Buy or Rent?

[urbandreamer]

Everything Zen: What Zen Buddhist retreat did you join?

I discovered this really cool place in the Junction today. It was so relaxing, that even though I saw vultures circling my balcony this afternoon, I decided to rent them 1 sq ft of space....

 

[condoboy]

I'm afraid I can't share your optimism.

Can you please explain to me how condo prices in New York or Miami (both falling rapidly btw) are
relevant to condo prices in Toronto? I don't follow that logic. A condo is not a transportable object
like a car that you can purchase in Buffalo for 20% less, pay the duty and drive across the border.
It only has value to a local user/occupier. Shouldn't the value of that condo be determined by the local
demand for condo living, including the local demand for rental accomodations? How is it at all relevant
what values are in a foreign city?

I don't understand that logic. Perhaps you could enlighten me with your understanding of it b/c I've heard
that argument before and it never made any sense to me.

Peace & Kindness

Ok Zen...I'll try to break it down for you.

Toronto condo values are determined by the demand that they accompany. The demand for condo living in Toronto has never been higher, and proof of that is all of the condo projects, lofts and highrises that have gone up in the last several years....and more that are still to come. Believe me when I tell you that all of these builders have done their market research and they wouldn't be building all of these buildings if there wasn't a market for them. What is there not to understand about my arguement as far as values go? For years Toronto has been underpriced in condo prices! Now, there is an energy in this city, things are happening all around you...take a look! This energy has increased the appetitie for home buyers to purchase in a vibrant city that has so much to offer. Do you think Donald Trump just chooses any city at random to build in? I think not. New York, London, Paris, and Tokyo have been world class cities for years, which goes hand in hand with the high demand to live there, and ultimately the value of real estate in those cities. What I am saying is that we are behind...but not that far anymore. You'll see...Toronto will become a world class city and one day all of those people that were thinking about buying in this city and didn't are going to be kicking themselves and wondering...if only I had done things differently.

 

[AKS]

Well we looked downtown Toronto and all you get is a shoebox size wise and no visitor parking thats what attracted us to the unit:

-It has Lake View
-Top Floor
-2 Parking Spots
-2 Floors
-over 900sq/ft

$1500/ doesnt get you much downtown to rent in all honesty.

That's pretty big for a 1bdrm. Usually only old condos are that large. 900 sq ft are 2bdrm downtown. As for the price. I think maybe some do rent that low? My cousin surprisingly rented his out for $1600-$1700. His was around 900 sq ft too but maintenance costs him around $600/month. I notice someone selling their apt at 10 Yonge 2bdrm for $359,000 south view. It's lake too but I guess that would cost more than yours currently.

btw, if you're only planning to live in it for 2-3 years, its best not to buy. Hard to tell where market will head. Even if it doesn't drop, the rate it will be rising will be very slow or flatten out. Factoring in all the costs, you might just end up breaking even or losing depending what you can sell at.

 

[daveto]

Ok Zen...I'll try to break it down for you.

Toronto condo values are determined by the demand that they accompany. The demand for condo living in Toronto has never been higher, and proof of that is all of the condo projects, lofts and highrises that have gone up in the last several years....and more that are still to come. Believe me when I tell you that all of these builders have done their market research and they wouldn't be building all of these buildings if there wasn't a market for them. What is there not to understand about my arguement as far as values go? For years Toronto has been underpriced in condo prices! Now, there is an energy in this city, things are happening all around you...take a look! This energy has increased the appetitie for home buyers to purchase in a vibrant city that has so much to offer. Do you think Donald Trump just chooses any city at random to build in? I think not. New York, London, Paris, and Tokyo have been world class cities for years, which goes hand in hand with the high demand to live there, and ultimately the value of real estate in those cities. What I am saying is that we are behind...but not that far anymore. You'll see...Toronto will become a world class city and one day all of those people that were thinking about buying in this city and didn't are going to be kicking themselves and wondering...if only I had done things differently.

CB, this may seem like a flame but I'm doing it to be kind. Truly

What you have just written above is not only monumentally staggering in its naivete - it is also factually wrong.

Regarding the builders, for the sake of argument let's accept the questionable theory that their interests are the same as the interests of those who purchase their product (!!)

If Lehman Brothers, AIG and the US Federal Gov't can be so wrong, why would you place such faith in the business savvy of a condo developer?

Going one step further, the demand for condos in Toronto is not only not at an alltime high but in fact has just fallen off a cliff.

I've got no personal financial interest in dissuading you (or anyone else) not to be investing in the condo market. I myself was on the verge of buying 4 months ago, and feel like I've dodged a bullet.

At the same time I am no market expert, and I'm always open to learning (as I did 4 months ago when I was saying similar things as you). So if you want to present a slightly more intelligent thesis I'll look forward to reading it.

