Baby, we got a bubble!?

[ham]

I just wonder whats the better long term (+10 years) investment to rent out:

1) 2 bedroom (approx. 850 sft), 1 parking + locker, at Regents Park

or

2) 1 bedroom (approx. 600), 1 parking + locker, Financial district

both around 400 000,
thanks for your advice!

 

[ILuvTO]

I just wonder whats the better long term (+10 years) investment to rent out:

1) 2 bedroom (approx. 850 sft), 1 parking + locker, at Regents Park

or

2) 1 bedroom (approx. 600), 1 parking + locker, Financial district

both around 400 000,
thanks for your advice!

I am no expert, but I would vote financial district. It's in the core and right on the subway line. Because of that I would think it would be easier to rent out regardless of market conditions.

 

[cdr108]

wow, that price is crazy for regent park.

i'm really surprised Andrew bought it at that price considering he seems to value investor from his posts here.

also, i don't see anyone paying $1,000/m for 301 sqft in Regent Park anytime soon considering the going average rental rate for prime dt core TO ranges from $30-36 psf per year; and he's expecting $40 ?!?!?

The trend to miniaturization continues:

301 square foot condo with 89 square foot balcony (with world's shortest video tour)

Sold for $166000 ($551 per square foot, pre-construction).

A similar one is on sale for $200000 now. Granite counters, in-suite washer/dryer, but no closet space.

 

[Eug]

In my limited experience, it seems the smaller the unit, the higher the per square foot cost. ie. A 600 square foot unit usually costs more than half as much as a 1200 square foot unit of the same quality. This tends to be true with both purchases and rentals (although lots of exceptions exist).

I don't have any experience with 300 square foot units though.

 

[Wildymyst]

VIDEO:Stock trader who ‘dreams of another recession’ revealed

I think there's an element of truth that the rich gets richer, and the average middle income person either misses out the real estate "gravy train" or comes in later after the peak when everyone is talking about real estate and more people think they are experts. The real estate insiders and pros will always have less risk but make more money before passing it on to the next stakeholders to take the remaining risks.

Whether it's a hoax or not below, there's an element of truth to what he says. Although he talks about the Eurozone, if you were to substitute real estate into the Eurozone and the stock market, I think it embodies some of the similar debate in this thread.

From the Toronto Star:

http://www.thestar.com/business/art...ader-who-dreams-of-another-recession-revealed

Alessio Rastani
http://www.youtube.com/watch?v=aC19fEqR5bA&feature=player_embedded

 

[brockm]

I think there's an element of truth that the rich gets richer, and the average middle income person either misses out the real estate "gravy train" or comes in later after the peak when everyone is talking about real estate and more people think they are experts. The real estate insiders and pros will always have less risk but make more money before passing it on to the next stakeholders to take the remaining risks.

Whether it's a hoax or not below, there's an element of truth to what he says. Although he talks about the Eurozone, if you were to substitute real estate into the Eurozone and the stock market, I think it embodies some of the similar debate in this thread.

From the Toronto Star:

http://www.thestar.com/business/art...ader-who-dreams-of-another-recession-revealed

Alessio Rastani
http://www.youtube.com/watch?v=aC19fEqR5bA&feature=player_embedded

Rastani merely speaks the truth. I, like Rastani, am positioned to make a lot of money in the event of an economic collapse? Why? Because I'm on the other side of the trade. I do not believe that Western governments are on a sustainable course, and as such, I have chosen to bet against them with credit default swaps and short positions on currencies.

I'm sick and tired of people who think this is somehow immoral. It's not immoral. What's immoral is governments and central banks putting people in this position to begin with. Not that people like me actually try to protect our wealth the only way we can.

When people like me make windfall profits, we're called "greedy speculators". No. We're the rational ones. We make money because we're right. Not because we're wrong. When speculators speculate wrong, they have potentially unlimited losses. It's a huge risk to make massive bets against Greece, or Portugal. But if I turn out to be right, it is only because I was right about one thing: Greece and Portugal are in too much debt and cannot pay it back.

All of these moralizers talking about preying on the weak and what-not are so tiring. Countries that default are not weak. They're stupid. They collectively chose to vote for governments that would put social spending ahead of fiscal responsibility. And I am supposed to feel guilty about actually preserving my capital because of the fact that I don't suffer along with them, for the mistakes that they, not I, made.

This applies to the North American real estate bubble, and the real estate crash in the United States in 2008. It was a product of artificially cheap credit created by the government, not but private business. Everyone wants a cheap mortgage, so the politicians appoint central bankers who'll be good boys, create insane amounts of demand deposits in the central bank coffers, and then go out and let primary lenders leverage the hell out of it -- we pay for it in consumer inflation, and housing prices rise double-digits every year, far out-pacing wage growth. Everybody thinks we're getting richer, and then realty gets imposed by the fact that houses are depreciating assets that only go up in price if there are more buyers than sellers. When the buyers dry up, the market collapses.

