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Baby, we got a bubble!?

KA1 said:
I would like to add my 2 bits to the comments made by ex-Montreal girl and 'ex-Montreal guy(ex-Montreal senior citizen?:).

In the early sixties I used to live in London, England. We used to get paid every week.

In January of a year, banks will start 'Christmas club' -- encouraging individuals to start savings for the next Christmas on weekly basis. At that time, it did not make any sense. As a matter of fact, it used to sound funny. Now, looking back, it all makes sense.
Click to expand...

I guess banks make way way way more on 19.5% credit card interest charges and whatever the going rate is on $400K+ mortgages than they do on your Christmas savings accounts. And I am sure it's deliberate.

I have a savings account for one reason and one reason alone: I put aside $100 a month to cover off the condo property tax and the car and condo insurance. Occasionally I will use it to save for a special trip like, next year, we would like to go to an elephant sanctuary in S.A.

But it's not like I am getting a statement every month and going, "Oooooo, look at how much I made in interest!" the way I might have in my parents' time.

If I understand banking correctly, back in the day, they'd use our savings account money for investing. But now, with RSPs for example, why should they bother?
 
^^^
"But it's not like I am getting a statement every month and going, "Oooooo, look at how much I made in interest!" the way I might have in my parents' time.

If I understand banking correctly, back in the day, they'd use our savings account money for investing. But now, with RSPs for example, why should they bother? "

The problem is not that people do not save in a savings account. The problem is they are not saving at all. I have heard people say "why bother". Money is so cheap you should borrow to invest today. And with my last posting of the article about Bubbles in every asset class, that is great.....except that people who are doing it with borrowed money or who are in debt are going to be in all sorts of trouble when/if interest rates rise...unless they are smart enough to get out when the bubble bursts. I think this is unlikely....like timing the market.... I know very few people who got out in time in 2008/2009.

I run into people who say how silly to be in low interest paying vehicles or who buy junk bonds for a 2% bump up in yield not appreciating the risk....simply saying I need more yield and not saying I need more yield at reasonable risk.

I do however agree that using a savings account for investing today is not the right vehicle. I believe Ka1's point was that people were encouraged to save as oppose to spend money borrowed from the future.

In response to Ka1, I am old enough to be a Sr. at Shopper's Drug Mart (55):) but not old enough to collect Old Age(65):(
 
TheKingEast said:
Condo George.

2014/2015 there will be an unprecedented amount of new condos on the market as many projects will take occupancy during that time. Where do you see prices going? I feel that at that point? I feel there will be an over supply of condos and hence prices my dip a little bit. What do you think?

Also, what do you think of Regent Park and Liberty Village? There appears to still be some good value there and an opportunity to make some money in the future.
Click to expand...

1. As long as we have a strong rental market we will be ok in 2015 imo the gap from freehold to condo is too wide as condos underperformed the overall market in the last 2 yrs so they have some catching up to do. The investor that has a rented unit will most likely stay invested as in the past and rental rates aren't getting any cheaper as this spike in rates was seen when the finance minister and company scared the crap out of the market in July 2012 and creating a rental surge from sellers trying to time the market. We then move into 2016 2017 where most pre con that was sold in 12 and 13 comes to market which is not much at all because of the above and some wall street guru calling for a 30% drop that never happened the investor community in condo came to a halt or at best a snails pace.

2. I don't sell Liberty Village or Regent park, that doesn't mean you cant make money there if there is value, I just pick one or two towers a year to promote and none have been in these areas.

3. Personally I continue to invest in select locations and select units within those towers, most on lower floors as imo the high floors will not get the ROI the lower floors will get percentage wise.

4. Some of my investors like to sell before occupancy or final closing, not all agents are comfortable with doing assignments but I am and will help clients and agents through the process. If successful then there are no closing costs as they are transferred to the new buyer, one should always plan on worst case scenario and include closing the unit before you make a buy decision but it is an option to sell before even occupancy although best to get the keys so buyers can view what they are buying, its a harder sell off floorplan. you can view my assignments approx. 30 units here all are before occupancy www.georgekozaris.com

5. I still like real estate over any other asset class over the long term, its really up to you where you invest but its important to do something even if its not real estate, a calculated risk imo is better than 1% GIC.
 
Condo George said:
1. As long as we have a strong rental market we will be ok in 2015 imo the gap from freehold to condo is too wide as condos underperformed the overall market in the last 2 yrs so they have some catching up to do. The investor that has a rented unit will most likely stay invested as in the past and rental rates aren't getting any cheaper as this spike in rates was seen when the finance minister and company scared the crap out of the market in July 2012 and creating a rental surge from sellers trying to time the market. We then move into 2016 2017 where most pre con that was sold in 12 and 13 comes to market which is not much at all because of the above and some wall street guru calling for a 30% drop that never happened the investor community in condo came to a halt or at best a snails pace.

