn a living working for others -- and not for the risk takers, business owerns and investors. Even in today's The Globe and Mail print edition there is news item that investors from Europe are pouring money in expensive/upscale neighbourhoods of London, England -- Chelsea, Belgravia and Kensington. They are not worried about the coming economic implosion and perhaps death of Euro as well.

As I had replied earlier to one of your posts ''.. as they say in England, you live like a chicken, you die like a chicken..' Personally, I do not believe that there was a bubble or there is a bubble. There is nothing to burst.

Having said that, I whole heartedly agree with a post by CN Tower -- an individual whose opinions I respect most -- that this year over year increase in prices of 10/15% is insane and can not last for too long. Increase in prices 2/3% more than the inflation --or 5% in current situation -- is more realistic and common. Decrease in price increase, say, from 10/15% to around 5% is not a 'bubble burst' by any stretch of imagination.

Feel free to continue this discussion.

By the way, Interested: thanks for your moral support.

 

[interested]

One additional question CN Tower?

SL maintenance fees were quoted at 54 cents/sq.ft. which I am sure will be 60-65 cents for the residences. The estates were to be 75 cents which I am sure will be 85-90 cents/sq.ft. I note the Ritz is almost $1/sq.ft. Would you agree with my assumption that when looking at luxury; savy condo owners will look at running costs. I mean; 35 cents/sq.ft. every month is $5000/year; petty change perhaps on $1 million dollars but for most people in my experience with condos, it is not the cost to buy but the cost to maintain. The fact that the Ritz has about 200 units and SL for comparison has 360 was a significant factor in my decision at least to purchase in SL vs. Ritz or others. As well, the most popular designs are 1 bedroom/den or 2 bedroom. Ritz offered large 1 bedrooms at 1200-1500 sq.ft. vs. the 1 bedroom / den at 1100 sq.ft. that I got which I thought was more useful, even if the spaces were not as large. Also, I have a West face 200 sq.ft. balcony which I consider very important. The extra ability to have a den I felt was also of great value.

Just my thoughts but I purchased for personal use anyhow so in the end, it is somewhat academic from my point of view. It does however raise a question as to whether SL will be able to continue to justify $1200/sq.ft. and higher prices; and for that matter Trump. 4S I believe is more about the Yorkville lifestyle but frankly their prices (and all of Yorkville) is at quite a premium but there really is only 1 Yorkville vs. the "rest of downtown".

 

[daveto]

. A unit comparable to my unit -- just 1 floor above -- was sold in August 2011 at a price 50% higher than the similar size unit sold in March 2008. In its October/November market report, Remax Condos Plus has stated that units in RoCP in September were sold at even higher price psf. I have pasted the link below.

http://www.remaxcondosplus.com/blog/octobernovember-market-report-2011/

In March 2008, depending upon the floor, Canderel was selling units, in AURA, to the public -- and that includes me -- between $ 500-550 psf. 10% increase in the price to the public as compared to the price for VIP agents -- as I was told by an agent standing in line just behind me.Recently there was a post in the AURA thread that Canderel is selling units on floors 35, 36 & 37 at $ 725 psf. Depending upon your base, prices in AURA seem to have gone up sharply as well.

I presume prices in other buildings in C1 area have gone up similarly. But then, without sounding like a 'snob', I own a unit in College Park. Owing a unit in College Park is not like owning a unit in Shangri-la though.

The link you provided describes 3 properties, none of which have seen a price increase of 50-60% since March 2008. The TREB data of a 20% nominal increase since March 2008 refutes your presumption of a 50-60% increase. Do you agree?

As regards cultural background, I have repeated just what was said to me. Generally, as they say, birds of a feather flock together. (By the way, this is a saying that is used in England where I spent the very precious years of my youth before I was lured to come to 'sunny' Canada)

It is my assumption, perhaps wrong, that investors from China, who would know nothing about Toronto would want to deal and rely on the services of their own kind.

You're refuting a straw man argument. My question was whether the cultural distribution of the agents you were told about were similar or different to that of Toronto's population. If I can paraphrase your answer, "you don't know", correct?