Then, every armchair economist decides it was all the greedy bankers fault and the "speculators".

Do you know who the biggest speculator in the market is? It isn't me. It's your average family going out and buying a $750,000 home in Richmond Hill on 4x leverage through a cheap artificially low-rate mortgage.

Long live short sellers like me. We represent reality. Sorry you don't like it.

 

[dlam]

I remember hearing tons of traders in New York made huge money on oil after 9/11. Is it wrong? No, the opportunity was there to make money, someone is going to do it. Is it good for society, probably not. It seems to me some small group of people taking advantage and the rest are paying for the actions. To me as I understand it, when someone makes money, another loses money or pays more money.

 

[brockm]

I remember hearing tons of traders in New York made huge money on oil after 9/11. Is it wrong? No, the opportunity was there to make money, someone is going to do it. Is it good for society, probably not. It seems to me some small group of people taking advantage and the rest are paying for the actions. To me as I understand it, when someone makes money, another loses money or pays more money.

This is a nonsense economic argument. There does not need to be a loser for every winner. If this principle held, every new job one mean one job loss for another. I don't know why so many people subscribe to this fixed pie economic theory.

 

[Eug]

July Teranet numbers are out.

2005-06: 100.00
2006-06: 105.22
2007-06: 108.41
2008-06: 114.84
2009-06: 108.46
2010-06: 125.98

2011-05: 128.72
2011-06: 131.26
2011-07: 133.53

So, we are now over a third higher than prices in summer 2005, and exactly 20% higher than when I bought in 2007-08 (111.27). We are also 13% up from when this thread started, in 2009-11.

 

[redfirm]

Rastani merely speaks the truth. I, like Rastani, am positioned to make a lot of money in the event of an economic collapse? Why? Because I'm on the other side of the trade. I do not believe that Western governments are on a sustainable course, and as such, I have chosen to bet against them with credit default swaps and short positions on currencies.

I'm sick and tired of people who think this is somehow immoral. It's not immoral. What's immoral is governments and central banks putting people in this position to begin with. Not that people like me actually try to protect our wealth the only way we can.

When people like me make windfall profits, we're called "greedy speculators". No. We're the rational ones. We make money because we're right. Not because we're wrong. When speculators speculate wrong, they have potentially unlimited losses. It's a huge risk to make massive bets against Greece, or Portugal. But if I turn out to be right, it is only because I was right about one thing: Greece and Portugal are in too much debt and cannot pay it back.

All of these moralizers talking about preying on the weak and what-not are so tiring. Countries that default are not weak. They're stupid. They collectively chose to vote for governments that would put social spending ahead of fiscal responsibility. And I am supposed to feel guilty about actually preserving my capital because of the fact that I don't suffer along with them, for the mistakes that they, not I, made.

This applies to the North American real estate bubble, and the real estate crash in the United States in 2008. It was a product of artificially cheap credit created by the government, not but private business. Everyone wants a cheap mortgage, so the politicians appoint central bankers who'll be good boys, create insane amounts of demand deposits in the central bank coffers, and then go out and let primary lenders leverage the hell out of it -- we pay for it in consumer inflation, and housing prices rise double-digits every year, far out-pacing wage growth. Everybody thinks we're getting richer, and then realty gets imposed by the fact that houses are depreciating assets that only go up in price if there are more buyers than sellers. When the buyers dry up, the market collapses.

Then, every armchair economist decides it was all the greedy bankers fault and the "speculators".

Do you know who the biggest speculator in the market is? It isn't me. It's your average family going out and buying a $750,000 home in Richmond Hill on 4x leverage through a cheap artificially low-rate mortgage.

Long live short sellers like me. We represent reality. Sorry you don't like it.

Brockm,
why such negativity? I tend to agree to what you say, especilly your "Richmond Hill" reference, but no need to be so militant. Instead, I'd like to know when do you expect this bubble of ours to burst and provide some support for your reasoning. Pretty much, that's what this thread's all about: timing and percentage drop. We all know nothing lasts forever.

 

[brockm]

Brockm,
why such negativity? I tend to agree to what you say, especilly your "Richmond Hill" reference, but no need to be so militant. Instead, I'd like to know when do you expect this bubble of ours to burst and provide some support for your reasoning. Pretty much, that's what this thread's all about: timing and percentage drop. We all know nothing lasts forever.

I was merely reacting at all this hatred being lunged at Rastani in the media and blogs, etc. Investment is all about opportunity. And opportunity is created no matter what the market does.

Everybody loves speculators when they help leverage up their RRSP stock portfolio to an absurd valuation. Then, when the short sellers come along and say "hey, hold on now... not so fast! There's no way the company is worth that..." the screams of the evil of short-sellers come from the far reaches of society.

Speculation is good if it increases your home equity or your retirement account. It's bad if it calls bull**** on the market.