Again, I'm not intending to flame some stranger across the anonymity of internet. However your post seemed to merit a sharply worded response.

 

[EverythingZen]

So you're suggesting that international buyers, with no intention of occupying their units
here other than for the odd business trip, form of substantial part of the market demand?
Strangely, the stats show otherwise. Unless Toronto has recently become a tourist mecca
that I'm unaware of (in fact stats show a substantial decline in tourism) then I don't see
how demand from foreigners, as little of it as exists, would have any impact on the market.

In my opinion, demand for condos in Toronto is ultimately a function of what local buyers can
afford to pay. The excess that we've seen as of late has been driven entirely from speculators-
the same breed of value and job destroyers that have contributed to the virtual meltdown in
worldwide credit markets. Don't be fooled by the clever and slick marketing machines that
inundate you with misguided messages. Mr. Trump is merely a franchisor and will sell his name
to anyone with the means to pay his fee.

Market data suggests that demand for new condos in Toronto has fallen dramatically. It is going to
be a long cold winter friends, stay warm and stay safe in rental accomodations with no capital risk
if you are able. As I see it, the confluence of the crumbling credit markets and the oversupply of units will
suppress prices further (down 8% in the City of Toronto over Sept 07) for quite some time.

I practice in the west end Mr. Urban Dreamer. I hope you enjoy your practice!

Peace & Kindness

 

[androiduk]

Yes, I think the condo market will be higher in the next 2-3 years in Toronto. And I certainly don't think that there is going to be a major correction or crash either. Prices in Toronto will stay steady in the next couple of years, with modest price gains in the range of 1-3 % annually (in my opinion). For many years the condo market in Toronto has been under valued and we are only now catching-up to other major cities in North America and the world as far as values go. The areas where I see major price corrections are in the West (Edmonton, Calgary) where we have seen major double digit appreciation over the last few years and over inflated values. I am an optimist and I think Toronto's real estate market is going to pull through any turmoil in the coming years!

"confidence is suspicion asleep"
Disreali

 

[condoboy]

CB, this may seem like a flame but I'm doing it to be kind. Truly

What you have just written above is not only monumentally staggering in its naivete - it is also factually wrong.

Regarding the builders, for the sake of argument let's accept the questionable theory that their interests are the same as the interests of those who purchase their product (!!)

If Lehman Brothers, AIG and the US Federal Gov't can be so wrong, why would you place such faith in the business savvy of a condo developer?

Going one step further, the demand for condos in Toronto is not only not at an alltime high but in fact has just fallen off a cliff.

I've got no personal financial interest in dissuading you (or anyone else) not to be investing in the condo market. I myself was on the verge of buying 4 months ago, and feel like I've dodged a bullet.

At the same time I am no market expert, and I'm always open to learning (as I did 4 months ago when I was saying similar things as you). So if you want to present a slightly more intelligent thesis I'll look forward to reading it.

Again, I'm not intending to flame some stranger across the anonymity of internet. However your post seemed to merit a sharply worded response.

Dave....take a look around you....the cranes don't lie. Let me ask you one question - what's going to happen to all of those condo units in Toronto that are either under construction or have just been approved? Are all of these projects going to be cancelled? Are they going to sit abondaned, unoccupied when they are built? I don't claim to be an expert either but seeing is believing....

"If you build it...they will come"
Field of Dreams (1989)

 

[androiduk]

Dave....take a look around you....the cranes don't lie. Let me ask you one question - what's going to happen to all of those condo units in Toronto that are either under construction or have just been approved? Are all of these projects going to be cancelled? Are they going to sit abondaned, unoccupied when they are built? I don't claim to be an expert either but seeing is believing....

"If you build it...they will come"
Field of Dreams (1989)

You have to look a lot farther than the cranes in the sky. When those cranes were put and those buildings were started, it was a different world. Things have changed almost literally overnight. Some of the biggest banking and investment institutions in the world have disappeared off the landscape. Why would you take a chance in this environment and - what's the rush?

 

[condoboy]

You have to look a lot farther than the cranes in the sky. When those cranes were put and those buildings were started, it was a different world. Things have changed almost literally overnight. Some of the biggest banking and investment institutions in the world have disappeared off the landscape. Why would you take a chance in this environment and - what's the rush?

No rush...I just wouldn't want to wake up one morning and realize that I couldn't afford that condo in the city because the prices have risen to eight, nine, one thousand dollars per square foot like other major cities throughout the world. I mean I hope I'm wrong and prices don't get out of control like in NY or London, but isn't it better not to take that risk? For the short term investor you are right, it's not the time....but for the person that can buy and hold on to something for 5-10 years...isn't it a good time to buy? When things are still affordable? Does anyone see a major crash in prices in Toronto?

