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Baby, we got a bubble!?

NorthYorkEd said:
But no matter how much those items are overvalued, nobody is lining up to borrow money they don't have to buy sour milk, a busted PS4, or a broken-down, barely-working iPhone. Even for bragging rights that they "bought it in Toronto".
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Meh, the new Iphone bends and the PS4 is crap and the sheep are still buying. :cool:
 
A growing segment of Canadian families is highly indebted, leaving them more vulnerable to any economic shift such as a job loss, illness or rising borrowing costs.

More than a third, or 35 per cent, of families had a debt-to-income ratio above 2.0 as of 2012, meaning their overall debt level was at least twice that of their annual after-tax income, a new paper by Statistics Canada finds. Back in 1999, that share was 23 per cent.

The findings are similar to the Bank of Canada’s assessment of debt trends in Canada, which suggests much of the country’s debt is concentrated in a few households. It noted in December that 12 per cent of households have a total debt-to-income ratio above 250 per cent, and that though this portion has been steady in recent years, it is almost double 2000 levels. These one-in-eight households hold about 40 per cent of overall debt.
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http://www.theglobeandmail.com/glob...are-highly-indebted-statscan/article24162884/

Nothing to see here. Everything's chugging along smoothly.
 
Migos said:
http://www.theglobeandmail.com/glob...are-highly-indebted-statscan/article24162884/

Nothing to see here. Everything's chugging along smoothly.
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The question is still: how many of the 1 in 8 have bought in the past 1-2 years in Toronto and bought condos and will it be enough of a drop that occurs to put them under water. Short of this type of event to start the cascade....the market should not continue up much in my view but will also not adjust downwards to any signficant degree.
 
interested said:
The question is still: how many of the 1 in 8 have bought in the past 1-2 years in Toronto and bought condos and will it be enough of a drop that occurs to put them under water. Short of this type of event to start the cascade....the market should not continue up much in my view but will also not adjust downwards to any signficant degree.
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I don't think it necessary matters if people are "underwater" or not. Most loans in Canada are recourse so you can't really decide to just walk away like in the U.S.

I think the bigger risk is that people can't afford their payments when interest rates rise or if there is an economic shock. Heck, maybe they can make their payments but decide to sell anyway because 70% of their after-tax income is going to the mortgage. Most people can't live like that. Then there's the investors who will simutaneously be watching their monthly cash flow dry up (carrying costs > rental income) and their capital disappearing. These people will be the first to sell because it's purely an economic choice and not emotional.

Essentially, I don't think we need to see a wave of defaults for there to be a serious downward spiral in pricing.
 
Migos said:
I don't think it necessary matters if people are "underwater" or not. Most loans in Canada are recourse so you can't really decide to just walk away like in the U.S.

I think the bigger risk is that people can't afford their payments when interest rates rise or if there is an economic shock. Heck, maybe they can make their payments but decide to sell anyway because 70% of their after-tax income is going to the mortgage. Most people can't live like that. Then there's the investors who will simutaneously be watching their monthly cash flow dry up (carrying costs > rental income) and their capital disappearing. These people will be the first to sell because it's purely an economic choice and not emotional.

Essentially, I don't think we need to see a wave of defaults for there to be a serious downward spiral in pricing.
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I am not sure I totally agree.
Drawing from what I recall from 1989 to 1992 with the big meltdown of Toronto real estate and condos....people held on for 3 years hoping things would reverse.
In Florida, prices dropped from 2006 to about 2009 or 2010. People do not usually want to crystallize their loss or hold on to hope that things will be better.

I do agree that people will make payments, may not want to at a given point and that investors may barrel out...especially those most leveraged. My point about having bought 2 years ago is that they have equity now and can withstand a "smallish 10-15% " correction. Now, as far as investors...if there is desperation to get some revenue, any revenue to cover expenses, then I can certainly see rents plummetting as landlords desperately try to get some money to meet the monthly payment
 
Question:

If you owned condo suites at 45 Carlton (The Lexington) and 711 Bay Street (The Liberties), when would you sell them? I feel like these condos, built in 1982 and 1991, will start to be more trouble than they are worth soon. Opinions?
 
yin_yang said:
Question:

If you owned condo suites at 45 Carlton (The Lexington) and 711 Bay Street (The Liberties), when would you sell them? I feel like these condos, built in 1982 and 1991, will start to be more trouble than they are worth soon. Opinions?
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Man, 45 Carlton is one of those buildings I'd consider moving into. 65 cents/sqft isn't too bad for maintenance fees (electricity included) compared to even the newest buildings and it looks reasonably well maintained.

Do you know of upcoming maintenance difficulties not mentioned in the engineers reports or is this speculation that they might have some?
 