That would lead me to answer your 3rd question. Bubble. Here, I have used the term 'bubble' as described by various intelligent and analytical posters, for example, Interested and the likes.

Intelligent and analytical? I'm blushing.

Bubble is in the minds of weak hearted only -- especially those who earn a living working for others -- and not for the risk takers, business owerns and investors...

...As I had replied earlier to one of your posts ''.. as they say in England, you live like a chicken, you die like a chicken..'

Weak hearted? Chickens? Compelling arguments.

 

[interested]

From the Globe and Mail:

http://www.theglobeandmail.com/repo...prices-fall-in-chinese-cities/article2240888/

Housing prices fall in Chinese cities
Simon Rabinovitch
Beijing— Financial Times
Posted on Friday, November 18, 2011 7:28AM EST
5 comments





Housing prices in a growing number of Chinese cities fell last month, weighed down by a sustained government campaign to deflate the market.

Official data published on Friday depicted a soft landing for the Chinese real estate sector, with prices for new homes dipping by an average 0.15 per cent month-on-month in the 70 cities monitored by the national statistics bureau. However, the trend was clear with housing prices falling in 34 of the cities in October, twice as many as in September.

China has used a battery of policies to cool its real estate market, trying to rein in the runaway prices that had become a major risk to the economy and a bitter frustration for ordinary citizens unable to afford property.

Since early last year, the government has raised the mandatory downpayment on mortgages, restricted the number of homes that people can buy and slowly choked off financing to real estate developers.

Investment in real estate accounts for about 10 per cent of China’s gross domestic product, so the downturn in the housing market and the consequent slowdown in construction activity is expected to dampen economic growth. But even as Europe’s debt woes cast a growing shadow over China, many analysts believe that Beijing will not lightly relax its property tightening measures, for fear of giving rise to an even bigger real estate bubble than before.

On the surface, the official data suggest that China’s property market is holding up reasonably well. In Shanghai, prices for new homes dipped 0.3 per cent from a month earlier. In Beijing, they were down just 0.1 per cent.

But the numbers published by the statistics bureau are notorious for understating the true volatility in the market. When prices were soaring in late 2009, the official data showed annual gains of 10 per cent when private companies estimated that prices in top-tier cities had doubled.

One key concern now for both policymakers and investors is whether the official data will fail to capture the full extent of the stress in the housing market as prices fall.

A series of reports in official media have said that many smaller real estate developers are on the brink of collapse, blocked from bank financing and unable to generate cash flow as transactions plummet. In Wenzhou, the weakest housing market in the country, one developer recently offered free BMWs in the hopes of enticing buyers.

To support the economy even as it heaps the pressure on real estate developers, the government has launched a program to build 36 million affordable homes over five years. But in a rare setback for such a high-profile policy target, the housing ministry has admitted that progress has been slow, raising doubts about whether the public investment in property construction can adequately compensate for the decline in private investment.



Along a different venue from the National Post; our prices I guess sound reasonable compared to this!!!
I understand a lot of Europeans especially from Southern countries worried about their banks and Euro are investing in "stable" London real estate; similar to what the Chinese and East Asian populations are doing in Vancouver and Toronto.

http://www.nationalpost.com/news/in...e+apartment+building+world/5720880/story.html

Julie Zeveloff, Business Insider · Nov. 16, 2011 | Last Updated: Nov. 16, 2011 4:06 PM ET

One Hyde Park, an ultra-high end apartment complex in Knightsbridge, London, is the world's most expensive residential development.

Residences in the 86-apartment building sell for around $11,270 per square foot, far more than typical residential real estate in London, which currently goes for around $1,059 per square foot.

Despite the fact that sales for One Hyde Park started in 2007, on the eve of the recession, the building has been hugely successful, with 62 units selling for a combined $2.25 billion to date, according to real estate consulting firm Knight Frank.

Knight Frank's new report on One Hyde Park and the creation of the "super-prime" market details the residence's rise, and explains why we're unlikely to see duplicates in the near future.

Click here to read the success story of One Hyde Park >