Here’s How Much Toronto Real Estate Needs To Rise For Investors To Break Even

Here’s How Much Toronto Real Estate Needs To Rise For Investors To Break Even

Almost half of Toronto condo investors are committing to negative cash flow, according to a CIBC Economics study. One of the city’s most prominent mortgage brokers pointed out, this is a disaster in the making. If you can’t make the deal work at an all-time low for interest rates, when can you make it work? This got me thinking, what’s the likelihood of these investors making money from here, in a best case scenario? Let’s crunch some numbers. It’ll be like the real estate wealth expo, but for people that like math.

About The Investors

Since nearly half of condo investors are cash flow negative, they’re depending on the appreciation to payout. In order to do that, the rise in prices would have to at least cover their cost basis, before producing any profit. CIBC economics provided us with the data on a range of what these investors were paying. It looks like Calum is right, it’s going to be very difficult to make a profit on some of these deals.

Quite a few investors are benefiting from our record low interest rates, but a lot aren’t. The largest bracket of investors, 30.6% of them, are paying between 2.51% and 3.00% in interest. However, 32.3% of investors are paying over 6% – which is practically a biblical amount of interest. Even worse, 16.2% of those investors are paying over 9%. You don’t need a comprehensive risk model in order to assess how risky borrowing at this level is, you really just need to do some napkin math. (okay, maybe some tablecloth math).

Better Dwelling. Source: Urbanation, Teranet, CIBC.

About The Calculations

Today we’ll be looking at likely break even points for these investors, but we’ll have to make some estimates to fill the data gap. The price we’re going to be using is the Toronto Real Estate Board (TREB) benchmark condo. This is the price of a “typical” condo on December 2017, which was $490,500. We’ll also factor in the cost of commission at 5%, but we won’t be adding other fees that would also reduce profitability.

Since the interest rate is a bracket, we’ll use the middle of the bracket except for the lowest number, which we’ll use the lowest 5 year fixed we’ve seen (2%). Closing costs for sellers is also a thing, so it’s a good idea to include those when running your own numbers. These are highly variable, so we’ll also exclude these as well. However, you should find a *good* Realtor or mortgage broker to walk your through these numbers. Especially if you’re getting ready to pull the trigger and buy an investment.

Oh yeah, and despite the numbers I’ve presented to the banking industry more than once,  let’s give Realtors the benefit of the doubt. We’ll assume Keynesian economics trumps credit consumption and real estate cycles. In this fictional market, prices only act how how they have been since 2005, as far back as TREB usually provides data for. 😉

One Year Later, You Need Prices To Rise Over 7% To Break Even

Quite a few investors think they can buy a condo for a year, and make a profit. If you’re paying 2% interest, you would need prices to rise 7.03%. At 2.75%, you need a 7.66% increase. 4.5% would need a 9.13% increase. After that, you’re getting into double digit gains required. 7.5% interest, would require an increase of 11.66%. 9%, would require a massive 12.92% increase. If you’re a real estate professional from a non-Canadian market, you’re probably cringing. Let’s see how this compares to our positive biased, historic price increases.

Source: Better Dwelling, TREB.

Charting it against historic 12 month returns, we see this is really hard to do – even at the lowest interest rate. At 2%, only 34% of 1 year periods would have gone past breakeven. At 2.75%, that drops to 27%. If you’re paying any more, the ratio drops to less than 1 in 5. Basically, if Toronto’s real estate market was restricted to acting how it has over the past 12 years, you would break even just over a third of the time.

Source: Better Dwelling, TREB.

Five Years Later, You Need Prices To Rise Up To 42%

Looking at investors that plan to hold for a 5 year mortgage term, the return required is a huge range. At 2%, you would need a 13.24% increase, which isn’t all that bad. However, at 9% you would need to see a 42.55% return. That’s a really wide gap, but here’s the breakdown of everything between.

Source: Better Dwelling, TREB.

That wide-ass gap is equally varied from historic 5 year periods. If you’re paying a 2% or 2.75% interest rate, you would have broke even 100% of the time in recent history. At 4.5%, it slips to 75%, which is still pretty good. You see a quick decay after 7.5% interest, which drops to less than 16.09% of the time. Higher interest rates kill profit potential very quickly.

Source: Better Dwelling, TREB.

Once again, this using only a positive outlook. If Toronto real estate isn’t immune to a typical real estate cycle, you should expect negative numbers to balance that monster year we just observed. Now don’t get the wrong takeaway. Real estate can and does still produce wealth for a large number of people, but you need to do a little more work than just follow the herd.

