News   Nov 08, 2024
Tricon's Birch House Welcomes Residents to the Canary District
 56     0 
News   Nov 08, 2024
News Roundup for November 8, 2024
 244     0 
News   Nov 08, 2024
Aqualuna Dawn
 504     1 

Baby, we got a bubble!?

TheKingEast said:
The problem is there is no actual data to support this. Once we get some real numbers then we can properly diagnose the problem. Foreign buyers could represent 4% or 40. We don't know. Still think the US was different in that people were buying property with 0 down and in some cases getting money from the bank. We are nothing close to that as many are putting 20+. Now is there any data on the amount of people putting just 5% down? I wouldn't be surprised if they eventually raised the minimum down payment to 10%.

Wake me up when we get more data.

PS sold data should be public and easily accessible
Click to expand...

You're right. We don't know, and I would love to have some demographic data on the foreign buyers. I would love to know how many are purchasing homes through family members, etc. too. But we may not know until it's too late.

As far as the downpayment comment you just made, I read a lot of articles, hear/read from realtors, and read in that book I mentioned about the source of the 20% downpayment for many of these mortgages. And unfortunately, it's more debt. It'd be great if every one of these down payments were hard earned savings, but parents are taking out home equity lines of credit, extending their existing mortgages. Once again, we really don't know how many are doing this, but HELOC's are a on an upsurge, whether it's for more real estate, or personal spending money. For these home owners to continue to increase their leverage introduces new risk. And why not right? Credit is cheap, the offers the banks are emailing out sound great, and their homes are worth a ton! As a result, personal debt levels in Canada are through the roof and provides a new avenue of exposure to the banks that could burn them if there ever is a real estate crisis. I would love to have some raw numbers on all of this.

I'm in my early 30's and my wife and I's income is into 6 figures. Our combined total savings is close to or just over $200k and our credit ratings are superb. My agent has told me that he could 'easily' get us a mortgage worth $1 million. My jaw hit the floor when I heard this. I'd never take out a mortgage that large in my current situation. It's far too high to be serviceable by my income to leave any money left over to live a decently entertaining life. But I wonder how many people in my position would take it or already have?
 
Admiral Beez said:
My concern over the skyrocketing market is the MPAC assessments. High assessments will drive seniors out of their homes through taxation. The city must see these assessments as a windfall.
Click to expand...

No they won't. The mill rate will automatically go down in response to higher MPAC assessments, unless city council specifically raises property taxes.
 
cheech10 said:
No they won't. The mill rate will automatically go down in response to higher MPAC assessments, unless city council specifically raises property taxes.
Click to expand...
True, but we've all read about seniors and longtime homeowners being taxed out of their homes. If the tax rate is static, how does this happen?
 
krispyk84 said:
Something doesn't seem to add up.

If our reliance on foreign buyers and capital is as high as some suspect, our housing market now relies on the continued health of foreign markets. If the Chinese markets take a nose dive, ours could be dragged down with it.

It almost seems like the perfect storm is starting to take shape: Irrational buying pressure, unsustainable debt to income ratios, demographic changes that will only increase supply, an uptick in housing starts (new construction projects in the GTA) which will grow supply, a depressed resource economy nationwide, shady mortgages, rising interest rates, foreign buyers tax and foreign market reliance. Just a handful of these have the potential to impact our housing market. What could happen if most of these catalysts happened at around the same time? The house of cards would come crashing down...
Click to expand...

I've always suspected that the interest of "foreign flight capital" in our wonderful country has more to do with the fact that we are easy pickings, as opposed to the various reasons that are often thrown out there -- like our stability and schools, etc.

Yes, we do have all those great things, but by easy pickings I mean we have several loopholes and backdoor shenanigans going on that are enabled by a government that either doesn't notice or doesn't care how these people are screwing the system. Case in point, the "students" and "housewives" in Vancouver, claiming social benefits and paying no taxes while living in million-dollar mansions. Or the retail condo units in some of our new mixed-use buildings that are sold but sit empty, never intended to be used or rented out.

I agree that something is brewing. A gut-check says that there is more to this story, but we are also waiting for more conclusive or accurate data -- which may or may not ever come.
 
NorthYorkEd said:
And although the Toronto Real Estate Board likes to say that foreign buyers make up a tiny proportion of buyers in Toronto (<5%), similar statements were made about Vancouver. A foreign buyers tax had far more of an impact on the Vancouver market than 5%. Something doesn't seem to add up.
Click to expand...

For years there was enormous push-back in Vancouver by property owners and the real estate sector against any calls for a regulating tax on foreign buyers.

First they said there was simply no way you know if foreign investors were driving up prices.
Then they presented skewed data showing it was a only a "tiny" percentage of buyers.
Then they said any tax would crash BC's economy.
When the gig up, they tried calling everyone and anyone calling for a tax a "racist".

