TheKingEast
Senior Member
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Baby, we got a bubble!?
- Thread starter simuls
- Start date
brockm
Active Member
I'm not so sure. Rent prices, unlike sale prices (due to the ability to utilize leverage) are bound by income. Rent prices cannot exceed a certain percentage of people's incomes. If they do, people will simply start moving elsewhere. To green pastures, as it were.
There is money in multi-tenant development at current rent prices and the market would meet those demands unless zoning and regulatory burdens (such as rent control) stood in the way.
Kenny
Active Member
Eh..I knew waiting to sell my condo would bite me in the butt. Should have sold last year but was advised against it.
Better late than later.
cdr108
Senior Member
not sure if many have noticed, but several developers and property management companies are doing exactly that.
concert, minto, greenwin and few more that i can't recall right now.
several thousand units are in the pipeline ... not crazy numbers but more than enough to meet demand and compete against the small time individual specu-vestor with a unit or 2 in a building.
these guys have the capital, volume and namebrand to take away market share from those already negative cash flow condo specu-vestor.
Ric
Active Member
I have to agree with that report on the rental market. I've never seem it so hot. Multiple bids, with units going over asking. I think it's great for investors with +ve cash flowing units.
daveto
Active Member
The CMHC doesn't "make housing affordable for homebuyers". Rather, it makes mortgages more available by providing mortgage insurance.
Housing affordability is currently close to the most unaffordable level of the last 20 years. (despite historical lows in mortgage rates).
http://www.rbc.com/economics/market/pdf/house.pdf
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rbt
Senior Member
Not to be picky but milk in Canada and the United States (possibly elsewhere too) is very heavily subsidized. You might be paying more on lots of other things, but not milk.
Riverdale Rink Rat
Senior Member
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Not to be picky, but you're paying "more than twice the world price for milk" according to the OECD because milk is not subsidized, but rather supply is restricted, i.e. the farmer is making out like a bandit and the consumer is getting the sharp end of the price.
http://www.theglobeandmail.com/news...s-dont-know-the-price-of-milk/article1315665/
rbt
Senior Member
I suppose it depends on how you measure things, and it obviously changes depending on location. Yes, supply is restricted but a large number of cattle specific items (antibiotics, vet services, food [different food changes milk flavour -- growers of certain foods tend to get tax subsidies], rural wells [dairy cattle drink a lot], ...).
That's before you get into rural transportation (something dairy farms make very heavy use of). No, it's not direct but they do take substantial benefit from it.
Farm sewage treatment laws are also extremely lax to the primary benefit of cattle and sheep farms; particularly the heavily fed/innoculated dairy cattle farms. A typical Ontario dairy farm produces as much sewage as a small town but has significantly different treatment laws than that small town. Having lived in Hanover (Walkerton is 10km down the highway) cattle farm runoff is a big annoyance of mine; particularly when it was my own families farking farm which, thankfully, they've since sold.
In my very limited experience on an Ontario farm which rotated through several different forms of livestock over a decade, dairy certainly is indirectly subsidized by law or direct dollars to a large amount. Many things in Canada are.
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macookie
Active Member
Well... taxes redistribute wealth so that the collective "we" all share... aka taxes subsidize something. And we're all just a little more healthy because of it... no one really needs to be stuck with a massive bill for being unlucky recipient of cancer... or a worse a heart attack... from the shock of paper losses on real estate.
But... at least with some taxes we get direct benefits... unlike CMHC premuims which must go somewhere... I'm not exactly sure where... but I'm sure there's no bank account that actually contains the money that thousands of Canadians have paid in silly-like hidden "tax" fee for insuring a mortgage... to actually insure against losses...
So... one should pose the question, to someone... important, as to what do those fees actually specifically pay for?
James
Senior Member
According to the new Scotia Economics report, is anyone else not really impressed by their prediction of a 10% decrease over the next 2-3 years? Per annum, this is not a real significant drop. Granted since this is a national average, we would expect Toronto and Vancouver to be more heavily weighted in the correction but it still doesn't scream bubble to me.
http://www.thestar.com/business/art...ded-for-10-per-cent-downturn-scotia-economics
Housing prices headed for 10% slide: Scotia Economics
Published on Wednesday August 08, 2012
Susan Pigg
Business Reporter
Canadian home prices are likely to decline 10 per cent over the next two to three years before facing a period of “prolonged” softness and lower demand, says a new report from Scotia Economics.
“The correction will be concentrated in the Toronto and Vancouver markets, where supply risks and affordability pressures have the potential to trigger larger price adjustments,” says the report by Scotiabank’s Global Economic Research Group.
There are signs that Toronto’s condo market “is beginning to self-correct” with a sharp downturn in sales in the second quarter of 2012. Prices are likely to moderate and a record inventory of unsold units is likely to force some developers to delay or cancel some planned projects, it notes.
Vancouver’s notoriously overheated housing market is now seeing a 20 per cent decline in demand over long-term trends and prices are likely to follow, the report notes.
Toronto may not be far behind: Sales remain 10 per cent above historic averages and the short supply of detached homes in particular continues to drive up prices. (The average price of a detached home in the GTA hit almost $600,000 in July. A detached in the 416 area was up to $752,4310, according to the Toronto Real Estate Board.)
“This is beginning to present affordability challenges, and raises the risk of a bigger price correction down the road,” says Scotiabank’s report.
Pent-up demand for housing has been “effectively exhausted” right across Canada by the decade-long housing boom, fuelled by historically low interest rates, which has helped push home ownership to record levels, the report notes.