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102 Comments

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  • Reply
    Not Pitbull 6 years ago

    After 2008 we saw condo prices fall, and we only experience a brief recession with the banks requiring massive liquidity injections. Anyone that thinks these prices aren’t going negative with out next recession, has no idea what they’re talking about.

  • Reply
    MM 6 years ago

    This is the worst part, people are going in blind without wanting to understand their numbers. They saw smart investors make money, and think they can do the same. That’s not how it works. When the news is reporting on how much money people are making, you can rest assured its too late.

  • Reply
    Matt 6 years ago

    Does this include rent received? I believe condo yields are around 4% a year before expenses, taxes, etc..

    • Reply
      Trader Jim 6 years ago

      Zero chance you’re getting 4% per year. You’re lucky to be getting 2% in Toronto. They reference a report from CIBC that showed 44% of investors are negative carry, which means they lose money every month, with the expectation that price gains will make up the difference. Very few people were making enough profit that it would even crack the 3% range.

      … that’s before rates started to get hiked. Try to make a profit now.

      • Reply
        z 6 years ago

        he said before expense. I just did my return and my gross rental income for a 1+1 is $27.6k and it was 340k when I bought it few years.

        right now the condo is probably going for 650k maybe? so if someone buys my condo and the gross return is 4.2% which is about what same as what he claimed.

    • Reply
      Joshua McIntyre 6 years ago

      All that maters is net return, after taxes, expenses etc. If an investor it making a 4% gross return, and -2% net return, they are losing money. They would be one of the above mentioned negative cash flow investors.

      To compare real estate investments, the only logical way is comparing the NOI relative to purchase price. NOI would factor in all your expenses directly related to the property. An individuals personal tax rate on that return, and the interest they pay on a mortgage should not be considered in comparing two investments (the individual them can compare that way), but strictly looking at the investment as an investment and directly comparing the investment value, you would not include those items. Unfortunately, like MM pointed out, most “investors are not doing the math and those that are, are probably doing it incorrectly to make an informed decision. This, it a big part of the problem we are in.

      Non the less, 4% gross of expenses, no doubt you’d be losing money.

  • Reply
    Bluetheimpala 6 years ago

    Interest rates will never go up again, the government just raised it a bunch of times and the bubble has burst. Bankers, RE agents and the media are saying as much and March number support this. Expect prices to rebound by Q3 and be positive YoY by Q2 of next year. Anyone whining here is a lose who needs to focus on making money. Toronto is our Manhattan so if you can’t take the heat get out of the fire and move to Manitoba….INB4 the usual piss weasels. Wassup mark and ketchup, hope you came out to play again.big hugs.

    • Reply
      Trader Jim 6 years ago

      Uh… interest rates impact more than just housing, despite what your real estate agents tell you. If they stay low, expect inflation to blow up.

    • Reply
      carlton 6 years ago

      “Interest rates will never go up again, the government just raised it a bunch of times and the bubble has burst.”

      Too much crack last night Blue? April 18th is just around the corner lets see what happens……….

    • Reply
      Alistair McLaughlin 6 years ago

      He’s being sarcastic.

    • Reply
      Bluetheimpala 6 years ago

      My attempt at sarcasm… Lol. BD4L

  • Reply
    Trader Jim 6 years ago

    Backtesting like a boss. I like the equities style analysis.

  • Reply
    vnm 6 years ago

    Wow. May as well buy a new model tricked out car at a dealership and try and make a profit selling it on Auto Trader. If it’s a good car, at least the wheels won’t start falling off the second you drive it off the lot.

    • Reply
      CryptoJunkie 6 years ago

      Lambos have great re-sale value in comparison to buying a Toronto condo today.

  • Reply
    Gord 6 years ago

    Anyone who purchases real estate @ interest rates of 6-9% are not smart investors. They obviously should look to other investments and or alternative living accommodations like renting.
    But if you buy at current rates (cause you can afford to and qualify) and rent out the property at current market rents you will do well. You may have to supplement the finances on it for the first few years. Eventually, you will have a nice asset and steady rental income to boot. But it’s only possible if you have the proper income or savings to support it. It’s not rocket science. I know some will say that the market may crash due to properties flooding the market from all of these “not smart” investors needing to unload them. To them I say, Toronto is a world-class city, with a steady influx of people looking for real estate to buy or rent. That will continue. And if you are in the market and financed intelligently…you will do very well thank you.