2. I don't sell Liberty Village or Regent park, that doesn't mean you cant make money there if there is value, I just pick one or two towers a year to promote and none have been in these areas.

3. Personally I continue to invest in select locations and select units within those towers, most on lower floors as imo the high floors will not get the ROI the lower floors will get percentage wise.

4. Some of my investors like to sell before occupancy or final closing, not all agents are comfortable with doing assignments but I am and will help clients and agents through the process. If successful then there are no closing costs as they are transferred to the new buyer, one should always plan on worst case scenario and include closing the unit before you make a buy decision but it is an option to sell before even occupancy although best to get the keys so buyers can view what they are buying, its a harder sell off floorplan. you can view my assignments approx. 30 units here all are before occupancy www.georgekozaris.com

5. I still like real estate over any other asset class over the long term, its really up to you where you invest but its important to do something even if its not real estate, a calculated risk imo is better than 1% GIC.
Click to expand...

Thanks for the response. I bought a condo off assignment years ago and got a very good deal out of it. But now it seems that assignments aren't as great of a buy as they used to be. Too much money up front and a lot of work involved. Had someone at BMO say they don't like doing assignments and want 25-30% down which is ridiculous. I agree with investing in low floor units. There is more value there.
 
interested said:
^^^
"
I believe Ka1's point was that people were encouraged to save as oppose to spend money borrowed from the future.

In response to Ka1, I am old enough to be a Sr. at Shopper's Drug Mart (55):) but not old enough to collect Old Age(65):(
Click to expand...

Yes, the point is that people were encouraged to save for the future expenses first rather than borrow, spend and pay going forward. Amount of interest did not even matter.

I remember when Visa was first introduced in Canada/Toronto. It used to be called 'Chargex'. Quite a few retailers refused to accept it. However, they were 'rail roaded' by the credit card companies and a few other retailers who had started accepting 'Chargex'.

As Ex-Montreal girl has correctly stated, to para phrase it, starting around that point, this attitude of savings first and then spending went out of the window. Everything now became the 'Mantra' -- I want to enjoy life now while I can.

As quite a few of you on this thread might know -- Interested definitely knows -- that in my real life I am a practising accountant. Around mid-90's, a consultant young client of mine -- at least a lot younger as compared to me -- wanted me to help him to do 'financial planning' for him. I told him that it is going to be almost impossible to do that. The first thing I will be telling him to stop going to an ATM everytime he needs $ 10 or $ 20 and pay $ 2 ATM charges per transaction. He should be going to his bank instead and withdraw enough money to last him till his next pay cheque and go to ATM only if he absolutely, positively has to go. His answer was that withdrawing money from bank to last till next pay cheque were the days of his parents and are not for him.

Interested, thanks for the mature response to my jab at you in my earlier post.
 
KA1 said:
As Ex-Montreal girl has correctly stated, to para phrase it, starting around that point, this attitude of savings first and then spending went out of the window. Everything now became the 'Mantra' -- I want to enjoy life now while I can.
Click to expand...

Ironically, it is the collective attitude of the savers, both consumers and businesses, that are slowing economic growth by not spending/investing and thereby keeping interest rates low and asset values "out of whack".
 
Ex-Montreal Girl said:
If I understand banking correctly, back in the day, they'd use our savings account money for investing. But now, with RSPs for example, why should they bother?
Click to expand...

Why should they bother? Because that's how banks make money. In a low interest environment, they pay you less interest but they also get less interest on the money they lend out. I thought this is common sense.
 
The Ontario Home Ownership Index Reveals Positive Expectations for Province’s Real Estate Market
Thursday, July 10, 2014

Toronto, ON – While the average detached home is still the standard for prospective homebuyers in Ontario, many Ontarians are turning to the condo market for their future residential needs, according to a new survey conducted by Ipsos Reid on behalf of the Ontario Real Estate Association and The Ontario Home Ownership Index.

A majority (59%) of Ontarians likely to purchase a home in the next two years indicate they are looking for a detached house. While detached residences top the list, condominiums or apartments (28%) rank second among homes most sought out by prospective buyers in the province. This push is led by the 41% of prospective buyers in the City of Toronto who indicate they’re looking at a condo or apartment for purchase.