 

[lowesthangingfruit]

Dave....take a look around you....the cranes don't lie. Let me ask you one question - what's going to happen to all of those condo units in Toronto that are either under construction or have just been approved? Are all of these projects going to be cancelled? Are they going to sit abondaned, unoccupied when they are built? I don't claim to be an expert either but seeing is believing....

"If you build it...they will come"
Field of Dreams (1989)

Ummm, you mean like the cranes and projects I saw in Florida/California/UK/Spain etc.... a few years back ??

Listen, not trying to be a smart ass, but in an earlier post you indicated TO prices are undervalued relative to world prices, yet if you look around, there is a GLOBAL credit crunch that is deleveraging RIGHT NOW. So my question is,....why would you think TO real estate can share in the upside of relative world prices but can't share in the downside equally as is occuring right now all over the world ??

 

[condoboy]

Ummm, you mean like the cranes and projects I saw in Florida/California/UK/Spain etc.... a few years back ??

Listen, not trying to be a smart ass, but in an earlier post you indicated TO prices are undervalued relative to world prices, yet if you look around, there is a GLOBAL credit crunch that is deleveraging RIGHT NOW. So my question is,....why would you think TO real estate can share in the upside of relative world prices but can't share in the downside equally as is occuring right now all over the world ??

One reason...because we haven't hit our peak yet. You'll see, prices will stay consistent in the near future or slightly fall, I don't dispute that. However, we haven't seen the type of appreciation in real estate that other areas have such as California which you have mentioned above. This "global credit crunch" as you call it will affect us of course, but not to the degree that it will affect other countries similiar to ours worldwide. Our lending institutions have not been as liberal with their practices and Canadians are much more conservative in their finances for it to affect us as much. While there will be a mini-recession in the coming year because America is of course our biggest trading partner, we will bounce back and once again set out on the ride of our lives...the party is not over, this is just a bump in the road and we will continue to see the rise of one of the best cities in the world...T-dot.

One last note...all the people that are claiming that prices are falling are comparing existing prices to last years real estate numbers, which in my mind are a totally anomaly. Take out the insane year of 2007 which broke every real estate record imaginable, and you have a pretty different picture.

 

[lowesthangingfruit]

One reason...because we haven't hit our peak yet. You'll see, prices will stay consistent in the near future or slightly fall, I don't dispute that. However, we haven't seen the type of appreciation in real estate that other areas have such as California which you have mentioned above. This "global credit crunch" as you call it will affect us of course, but not to the degree that it will affect other countries similiar to ours worldwide. Our lending institutions have not been as liberal with their practices and Canadians are much more conservative in their finances for it to affect us as much. While there will be a mini-recession in the coming year because America is of course our biggest trading partner, we will bounce back and once again set out on the ride of our lives...the party is not over, this is just a bump in the road and we will continue to see the rise of one of the best cities in the world...T-dot.

One last note...all the people that are claiming that prices are falling are comparing existing prices to last years real estate numbers, which in my mind are a totally anomaly. Take out the insane year of 2007 which broke every real estate record imaginable, and you have a pretty different picture.

So if I am hearing you correctly, you are saying because TO has not appreciated as much, we will not fall as much relative to rest of the world.

But that still begs the question,....where is the upside if TO is in fact a chronically undervalued region that will follow the rest of the world up and down but just simply "not as much". According to your thesis, we have yet to peak relative to other parts of the world, but why would we not sharply drop off soon after this peak like the rest of the world ?? You can't have it both ways and say that we're gonna "catch up" to the rest of the world but not "catch down" when the rest of the world collapses.

 

[condoboy]

So if I am hearing you correctly, you are saying because TO has not appreciated as much, we will not fall as much relative to rest of the world.

But that still begs the question,....where is the upside if TO is in fact a chronically undervalued region that will follow the rest of the world up and down but just simply "not as much". According to your thesis, we have yet to peak relative to other parts of the world, but why would we not sharply drop off soon after this peak like the rest of the world ?? You can't have it both ways and say that we're gonna "catch up" to the rest of the world but not "catch down" when the rest of the world collapses.

Because by the time we peak....the cyclical values of real estate will have started once again, and we would have weathered the current storm. All this is just my opinion. We'll just have to wait and see!

 

[TKTKTK]

Because by the time we peak....the cyclical values of real estate will have started once again, and we would have weathered the current storm. All this is just my opinion. We'll just have to wait and see!

But according to stats, we've already peaked — and certainly not at a point where it could be said that we've "weathered the current storm".

 

[urbandreamer]

Indeed, according to the TREB sales data from September 2008, Toronto sales fell 6% in the final 2 weeks of the month--aka, when the American turmoil reached fever pitch. That indicates just how closely tied Toronto real estate is to American markets.

Condoboy, I get this sense you're working for one of the realtors--Brad Lamb, perhaps?

Source: http://www.movesmartly.com/2008/10/toronto-real-es.html