----

As for the timing of the Canadian real estate bubble -- which clearly exists by any historical measure -- don't look at me. I've been doing this a long time. Last year I was sure we'd see a downturn in Canadian real estate in the Fall and I ended up being ridiculously wrong.

But when you've got mortgage liabilities for your average family nearly four times higher relative to income than they were thirty years ago, a macro guy like myself has to assume that a violent downturn is in the offing somewhere in that murky future.

If the market was sane -- which it is not -- the market would just implode now. But we live in a world where government's and central bankers are willing to play every confidence trick in the book to convince everyone that everything is just fine, and to keep spending money.

If the housing market starts to implode, I wouldn't put it past our provincial and federal government to roll out tax credits, building subsidies, mortgage default insurance premium reductions, etc. It's just what they do. The world is run by idiots. To the left and to the right.

 

[KA1]

... I'd like to know when do you expect this bubble of ours to burst and provide some support .. reasoning. Pretty much, that's what this thread's all about: timing and percentage drop. We all know nothing lasts forever.

You won't have to wait too long. It is just around the corner. Below, is a link to a post on today's The Globe and Mail by Jeff Rubin.

http://www.theglobeandmail.com/repo...-to-prevent-another-recession/article2181607/

 

[redfirm]

You won't have to wait too long. It is just around the corner. Below, is a link to a post on today's The Globe and Mail by Jeff Rubin.

http://www.theglobeandmail.com/repo...-to-prevent-another-recession/article2181607/

Long time no see ... was in the States .... business and some pleasure.
Please don't tell me you're changing sides? Because there's nobody else left to argue the other side. I have nothing to argue with Brockm, CN and the crew ...
Just kidding. Yeah, lots of "news" around us every day. It all seems doom and gloom .... but than, it all depends on where you stand. Just like Brockm pointed out. Somebody always makes money.

 

[KA1]

Long time no see ... was in the States .... business and some pleasure.
Please don't tell me you're changing sides? Because there's nobody else left to argue the other side. I have nothing to argue with Brockm, CN and the crew ...
Just kidding. Yeah, lots of "news" around us every day. It all seems doom and gloom .... but than, it all depends on where you stand. Just like Brockm pointed out. Somebody always makes money.

No. I am not changing sides.

I will repeat what I said quite a few posts ago. You live like a chicken, you die like a chicken. Stay on the sidelines and you will miss all the action.

When the economy goes down, people lose job. Businesses go bankrupt. That's bad for employees and business owners. However, that is good for Trustee in Bankruptcy.

Quite a few individuals on this thread describe themselves as 'savy' investors. They talk about ROI -- stock market versus real estate; bond yield and financial/technical analysis and what have you. I just ignore that sort of talk.

There is this 'Interested' talking incessantly about coming crash in prices around March/April to the level of 2008. Not too long ago, he mentioned about coming ' day of recokening' in 2016. He laid blame on low interest policy of Bank of Canada. Then there is Daveto always lost in numbers and losing sight of reality.

The only person who, in my opinion, makes sensible posts -- with all due respect to you, Redfirm -- is CN Tower.

The way I see it, if economy tanks and R/E prices crash, individuals who will be in trouble will be those who have stretched themselves and purchased R/E with only 10/15/20% down -- hoping to ride out the difficult times, in due course, with increase in salary. If you buy a property, after doing due diligence, with a substantial downpayment, then, you will survive. If economy goes to the level of 'Dirty 30s', then, everything will be worthless, including cash.

I have a unit coming up for possession in AURA, on higher floor, sometime in 2013. I will be paying 50% down. Rent should cover carrying costs and leave a small change for me. If things really difficult/bad and prices drop, say 50%, then what? Unit will be still there. I will be in trouble if the economy is so bad that I can't find a tenant -- not at any price -- and I lose my business (my cash cow). In that event, almost everybody will be in trouble, except, of course, Trustee in Bankruptchy.

After I have swallowed AURA unit, then, I will go for another unit somewhere. On a per sq. ft basis, I will be paying a higher price in 2014/2015 than as compared to now. Then what. At least, I will be comfortable and will not be losing sleep at every unpleasant news. Over a long term horizon, R/E prices, generally, show an increase of 3 to 5% annual increase. That's fine with me.Of course, I fully agree with everyone that the kind of crazy increase in prices we have seen lately will not last forever and will go down from current levels. To what extent and to what level is unknown. You got to keep your cool and, periodically, take some 'Geritol'.

 

[redfirm]

KA1,
I couldn' disagree more with your post, except for the "CN Tower" part. Not even sure where to start: surviving part, large downpayment part, small change part, low interest rates part, or the numbers part. With all due respect - each and every one of these points you got wrong.
As a side note - you seem to talk quite a bit about just barely surviving and worse case scenarios in your post. It seems to me that you have lost your confidence in the current RE market but have tough time admitting that.