Baby, we got a bubble!?

[Waterloo_Guy]

Are you telling me foreign investors are making it easier for "poor people" as you said, to rent in this city? Foreign investment is keeping rents low and affordable? You sure that's the stance you want to take?

You think an investor buying up 20 units in a project is a good thing?

I'm not arguing with you, I'm correcting you. An investor who buys units to rent out increases the stock of rental units, which lowers prices. That's a fact. As the supply of housing goes up, prices go down.

An investor buying 20 units to rent out is a great thing. Even better if he buys 100. As long as there's a market for rentals, the investment will be profitable.

 

[Waterloo_Guy]

It might clarify things to explain that if you are a buyer, this isn't great news for you. Investors allow renters into the condo market. This increase in demand will raise prices if supply can't keep up. But remember this: these developers aren't buying units to leave empty. They are adding to the residential stock = lower prices.

People who rent are entitled to a place to live.

 

[CN Tower]

Are you telling me foreign investors are making it easier for "poor people" as you said, to rent in this city? Foreign investment is keeping rents low and affordable? You sure that's the stance you want to take?

You think an investor buying up 20 units in a project is a good thing?

TKE, my good friend, what Waterlooloo is saying (with a strange chip on his 519 shoulder for some reason ) is that absent the new speculative condo buying by let's call them 'non-occupying-owners' or NOO, the supply of rental housing would not be increasing. Without them we would likely see higher rents in older rental housing stock and probably a tighter vacancy rate and likely higher prices for new condos for rent as well.

However, the flip side which I believe is your argument, is that these condos are fairly expensive in relative terms so that while there is now more availability in rental housing it is higher quality and therefore probably higher cost as well. Furthermore, without all this NOO driven condo development we may actually see more new purpose built rental construction which would likely come at a lower cost than the NOO units so we may have seen lower rents for newer buildings actually. The NOOS are effectively scalpers jacking up the price of admission to the game, ie the rental market.

Make sense?

 

[DearSummer]

TKE, my good friend, what Waterlooloo is saying (with a strange chip on his 519 shoulder for some reason ) is that absent the new speculative condo buying by let's call them 'non-occupying-owners' or NOO, the supply of rental housing would not be increasing. Without them we would likely see higher rents in older rental housing stock and probably a tighter vacancy rate and likely higher prices for new condos for rent as well.

However, the flip side which I believe is your argument, is that these condos are fairly expensive in relative terms so that while there is now more availability in rental housing it is higher quality and therefore probably higher cost as well. Furthermore, without all this NOO driven condo development we may actually see more new purpose built rental construction which would likely come at a lower cost than the NOO units so we may have seen lower rents for newer buildings actually. The NOOS are effectively scalpers jacking up the price of admission to the game, ie the rental market.

Make sense?

Purpose-built rental buildings will hardly ever be built in Toronto. Even before the condo boom, we've hardly seen a new rental building go up in the 416 in decades. This is more a result of the long-term nature of rental building investments (most companies/individuals prefer the quick flip that condos provide...only pension funds and other long-horizon investors are interested typically) and the incredibly slanted landlord-tenant legislation in Ontario. I certainly wouldn't invest in a rental property in Toronto knowing the legislative environment favours tenants so heavily (rent control, difficulty evicting, etc.).

 

[TheKingEast]

TKE, my good friend, what Waterlooloo is saying (with a strange chip on his 519 shoulder for some reason ) is that absent the new speculative condo buying by let's call them 'non-occupying-owners' or NOO, the supply of rental housing would not be increasing. Without them we would likely see higher rents in older rental housing stock and probably a tighter vacancy rate and likely higher prices for new condos for rent as well.

However, the flip side which I believe is your argument, is that these condos are fairly expensive in relative terms so that while there is now more availability in rental housing it is higher quality and therefore probably higher cost as well. Furthermore, without all this NOO driven condo development we may actually see more new purpose built rental construction which would likely come at a lower cost than the NOO units so we may have seen lower rents for newer buildings actually. The NOOS are effectively scalpers jacking up the price of admission to the game, ie the rental market.

Make sense?

I don't agree with him, though.

 

[cdr108]

there have been several purpose-built rental buildings and what I did notice when the slow-down of 2009 happen is that many of the developers floated the idea of building them as opposed to condos.

minto, concert, tridel also keeps a small portion of their condos for their portfolio del rentals.

these corporations have the cash and clout to navigate the LTL much more than an individual investor.

Purpose-built rental buildings will hardly ever be built in Toronto. Even before the condo boom, we've hardly seen a new rental building go up in the 416 in decades. This is more a result of the long-term nature of rental building investments (most companies/individuals prefer the quick flip that condos provide...only pension funds and other long-horizon investors are interested typically) and the incredibly slanted landlord-tenant legislation in Ontario. I certainly wouldn't invest in a rental property in Toronto knowing the legislative environment favours tenants so heavily (rent control, difficulty evicting, etc.).

 

[cdr108]

this is anecdotal evidence but I've heard from many individuals that they see 20+% units in new condo buildings are completely dark at night. the assumption being the units are vacant.

in china, the pattern is to keep units vacant vs. renting them out as a "used" unit is less valuable.

