Barber: Condo Bubble

[TrickyRicky]

In the 1be thread I posted a re/max figure from the star suggesting 60-85 percent of condo purchasing has investor involvement now compared to under 50 percent last year. Those are actually starting to approach scary numbers. There definately are strong underlying forces driving real demand for condominiums in Toronto but keep in mind there was strong real demand underpinning the bubbles in places like Miami as well. Bubble or no bubble the market will work it's way out. Unfortunately the risk is spread out and will hurt owner occupier buyers as well as those playing the game. One thing we can definately say about the recent boom is that this is the point at which the concept of multi-residential living has really cemented itself into the housing culture of the city. We are also now seeing a boomerang effect where condo culture is changing the low-rise housing market as well. What I mean is that people are starting to re-evaluate detached and semi-detached housing on the basis of condo thinking. On the lower end urban shacks with 3 bedrooms once not considered inhabitable to middle-class families start looking like palaces on the basis of condo square footage. At the higher end people are blowing the roof off some inner city neighbourhoods. Based on condo pricing per square foot you could scoop up the highest price house in the annex and gut it, throw in over a million dollars in renovations and still come in at half the cost of yorkville which is just a 5-10 minute walk away.

 

[scarberiankhatru]

One thing we can definately say about the recent boom is that this is the point at which the concept of multi-residential living has really cemented itself into the housing culture of the city.

You mean multi-residential owning...

 

[TrickyRicky]

^I think your correction is accurate although it has also had an effect on trends in the rental housing market as well. Maybe multi-residental living by choice.

 

[scarberiankhatru]

Torontonians have willingly lived in high-rises for a long time. If they were vehemently opposed to high-rises, a huger rental/rooming house market could have sprouted.

 

[Admiral Beez]

It won't change the dynamic considerably...people will quickly get used to $100 per barrel. Now, if it rises 10% per month, for a couple of years, then people will really consider moving out of Milton, but only after demanding every possible government action/assistance under the sun to help them stay in Milton.

No point moving from Milton to downtown if your job is in Mississauga.

 

[BuildTO]

Actually, re: balance between condos and houses, it wouldn't suprise me if the next bull market cycle (2020-ish?) results in a return to low rise bungalows--condo-ized kids sick of downtown moving to ex-urbs like Etobicoke, old Oshawa, Burlington etc. Anyone else get this feeling too?

No.

More and more people are walking to work - not even cycling, but walking. With concern for the environment growing - along with traffic congestion as the GTA's population grows, more and more people are making the move to live near their jobs.

There will always be people who try living in a condo and then decide they want the space that only a house can provide (like the guy I bought my condo from), but I don't see a general reversal in attitudes.

 

[unimaginative2]

It won't change the dynamic considerably...people will quickly get used to $100 per barrel. Now, if it rises 10% per month, for a couple of years, then people will really consider moving out of Milton, but only after demanding every possible government action/assistance under the sun to help them stay in Milton.

You're actually quite right about the last bit. I really worry that we will completely bankrupt ourselves as a society in efforts to protect those lifestyles for a few more years. Of course, all this is crazy since we're a huge net energy exporter, but unfortunately Mulroney signed away our right to look after ourselves first with our own resources and sell to ourselves for less.

 

[TrickyRicky]

"Torontonians have willingly lived in high-rises for a long time. If they were vehemently opposed to high-rises, a huger rental/rooming house market could have sprouted"

There is already a huge rental/rooming house market (something like 1 in 4 houses has at least one rental unit) but as prices appreciate the economics of low-rise rental housing causes tightening supply of the available rental housing stock as more and more plex buildings are converted to single-family housing because the sale valuations no longer justify the rental income. But back to the point about high-rise living, it is the high prices and rents for condo units that justify the claim that there is greater appreciation for this kind of living now. While many Torontonians live and have lived in multi-residential buildings the majority of renters would rather not rent and the majority who rent or buy condo high-rise would choose a low rise detached house if given the option. But that is what is changing amongst a notable (although minority) group. People who chose, regardless of economic striction, to live multi-residential.

 

[scarberiankhatru]

People have chosen to live in towers for decades...they're choosing to buy homes in towers now in large numbers now. Also, apartments have always been an attractive option for non-poor people if their household only has 1 or 2 people in it.

 

[Hydrogen]

But back to the point about high-rise living, it is the high prices and rents for condo units that justify the claim that there is greater appreciation for this kind of living now. While many Torontonians live and have lived in multi-residential buildings the majority of renters would rather not rent and the majority who rent or buy condo high-rise would choose a low rise detached house if given the option. But that is what is changing amongst a notable (although minority) group. People who chose, regardless of economic striction, to live multi-residential.

Do you know for a fact that a majority of those who live in a high-rise would automatically want to live in a detached house? I have zero desire for a detached house. If anything, I'd prefer a high perch with a killer view of the city. I don't have to shovel snow up there.

 

[e4aiws]

^ Oil at $100 dollars a barrel will change the dynamic considerably especially if it keeps rising.



This is the money quote. When people start talking like this you know its time to leave the market. Remember how buying dot com stocks with no assets or revenues was ok because it was different this time?

I agree...the four most dangerous words in investments is, "it's different this time."

 

[TrickyRicky]

Well at this point I guess i'm arguing that the trend is towards more people accepting multi-residential living while the counter argument is that no, people have always accepted multi-residential living and hence there is no trend just latent demand. Either way it doesn't matter because a greater percentage of the population is going to be living multi-residential in the future regardless of if they like it or not.

 

[scarberiankhatru]

The trend is that more people are buying homes in multi-residential buildings, not just living [renting] in them. Of course, this isn't surprising since hardly any homes in the towers that went up in the 60s/70s were puchasable.

 

[Urban Shocker]

The condo option didn't exist at all in Ontario forty years ago.

 

[scarberiankhatru]

In that case, I guess you can't even call it a trend.