Other “downside risks” of the housing market are Ottawa’s tightened mortgage lending rules — the move to restrict repayment to 25 years instead of 40 years — high household debt and interest rates that have only up to go, it says.
Just shaving 15 years off the maximum allowable amortization period has added about $387 to the monthly carrying costs on an average-sized home for buyers with just a 5 per cent down payment, notes Scotiabank’s economists.
“Even beyond mid-decade, Canada’s housing sector faces the likelihood of a prolonged period of relatively modest sales and price gains,” the report says.
“Historically, long cycles of rising home prices have been followed by extended periods of persistent softness, allowing affordability to be gradually restored and generating renewed pent-up demand.”
Those downturns after the housing booms in the 1970s and 1980s — defined as periods of flat or negative real price growth — lasted 8 and 9 years, respectively, it notes.
“Canada’s housing market is expected to avoid the sharp downturn witnessed in the United States and Europe,” it stresses, adding that “Canadian household balance sheets remain in reasonably good shape.”
The equity Canadians have in real estate averages 67 per cent compared to just 41 per cent in the United States, which helped leave homeowners there particularly vulnerable when house prices took their dramatic downturn.
http://www.thestar.com/business/art...ded-for-10-per-cent-downturn-scotia-economics
Housing prices headed for 10% slide: Scotia Economics
Published on Wednesday August 08, 2012
Susan Pigg
Business Reporter
Canadian home prices are likely to decline 10 per cent over the next two to three years before facing a period of “prolonged” softness and lower demand, says a new report from Scotia Economics.
“The correction will be concentrated in the Toronto and Vancouver markets, where supply risks and affordability pressures have the potential to trigger larger price adjustments,” says the report by Scotiabank’s Global Economic Research Group.
There are signs that Toronto’s condo market “is beginning to self-correct” with a sharp downturn in sales in the second quarter of 2012. Prices are likely to moderate and a record inventory of unsold units is likely to force some developers to delay or cancel some planned projects, it notes.
Vancouver’s notoriously overheated housing market is now seeing a 20 per cent decline in demand over long-term trends and prices are likely to follow, the report notes.
Toronto may not be far behind: Sales remain 10 per cent above historic averages and the short supply of detached homes in particular continues to drive up prices. (The average price of a detached home in the GTA hit almost $600,000 in July. A detached in the 416 area was up to $752,4310, according to the Toronto Real Estate Board.)
“This is beginning to present affordability challenges, and raises the risk of a bigger price correction down the road,” says Scotiabank’s report.
Pent-up demand for housing has been “effectively exhausted” right across Canada by the decade-long housing boom, fuelled by historically low interest rates, which has helped push home ownership to record levels, the report notes.
Other “downside risks” of the housing market are Ottawa’s tightened mortgage lending rules — the move to restrict repayment to 25 years instead of 40 years — high household debt and interest rates that have only up to go, it says.
Just shaving 15 years off the maximum allowable amortization period has added about $387 to the monthly carrying costs on an average-sized home for buyers with just a 5 per cent down payment, notes Scotiabank’s economists.
“Even beyond mid-decade, Canada’s housing sector faces the likelihood of a prolonged period of relatively modest sales and price gains,” the report says.
“Historically, long cycles of rising home prices have been followed by extended periods of persistent softness, allowing affordability to be gradually restored and generating renewed pent-up demand.”
Those downturns after the housing booms in the 1970s and 1980s — defined as periods of flat or negative real price growth — lasted 8 and 9 years, respectively, it notes.
“Canada’s housing market is expected to avoid the sharp downturn witnessed in the United States and Europe,” it stresses, adding that “Canadian household balance sheets remain in reasonably good shape.”
The equity Canadians have in real estate averages 67 per cent compared to just 41 per cent in the United States, which helped leave homeowners there particularly vulnerable when house prices took their dramatic downturn.
rbt
Senior Member
Most government "rainy day" revenues go toward paying government debt and get issued the equivalent of bonds just like a private citizen buying government debt. A large chunk of Canadian Debt at the federal level is to the Canadian government itself; money for pension funds and I would expect CMHC insurance premiums paid into the system.
One of the coming difficulties for the United States as a result of their 0% treasury bills is that many government services which are forced to buy them are going to be short funds in the next couple of decades. They really are robbing future social security to pay for todays services. I have no idea how Canada fares in comparison but our rates are also above 0%.
brockm
Active Member
What I love about all these reports which call for a soft landing, is they are EXACTLY like all the reports in the US in the 2006-2007 period. And then, even when things were clearly going south, the analysts changed tacts and claimed the problems were "contained" to certain distressed market segments but there was "underlying strength".
When you see those phrases that I've quoted showing up in defecation of analysts, you know it's time to head for the door.
redfirm
Active Member
Do we have any real life example of "soft landing"? Any other country where prices climbed for 10-15 years period relative to income and rent levels, froze and stayed at that peak for, say, 5 years, and then continued moving up again?
redfirm
Active Member
Hey KA1,
when I joined this forum last year you challenged me to provide my prediction and my answer to the title question. In March-April last year I said 18-24 months before we see first serious cracks with the total damage 25%+. Well, we are approaching my timeline and it will be interesting to see what happens next. September and October .... Cheers
when I joined this forum last year you challenged me to provide my prediction and my answer to the title question. In March-April last year I said 18-24 months before we see first serious cracks with the total damage 25%+. Well, we are approaching my timeline and it will be interesting to see what happens next. September and October .... Cheers