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Baby, we got a bubble!?

Rental numbers continue to shrink this week in the core, the new listings continue to be eaten up by leased and in most days double. I stay ahead of the curve. We will see a favourable report in early Sept in relation to rentals.
 
RBC again slashed rates annouced today, rate sheets from brokers crossing my desk now see 5 yr money at 3.69%. Diff scope than the above Globe article.
 
Condo George said:
RBC again slashed rates annouced today, rate sheets from brokers crossing my desk now see 5 yr money at 3.69%. Diff scope than the above Globe article.
Click to expand...

George, interest rates are being "slashed" because the economy is not doing well and expected to get worse. This should not inspire people to invest with a hope to make more money through appreciation of real estate. To the contrary, when things are bad, as a rule, things get cheaper not more expensive. Example, when things were bad, car companies were giving all sorts of incentives to sell product effectively decreasing car prices. The same logic should be applied to condos and real estate.

The bond market is saying expect no long term inflation, possibly deflation and therefore real estate shsould not increase in value in this environment. As a rule, the bond market tends to get it more "right" than central bankers. However, it too is equally fallable. Since the bond market sets mortgage rates, the bond market is telling you it is not expecting inflation to any degree, a bad environment to expect price appreciation. Which brings one back to investment rental real estate and we have had this discussion numerous times and I don't feel at $600/sq. ft. this is a sound investment personally.

I believe it will be the uninformed or those who have not taken the time or do not comprehend what is coming that will make big purchase investments with the hope of making money on "future appreciation".

As for rentals, you may well be correct. However we both know that this is one of the peak rental times (September) and then things will likely slow as more product hits the market (18000 condos coming on line) and less renters rent in the winter months.
Rents are essentially flat (despite your MLS example before since $50 up or down could simply represent what 1 landlord is willing to take vs. another). I suspect there will be no upward pressure on rents.

Perhaps the core will continue to rent well but inevitably supply/demand will come into play.
 
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A look at what's happening south of the border from the front page of the NY Times:

Housing Fades as a Means to Build Wealth, Analysts Say
By DAVID STREITFELD

Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.

The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”
 
greenleaf said:
A look at what's happening south of the border from the front page of the NY Times:

Housing Fades as a Means to Build Wealth, Analysts Say
Click to expand...

I like the next few lines. It seems that most Canadians don't understand this yet.

Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.
...
“People shouldn’t look at a home as a way to make money because it won’t,†Mr. Baker said.
Click to expand...
 
Condo George said:
Bought in Dunedin for $50 psf 30% of 2006 levels
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New Zealand or Florida?

either way, that's a good price.

if it weren't for punitive US taxes, i would consider buying there since rates are at historic lows with available fixed 25/30/35/40-year terms and fairly low prices.

i still believe there will be further price declines in the US once the moratorium on foreclosures is removed; however, there is greater upside there than in Canada
 
Their reports are pretty decent. Like I've said before, it's a good time to rent now, so if that part of the market does its job, vacancy remains low, then rental prices have to increase (and selling prices won't decrease - as much). Unfortunately, to make investing a smart go, they'd have to increase a good 50% or more in the core. Places like Aura, Bell Lightbox, etc. with 7-800/ft prices will need way higher prices to make sense. I don't see how you could have any decent return on a unit at those place unless you're getting closer to $4/ft in rent vs. the $2.50 that's the norm now. They aren't luxury - those will be rented in Ritz/Four Seasons/Trump/Shangri-La.

I think, however, that being excited that 100 new rental units in MPR were absorbed is hardly call for dancing in the streets. With so much more coming down the pipe and a lot of it to become available in the slow winter months, I simply think the rental market is lagging. Also, if condo rents do rise substantially, then the 7% vacancy rate and way cheaper prices in regular apartments will start to kick in and people will migrate back to older buildings, kicking the vacancy rate up in condos and maybe dropping their prices again.

This will truly be a roller coaster for the next year or so.
 
simuls said:
I think, however, that being excited that 100 new rental units in MPR were absorbed is hardly call for dancing in the streets. With so much more coming down the pipe and a lot of it to become available in the slow winter months, I simply think the rental market is lagging. Also, if condo rents do rise substantially, then the 7% vacancy rate and way cheaper prices in regular apartments will start to kick in and people will migrate back to older buildings, kicking the vacancy rate up in condos and maybe dropping their prices again.

This will truly be a roller coaster for the next year or so.
Click to expand...


the devil is in the details ...
unfortunately, we don't know how long those rentals were on the market before being leased ...
Condo George posted a list of available units for rent and some were still on the market after 45+ days and one was over 90 days old.

also, from the above report, there are still 10 out of 100 units for lease still available ... that's 10% vacancy !
 
The interesting thing with all these reports that talk about possible deflation, a double dip, and the report in which they suggested interest rates increasing due to inflation significantly within 2 years, one has to wonder how does a thinking investor invest in these times. I would suggest it is akin to outright gambling to be purchasing anything today.

I too thought the Remax report was encouraging. I have been reading Remaxcondosplus reports for the past 3-4 years and I feel Jamie Johnson presents objective data, even if his examples select out the point he may be trying to expound.

My understanding with the rental market is that about 6000 units of condos have been completed in the first 1/2 of the year, but double that is due to come on line. If we assume 30% come for rent of the 12000 due to come on line, that represents 3600 more units. I don't believe that rental prices will be forced up and that did not happen despite sale price increases for the past number of years.

I am not sure I agree with Simuls that people will seek out older apartments if rents increase. I believe that rents won't increase and even if they do, most will be limited to the increases allowed by the government on rentals (less than 1% this year I believe) and since the new supply will be far less than existing, people won't move and there will be resistance to rent if the person is renting the same unit beside you for $100 or $200 less/month. I guess however, if there is truly "very little supply" which I don't believe to be the case, then rents logically could go up.
 
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