Taking a broader look at the province, Ontarians expressed positive perceptions of the current residential real estate market. A majority (57%) believe it is ‘favourable’, compared to only 20% who say it is ‘unfavourable’. Furthermore, half of Ontarians (52%) see the overall state of Ontario’s economy as ‘good’, compared to 29% that say it is ‘bad’.

Ontario Home Ownership Index Reveals Strong Sentiment for Provincial Market…

The Ontario Home Ownership Index is designed to reflect Ontarians’ overall views of the residential real estate market in Ontario, and incorporates measures such as Ontarians’ perceptions of whether the market in their neighbourhood, city, and Ontario, respectively, have improved or worsened in the last year and looking ahead into the future, whether homeownership is important to them and whether it is a good investment in the long term.

Various factors play into the home buying and selling decision which The Ontario Home Ownership Index intends to explore over time. These were some of the findings from the latest index wave:

10% of Ontarians say they are ‘very likely’ to purchase a home within the next two years
14% of Ontarians say they are ‘very likely’ to sell a home within the next two years
Three in ten (28%) Ontarians believe the current residential real estate market in their city or town is ‘very favourable’ and six in ten (57%) say it is ‘favourable’
82% of Ontarians agree that real estate is a good investment
84% of Ontario residents think it makes more sense to own a home rather than rent over the long-term
The results of the index also reveal that provincial market expectations and predications are more likely to be stronger than weaker:

Compared to one year ago, a third (35%) of Ontarians say the Ontario real estate market is ‘stronger’ while just one in five (18%) say it is ‘weaker’
A third (34%) of Ontarians say the Ontario real estate market will be stronger in the next year compared to one in five (17%) who say it will be ‘weaker’
Looking ahead to the next ten years, nearly half (46%) of Ontarians see a stronger provincial market; a quarter (22%) see a ‘weaker’ market
Home ownership perceptions among Ontarians are quite strong as it gives owners a sense of pride while acting as an investment for many:

79% of Ontarians say that home ownership is important to them
80% of Ontarians say that owning a home gives them a sense of pride
Ontarians ranked long-term investment value (29%), affordability/availability of homes (26%) and desire to own a home of my own (26%) as their top three reasons for a home purchase
 
Condo George said:
1. As long as we have a strong rental market we will be ok in 2015 imo the gap from freehold to condo is too wide as condos underperformed the overall market in the last 2 yrs so they have some catching up to do. The investor that has a rented unit will most likely stay invested as in the past and rental rates aren't getting any cheaper as this spike in rates was seen when the finance minister and company scared the crap out of the market in July 2012 and creating a rental surge from sellers trying to time the market. We then move into 2016 2017 where most pre con that was sold in 12 and 13 comes to market which is not much at all because of the above and some wall street guru calling for a 30% drop that never happened the investor community in condo came to a halt or at best a snails pace.

2. I don't sell Liberty Village or Regent park, that doesn't mean you cant make money there if there is value, I just pick one or two towers a year to promote and none have been in these areas.

3. Personally I continue to invest in select locations and select units within those towers, most on lower floors as imo the high floors will not get the ROI the lower floors will get percentage wise.

4. Some of my investors like to sell before occupancy or final closing, not all agents are comfortable with doing assignments but I am and will help clients and agents through the process. If successful then there are no closing costs as they are transferred to the new buyer, one should always plan on worst case scenario and include closing the unit before you make a buy decision but it is an option to sell before even occupancy although best to get the keys so buyers can view what they are buying, its a harder sell off floorplan. you can view my assignments approx. 30 units here all are before occupancy www.georgekozaris.com

5. I still like real estate over any other asset class over the long term, its really up to you where you invest but its important to do something even if its not real estate, a calculated risk imo is better than 1% GIC.
Click to expand...


Great post Condo George.
1 point though. The wealthy are sitting on more cash than at any time in recent years and not investing large amounts. Perhaps it is because the wealthy have a lot of disposable income. But the other consideration would have to be that a number of wealthy are worried more about Return OF capital than Return ON capital. In other words, I think the takeaway message is that all asset classes are inflated. The issue with real estate is that it is highly levered in many instances and certainly at the margin so the problem here is if 10% of the market is 20% down or less, a 20% drop would impact the real estate market significantly.
Perhaps new buyers will step in (the wealthy with cash) but other classes of assets are usually not as highly levered as this. Usually stocks are 50% levered at most (lessons learned from the crash of 1929 when 5% was enough down).
 
Good point.

I was hearing today from a friend that stocks are tanking now because of Portugal, last year it was Cyrus then Italy, Greece so on ... Why should an investors portfolio tank because of Portugal, no control I say......what happened to PE ratios etc for valuation!
 
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