Baby, we got a bubble!?

[James]

More stories about the wild and crazy Vancouver real estate market in the National Post...

‘We’re not realtors!’ Former ‘wholesaler’ reveals hidden dark side of Vancouver’s red-hot real estate market

Article: http://news.nationalpost.com/news/c...side-of-vancouvers-red-hot-real-estate-market

 

[TOphotog]

I'm not surprised at all with these numbers. Pier 27 is selling at over $1,000 /sq.ft. Investors don't just need to break even on the carrying costs, they're in it for the long-term increase in value. Toronto's real estate will continue to go up in value as long as we have current immigration policies, the Greenbelt north of us ( limited land on which to build ) and a stable financial climate. Even RioCan sold off $2.7B of their US holdings and are bringing that money to Canada, mainly the GTA. Small buildings are being scooped up for the land, torn down and hi-rises being built. Land assembly at Yonge & Eglinton is at an all-time high with developers bidding on low-rise condos in the area. The Harbour Castle is sitting on over three acres of prime waterfront property. I expect to see condo towers there in the next five years.

 

[ponyboy]

limited land on which to build

I hear this a lot. True there is less "greenfield" land on which to build, but there is an abundance of low-density development that can be upsized to mid- and high-rise development. Generations worth. Developers are tripping over themselves to propose and build high-rises in Toronto because it is so lucrative and virtually no politician wants to upset this market, so developers feel enabled. We have very little information on how lucrative it is because most are private entities (why don't many of the big condo builders trade as public companies?). We don't know how much they are making, but I think it is a lot.

 

[RButler]

Building high-rise condos is very risky, that is why they make a lot of money. You want to be a Calgary condo developer right now?

Borrow $10-$20 million for land and upfront costs and don't see a dime of profit back for 7 years, not the kind of business I could ever stomach.

 

[nrb]

Yes I'm sure all those development executives are crying themselves to sleep.

 

[RButler]

Yes I'm sure all those development executives are crying themselves to sleep.

Plenty of developers in Canada have gone Bankrupt or belly up in Canada. Ever heard of Bramalea?

Go ahead and stick your head in the sand and pretend everyone that works in real estate in Canada is rich, if that fits your narrative.

 

[mckats]

I'm not surprised at all with these numbers. Pier 27 is selling at over $1,000 /sq.ft. Investors don't just need to break even on the carrying costs, they're in it for the long-term increase in value. Toronto's real estate will continue to go up in value as long as we have current immigration policies, the Greenbelt north of us ( limited land on which to build ) and a stable financial climate. Even RioCan sold off $2.7B of their US holdings and are bringing that money to Canada, mainly the GTA. Small buildings are being scooped up for the land, torn down and hi-rises being built. Land assembly at Yonge & Eglinton is at an all-time high with developers bidding on low-rise condos in the area. The Harbour Castle is sitting on over three acres of prime waterfront property. I expect to see condo towers there in the next five years.

Agreed on all fronts.

Toronto is in the midst of an unprecedented boom, indicators are all favourable at this point - only thing holding it from going really crazy is our "conservative" Canadian temperment we were raised with.

Expect 10- 15% increases in both freehold condominiums (particularly those under 1mm in current value) until at least 2019.

 

[homelessgeneration]

First time poster, long time reader and follower.

I've just been stacking my chips for some kind of correction. IMHO 10-20% might be the most, but what I'm hoping is the outer rim gets a greater correction. I think Hamilton might be a good buy as soon as this hypothetical happens, then again, I may be waiting in vain...

 

[gentlepuppies]

Same. I too have been sitting on a growing pile of cash just waiting for the bubble to burst lol.

 

[good_times]

Expect 10- 15% increases in both freehold condominiums (particularly those under 1mm in current value) until at least 2019.

Why do you think that? TREB reported a 4% increase from Q4 2014 - Q4 2015.

NYC experienced YoY increases in that range between 1998-2006, as did the US in general (albeit at a slightly lower rate), and we all know how that ended. Prices have generally stagnated since, in the City at large and Manhattan in particular.

 

[mckats]

Why do you think that? TREB reported a 4% increase from Q4 2014 - Q4 2015.

NYC experienced YoY increases in that range between 1998-2006, as did the US in general (albeit at a slightly lower rate), and we all know how that ended. Prices have generally stagnated since, in the City at large and Manhattan in particular.

TREBs numbers this year will be substantially higher I suspect.
Manhattan YOY is 12-15% increase - from the last article I had read anyway. That is no joke considering average sale price over 2mm.

Reasoning for my increase in prices regarding Toronto.

- Interest rates will remain tragically low for at least 3 years (oil shock recovery)
- Immigration to Toronto + percentage increase in working population numbers will continue to push demand.
- Starts in GTA have plateaued and will be edging lower until at least 2019

 

[James]

One eye-revealing statistic that many people are surprised to learn about is that a 20% correction would essentially put the market back to where it was 3 years ago, based on an annual appreciation rate of 7.7%. In effect, someone who bought their property prior to 2013 would not necessarily be in a financial panic to sell should a 20% pullback occur. Just some food for thought.

 

[Migos]

One eye-revealing statistic that many people are surprised to learn about is that a 20% correction would essentially put the market back to where it was 3 years ago, based on an annual appreciation rate of 7.7%. In effect, someone who bought their property prior to 2013 would not necessarily be in a financial panic to sell should a 20% pullback occur. Just some food for thought.

I don't think home value has a big impact on panic selling. It ultimately comes down to a job loss or interest rates rising for most home owners. Most people aren't going to sell their house simply because it went down in value. They need a place to live.

 

[James]

^ I wholeheartedly agree. I mention it because some people I talk to get the impression that a 20% pullback will result in a slew of people who will be "under water" and feel pressured to sell for financial reasons. On a macro level, a real estate pullback is likely married to other economic disruptions as well, with job losses and interest rate hikes as more feasible reasons for a homeowner wanting to sell.

 

[Memph]

People could want to sell if prices start to drop based on the expectation that they will drop further, so might as well try to cut your losses and swap for a less expensive house or rent for a bit. Not sure how big of a segment of the population would think that way, but surely some would. And of course people would avoid upsizing or entering the market if they're renters, which would also cause prices to drop further.