TKE, my good friend, what Waterlooloo is saying (with a strange chip on his 519 shoulder for some reason ) is that absent the new speculative condo buying by let's call them 'non-occupying-owners' or NOO, the supply of rental housing would not be increasing. Without them we would likely see higher rents in older rental housing stock and probably a tighter vacancy rate and likely higher prices for new condos for rent as well.

However, the flip side which I believe is your argument, is that these condos are fairly expensive in relative terms so that while there is now more availability in rental housing it is higher quality and therefore probably higher cost as well. Furthermore, without all this NOO driven condo development we may actually see more new purpose built rental construction which would likely come at a lower cost than the NOO units so we may have seen lower rents for newer buildings actually. The NOOS are effectively scalpers jacking up the price of admission to the game, ie the rental market.

Make sense?

 

[interested]

this is anecdotal evidence but I've heard from many individuals that they see 20+% units in new condo buildings are completely dark at night. the assumption being the units are vacant.

in china, the pattern is to keep units vacant vs. renting them out as a "used" unit is less valuable.

I have read the same thing about the Chinese method of investing. If it is true, the concern of course with this is capital will go to were it make its best return. Should the Chinese who believe in this decide to leave, will other investors have the same approach and if not, and the new investors believe it must be rented, that could certainly add a lot of product to the market in short order resulting in a lot of product for sale/rent all at once.

 

[DearSummer]

Wait, people actually think Chinese are buying condos, having them sit vacant while paying carrying costs, and then hoping to sell at some point in the future for a capital gain?

I simply can't believe that any investor (particularly rich ones) would be so stupid. I suppose this all links back to the fact that Canada has a woeful amount of information on our real estate market and especially condos.

 

[interested]

Wait, people actually think Chinese are buying condos, having them sit vacant while paying carrying costs, and then hoping to sell at some point in the future for a capital gain?

I simply can't believe that any investor (particularly rich ones) would be so stupid. I suppose this all links back to the fact that Canada has a woeful amount of information on our real estate market and especially condos.

I thas to do with the culture there that "new" is better if I understand correctly. While you may offset your expenses, the thinking is that a new condo will be worth more than one previously inhabited. Hence, as a store of value, the thinking is "keep it new". If you are a foreign investor and that is your culture, it can be difficult to understand or do the opposite of what you would do "at home". I don't think those rich investors you refer to are "stupid". they may just be looking to preserve their capital rather than make a return on it.

 

[detroitbootybass]

An interesting related article: http://fivethirtyeight.com/datalab/why-the-chinese-are-snapping-up-real-estate-in-the-u-s/

 

[DarnDirtyApe]

this is anecdotal evidence but I've heard from many individuals that they see 20+% units in new condo buildings are completely dark at night. the assumption being the units are vacant.

in china, the pattern is to keep units vacant vs. renting them out as a "used" unit is less valuable.

Even if this is the case, it really isn't all that bad for the rental market. The new construction condo market is not supply constrained (there's no shortage of available sites or projects) instead it is demand constrained (developers will build as many units as they can find buyers for) so if that foreign investor disappeared, it's quite likely that the unit they would have bought simply wouldn't get built. If it helps, imagine that every new condo was only built to 80% of its actual height.

That being said, you might see a decline in new construction prices without foreign investors as a steady source of demand, but we might also just see developers scale back their plans. It's hard to predict what might happen - many variables. It's possible that these empty units are actually some of the more expensive units, and developers might have to increase prices if that source of higher end demand dried up.

 

[CN Tower]

Wait, people actually think Chinese are buying condos, having them sit vacant while paying carrying costs, and then hoping to sell at some point in the future for a capital gain?

I simply can't believe that any investor (particularly rich ones) would be so stupid.

DS, careful- your ignorance is showing. Just because something doesn't make sense to you or your personal investment (or capital retention) goals does not negate it's value to someone else with different objectives.

 

[TheKingEast]

Wait, people actually think Chinese are buying condos, having them sit vacant while paying carrying costs, and then hoping to sell at some point in the future for a capital gain?

I simply can't believe that any investor (particularly rich ones) would be so stupid. I suppose this all links back to the fact that Canada has a woeful amount of information on our real estate market and especially condos.

It may sound ridiculous to you but that's exactly what some investors do. They buy the property and sit on it. There are many condos that are sitting vacant right now.

 

[Eug]

I'm no expert, but AFAIK based on readings, this is not as common in Canada as some think it is. It's relatively common practice in China, but not Canada.

People have no qualms leaving condos empty for long periods of time, but most Chinese buyers are not intentionally leaving them empty for years hoping for appreciation when they sell as new 5 years down the line. If they are planning on keeping them longer term, they usually rent them out.

So why would people leave condos empty? Well, a fair number of them are likely seasonal homes / secondary homes. I actually personally know people who have condos in multiple cities and just live in their condo when they visit those cities, instead of paying for hotels.

Also, studies based out of BC show that the vast majority of investor owned condos are owned by investors who live in Canada. This is based on data from property assessments. The assessments are only very rarely sent out of the country, with the vast majority of the bills going to Canadian addresses. Of the investor-owned condos, they usually go to other addresses within Vancouver, or else to addresses in the Greater Vancouver Area. I think the number was that less than 1% are sent to addresses in China & Hong Kong, and a few percent sent to the US. Data also indicates that property assessments sent to management companies and the like within Canada is quite low.

So yeah, there are speculative buyers, and many are Chinese, but they are the minority, and even then, most of that minority mostly resides within Canada.