Holding Off vs Overpaying now...

[CN Tower]

I concede your very enthusiastic and sincere comments and won't go near the Cityplace topic except to say that I believe the site has been disappointing overall from the perspective of a private citizen with no vested interest in the area.

 

[daveto]

Yep. Here is the real estate analysis article.

http://www.globalpropertyguide.com/...arkets-in-2009#most-expensive-property-market

In regards to the population doubling in 20 to 30 years, I believe I read that in Metro on my way to work one day and thought it was interesting. However, as many of you said anything can happen between now and any time in the future and relying solely on statistics is not always a smart idea, but since none of us are psychics (I could be wrong about this one), statistics is all we got!

Thanks for posting the link wrt the London prices

I have three observations for you

1) The price list specifies that these are the average prices per metre "based on a 120 sq. m. apartment". As such, these are not average prices for the market. These are average prices for 120sq m apartments in those markets.

2) They don't identify the sources. To gather this sort of data is VERY difficult. Even more difficult is to gather this sort of data on a credible and consistent basis.

3) I did a 30 second google search on "london uk average house price", and the second hit on the list quoted avg prices for the greater london area last June at 260k GBP. At 1.7 CAD=1 GBP, this equals $450k CAD. This compares with approx $400k last June for Toronto avg. Certainly a far cry from the link you posted which suggests prices in London are 5x Toronto prices.
http://news.bbc.co.uk/2/shared/spl/hi/in_depth/uk_house_prices/counties/html/county37.stm


WRT to Toronto's population projections, I did a similarly quick google search on "toronto population projections" and the first link projected a 50% increase by 2031. I think it is high, and unlikely, but not unreasonable for a claim of doubling in 20-30 years from a different source.
http://www.toronto.ca/torontoplan/flashforward.htm

 

[ponyboy]

I have seen projected population growth for the GTA cited multiple times in justifying real estate price growth. However, the people trumpeting these statistics are usually folks who make money off of real estate transactions, encouraging skeptical individuals of the benefit of buying. As a demographer, I can tell you that these projections are based on a number of unknowns, some political and some economic. First, will future governments maintain, increase, or decrease immigrants quotas? From the vantage of counteracting the top-heavy age-distribution of the aging population, they may encourage more immigration of younger people who generate payroll taxes. On the other hand, if the economy tanks, there will potentially be political pressure to curb immigration to "protect jobs for Canadians", and this plus the disappearing opportunities might greatly curtail immigration. Some folks who are here may return to their origin countries, or seek out employment elsewhere. Second, will the greenbelt legislation continue to encourage high-rise and in-fill construction in built-up areas, increasing property values. I'm hoping that it stays in place, but some have been chipping away, and some Peel and Durham region municipalities have largely ignored the mandate. Third, will the composition of immigrants be as economically viable as those in the recent past, able to put a down-payment on a home. The composition of immigrants has varied both racially/ethnically and economically. Fourth, who knows where interest rates are heading. The original post focuses too much on monthly costs and not enough on the purchase price. Minimizing the initial purchase price is the key because of all the interest you will be paying over time, and knowledge of a future correction would make renting for now a no-brainer. I'm sure there are other reasons I failed to mention above.

 

[Bubba]

I am from Toronto (and own 2 condos in the city) but am living and working in London, UK for the next 2 years. I live in a 2 bedroom 1000 sq foot apartment, that is 20 minutes by subway away from the core, in an average area, and the unit is valued at £500K GBP (which I have been told by realtors is much lower than the pre-crisis prices).

Not to say that Toronto's downtown core prices are 'undervalued' however do not think that the prices are too high. I think that the issue the core faces is the number of units (supply) that will be coming onto the market in such a short period of time. If we spread the supply over 5-10 years vs the 2 years we are facing, Toronto would likely be able to absorbe the supply.

I think the deciding factor for Toronto will be the rate of population growth, the pace of the increase in interest rates, and ratio of investor (flippers) vs. owner occupied/investor-to-rent units.

One positive for Toronto is the general requirement for 15% down within the first year of pre-construction, with an additional 5-10% being required upon occupancy/closing. If resale prices do drop due to an oversupply, I think we will be faced with a situation similar to last March (at the heart of the recession) where the older units were selling for lower prices however new units were largely taken off the market. Sellers will never sell for less than they initially paid and considering the higher pre-construction prices in the past few years, most owners (whether be investors or not) will not sell for less than they paid unless they are facing desparate circumstances. They would rather rent the unit out, driving down rent prices (similar to what has occurred for rents within the cityplace units) than sell at a lost. Having said that buyers have put 15-25% as a downpayment for the units, I do not see most being in desparate situations.

Overall, I feel as though there will be an extended period of oversupply in the core, which will keep prices relatively flat with potential decreases, but not below the March 2009 level. Investors may have to be willing to part with less/little profit on buy-to-flip units unless they are willing to hold as a rental for some time. I really wish that the builders would stop the pre-construction frenzy for 2-3 years to allow the market to absorb the units, but the builders are greedy and know the people will commit to high prices in anticipation of a potential continued increase in prices, HST, and higher interest rates.

Thanks for posting the link wrt the London prices

I have three observations for you

1) The price list specifies that these are the average prices per metre "based on a 120 sq. m. apartment". As such, these are not average prices for the market. These are average prices for 120sq m apartments in those markets.

2) They don't identify the sources. To gather this sort of data is VERY difficult. Even more difficult is to gather this sort of data on a credible and consistent basis.

3) I did a 30 second google search on "london uk average house price", and the second hit on the list quoted avg prices for the greater london area last June at 260k GBP. At 1.7 CAD=1 GBP, this equals $450k CAD. This compares with approx $400k last June for Toronto avg. Certainly a far cry from the link you posted which suggests prices in London are 5x Toronto prices.
http://news.bbc.co.uk/2/shared/spl/hi/in_depth/uk_house_prices/counties/html/county37.stm


WRT to Toronto's population projections, I did a similarly quick google search on "toronto population projections" and the first link projected a 50% increase by 2031. I think it is high, and unlikely, but not unreasonable for a claim of doubling in 20-30 years from a different source.
http://www.toronto.ca/torontoplan/flashforward.htm

 

[Damien]

http://www.greaterfool.ca/2010/02/24/relax/

This site has a lot of good insight on the housing markets.