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Toronto rates a “yellow” or moderate risk ranking – along with Montreal and Quebec City – because price growth averaging 6 to 7 per cent has far outstripped income growth averaging less than 2 per cent; the number of new condos under construction across the GTA are close to historical peaks and there has been a slight increase in the number of units completed but unsold, said CMHC analysts.
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http://www.thestar.com/business/201...moderate-risk-of-price-correction-report.html
 
rbt said:
Man, 45 Carlton is one of those buildings I'd consider moving into. 65 cents/sqft isn't too bad for maintenance fees (electricity included) compared to even the newest buildings and it looks reasonably well maintained.

Do you know of upcoming maintenance difficulties not mentioned in the engineers reports or is this speculation that they might have some?
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i can't think of any deficiencies, apart from maybe aesthetic ones. it's a great building. i think our AC/heat system could use an upgrade.

but...how long until the concrete starts to age and really weigh on quality and floor levels? i notice that in a lot of buildings built in the 1960s, the floors are quite uneven.
 
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interested said:
I am not sure I totally agree.
Drawing from what I recall from 1989 to 1992 with the big meltdown of Toronto real estate and condos....people held on for 3 years hoping things would reverse.
In Florida, prices dropped from 2006 to about 2009 or 2010. People do not usually want to crystallize their loss or hold on to hope that things will be better.

I do agree that people will make payments, may not want to at a given point and that investors may barrel out...especially those most leveraged. My point about having bought 2 years ago is that they have equity now and can withstand a "smallish 10-15% " correction. Now, as far as investors...if there is desperation to get some revenue, any revenue to cover expenses, then I can certainly see rents plummetting as landlords desperately try to get some money to meet the monthly payment
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This argument for the rent dropping because landlords desperately try to get some money only make sense if there is a material level of vacancy, which currently in Toronto stands at less than 2%. Which means on average a Toronto rental condo vacant for less than 1 week per year. I will be duly supprises if an average land lord in Toronto is not able to carry a vacant property for 1 week.

For the rental balance to actually change, Canada will need to stop immigration, and young people from small Canadian towns will need to stop coming to Toronto to look for employment.

I do, however, see a 10 to 20 percent drop in small one bedroom or bachelor downtown condos over the next 3 to 5 years due to the new trend of developer focusing on small unit plans of less than 550SF causing the new supply of very small condos is disproportionately large. This is regardless of economic conditions.
 
UD2 said:
This argument for the rent dropping because landlords desperately try to get some money only make sense if there is a material level of vacancy, which currently in Toronto stands at less than 2%. Which means on average a Toronto rental condo vacant for less than 1 week per year. I will be duly supprises if an average land lord in Toronto is not able to carry a vacant property for 1 week.

For the rental balance to actually change, Canada will need to stop immigration, and young people from small Canadian towns will need to stop coming to Toronto to look for employment.

I do, however, see a 10 to 20 percent drop in small one bedroom or bachelor downtown condos over the next 3 to 5 years due to the new trend of developer focusing on small unit plans of less than 550SF causing the new supply of very small condos is disproportionately large. This is regardless of economic conditions.
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I think this is the point I was trying to make. If there are enough small investor units that come up, landlords will fight for tenants. While 2% vacancy translates to 1 week, this is an average and I don't think applicable. Landlords and leases almost all start at the beginning of the month...so if there is a vacancy, it will likely be 1 month...or potentially 2 or 3. Other properties will not be vacant at all. The problem again is how strong financially is the landlord who has gone 2 months without rent. Once the first few drop the rent, there is a tendency to follow (at least to a point) because each individual landlord will look and say "I want $1500/month but at least if I take $1400 I am only $100/month behind which is better than losing $1500 for a month which is 1 and 1/4 years of incremental rent loss. If this happens alot, we create a downward spiral.
 
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UD2 said:
This argument for the rent dropping because landlords desperately try to get some money only make sense if there is a material level of vacancy, which currently in Toronto stands at less than 2%. Which means on average a Toronto rental condo vacant for less than 1 week per year. I will be duly supprises if an average land lord in Toronto is not able to carry a vacant property for 1 week.

For the rental balance to actually change, Canada will need to stop immigration, and young people from small Canadian towns will need to stop coming to Toronto to look for employment.

I do, however, see a 10 to 20 percent drop in small one bedroom or bachelor downtown condos over the next 3 to 5 years due to the new trend of developer focusing on small unit plans of less than 550SF causing the new supply of very small condos is disproportionately large. This is regardless of economic conditions.
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You can't look at demand in a vacuum. Demand only matters as it relates to supply. We could have a million people immigrate to Toronto next year but if their is two million new homes built, there will be oversupply.

Take a look at the chart on page 2: http://www.bmonesbittburns.com/economics/amcharts/feb2415.pdf

Even better, look outside at all the condos nearing completion in Toronto. What happens when 10,000 units come online all at once? Nobody knows because it's never happened here.
 
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