When the tax was implemented, the market did not crash. But demand was alleviated significantly and the market cooled:
http://www.cbc.ca/news/canada/british-columbia/royal-lepage-report-q4-2016-1.3932424

The recent spike in the Toronto market corresponds almost exactly with the tax implemented in BC in August. It is very clear what it going on. Attending any open house in Toronto confirms it.

Taxes can be re raised and cut as needed. Implementing a foreign buyers tax is in the interest of Canadians and should be done immediately.
 
It's obvious that the money is primarily from overseas. Median income is $70k in Toronto. Who can afford the current prices at that rate? It's foreign investment or people earning money overseas that live here. Canada is attractive because it's easy to launder money and immigration is easy to scam in comparison to the US.

This isn't New York or London where there's a sizable "upper middle class" of finance and other movers-and-shakers making a few hundred thousand a year and can drop a million or more on a home. If you think Toronto is a "world class city" in the sense of NY or London, give your head a shake.
 
SkyGod said:
This isn't New York or London where there's a sizable "upper middle class" of finance and other movers-and-shakers making a few hundred thousand a year and can drop a million or more on a home. If you think Toronto is a "world class city" in the sense of NY or London, give your head a shake.
Click to expand...

I don't know what "world class city" means.

Foreign investors have driven up house prices in London and NY for decades. The price of entry into those markets is much higher (because they are obviously the two most important finance centres in the world) so they're attracting investors with deeper pockets. Those cities are seen as stable investments - as seen when Russians flooded the London property market before the latest sanctions went into effect. There is enough capital and people in China that it is affecting house prices in cities all over the world.

The same trend has been happening in Sydney, Melbourne, San Francisco, Los Angeles, Miami, Vancouver, Rio de Janeiro and may other markets that are seen as safe investments for one reason or another. Toronto is just the latest city to see its housing market spike like this.
 
Last edited:
I agree. My point is that Toronto housing isn't booming because our economy and wages are increasing. It's booming simply because foreigners have decided Toronto is a good place to move capital. That sentiment can change quickly. Where were these investors 10 years ago? New York or London are much more established, have more high earners, and will be the last places to have capital flight in all likelihood.

Anytime the economic fundamental of a city are this detached from home prices, there is a danger of a collapse.
 
UrbanFervour said:
I don't know what "world class city" means.

Foreign investors have driven up house prices in London and NY for decades. The price of entry into those markets is much higher (because they are obviously the two most important finance centres in the world) so they're attracting investors with deeper pockets. Those cities are seen as stable investments - as seen when Russians flooded the London property market before the latest sanctions went into effect. There is enough capital and people in China that it is affecting house prices in cities all over the world.

The same trend has been happening in Sydney, Melbourne, San Francisco, Los Angeles, Miami, Vancouver, Rio de Janeiro and may other markets that are seen as safe investments for one reason or another. Toronto is just the latest city to see its housing market spike like this.
Click to expand...

If this is the case, it doesn't necessarily mean that prices will stay high. China has been and continues to be an economic powerhouse, even with the slight downturn recently. A lot of wealth was created and all of these secondary investment properties are just a line on their balance sheet. When (not if) China faces a recession/depression, these properties may be sold off like stock. They are not as illiquid as a home belonging to a family that utilizes them as an actual home for their family. It makes the properties susceptible to panic selling. Our housing market, and economy as a whole, might now be at the mercy of the economic health of China, the Middle East, and other international investor hubs.

On the flip side, it's quite scary to think that if Canada faces a major downturn, but they do not, they will be in a position to take advantage of us and buy up more and more property while Canadian families can no longer afford to. We need some sort of protection so we don't end up a nation of renters paying foreign landlords. The mortgage crisis in the USA led to a wave of foreign buyers. That could happen here too.
 
SkyGod said:
This isn't New York or London where there's a sizable "upper middle class" of finance and other movers-and-shakers making a few hundred thousand a year and can drop a million or more on a home.
Click to expand...
The market says otherwise. Houses in my neighbourhood go for a million to professional couples.
 
Admiral Beez said:
The market says otherwise. Houses in my neighbourhood go for a million to professional couples.
Click to expand...

There's no denying that there are professional couples that can afford million dollar homes. However, if you take the number of million+ dollar homes out there, there aren't as many professional couples that can service the required mortgage and stay within 30% of their income. The pressure to buy is causing many to go well beyond 30%, and the banks and other mortgage lenders allow it. The banks love the higher risk <20% down mortgages because they are insured.
 
I see a whole bunch of talk and now actual data. I'll sit here patiently waiting for some credible data... Not saying yay or nay, just would like to see actual numbers.
 
TheKingEast said:
I see a whole bunch of talk and now actual data. I'll sit here patiently waiting for some credible data... Not saying yay or nay, just would like to see actual numbers.
Click to expand...
IDK what you're saying here. You claim to now have actual data, and then write you're waiting for data. Which is it?
 
You must log in or register to post here.

Back
Top