    • Reply
      Mmr 6 years ago

      That’s is the unfortunate part. Some ppl taking interest rate from sub prime. If they taken market rate in 2016-2017 which was well below 3 percent And locked in 5 year fixed rate, assuming they put 20 percent down at least with current rent it will cover all there expense for at least next five year. But some people screwing things up by taking loan from secendary market. No one can help you if you are dumb moron who take 9 percent loan to buy condo. This is just shocking.

    • Reply
      Alistair McLaughlin 6 years ago

      Toronto is a world-class city, with a steady influx of people looking for real estate to buy or rent. That will continue. And if you are in the market and financed intelligently…you will do very well thank you.

      That’s a platitude, not a reason to invest in Toronto real estate.

      • Reply
        Gord 6 years ago

        Alistair I realize that point has been overstated. But it is true and if you choose real estate as your investment vehicle, isn’t that a good foundation to start with? If it didn’t hold true then maybe I should be looking in say Blind River? Sorry Blind River.

        • Reply
          Alistair McLaughlin 6 years ago

          Don’t know about Blind River. I wasn’t thinking that remote. A multi-unit rental in any of the New Brunswick cities, for example, is instantly cash-flow positive. Will it appreciate? Probably not. Will it crash? Almost no chance, as it is already dirt cheap. What it will do is provide a steady income for the owner at very little risk. And steady equity gains year after year as the mortgage is paid down.

          If buying an entire multi-unit building is not your thing, even a bungalow in Fredericton with an in-law suite in the basement can be had for well under $200K, and can produce at least $1700 rent per month. That’s cash flow positive from day one, and it will stay that way until it is paid off, even if interest rates increase substantially, even if you hire a property management firm that charges 12% of your monthly take. There is virtually no risk in buying such a place. That’s what I’m looking at doing now. Steady income, no risk. That beats depending on price appreciation which may or may not materialize.

          I live in Ottawa, and even here, the condos and town homes, despite being 1/3 the cost of Toronto, are not cash flow positive once you include all expenses. If they’re cash flow negative here, they’re much worse in Toronto. I’m seriously considering buying one or even two rentals in New Brunswick while continuing to rent myself in Ottawa. I’ve crunched the numbers and that seems a much better use for the down payment money I’ve saved compared to buying a home here. Even after hiring a property management company at 12% of rent, those NB properties are still cash flow positive. Try that in Ottawa with less than a 50% down payment (let alone Toronto).

          • Mmr 6 years ago

            I live at Ottawa too. But here rent is way cheaper. Toronto you can
            rent two bedroom now for 3000 at Ottawa downtown two bedroom goes for 1650 that’s a huge difference. But I agree you buying in Atlantic Canada amazing people amazing cities too I love that part of
            Canada.

          • Alistair McLaughlin 6 years ago

            Yes, rents double in Toronto compared to Ottawa. But purchase prices for downtown condos are more than double.

            Agreed about the Maritimes. Not much opportunity, but if I could get paid there what I make here, I’d move there in a heartbeat. I plan to retire to New Brunswick anyway, which is why I have recently considered buying rental properties there.

          • hot sauce 6 years ago

            your plan is to invest in nova scotia? bunch of welfare NDPers.

          • Alistair McLaughlin 6 years ago

            New Brunswick.

          • Mmr 6 years ago

            Hot sauce… There is nothing wrong with investing in eastern Canada.

          • Alistair McLaughlin 6 years ago

            Hot Sauce is actually our friend Ketchup Chips from yesterday. He’s so clever he doesn’t know one province from another. That’s why he’s a wealthy property tycoon.

    • Reply
      vnm 6 years ago

      Gord: Is it sociopathic gall, or rank ignorance that would prompt you to post drivel like that, with no supporting facts or numbers, on a site with in depth financial and economic analysis which entirely contradicts it?

    • Reply
      MH 6 years ago

      It looks like my comment stuck in the spam filter due to the large number of links so I repost one relevant link here. Obviously New York cannot seriously compete with Toronto for the title of a world-class city but still…

      “Pick a New York City Borough: Rents are Falling There, and Fast”

      https://www.bloomberg.com/news/articles/2018-04-12/pick-a-new-york-city-borough-rents-are-falling-there-and-fast

  • Reply
    MH 6 years ago

    It’s good to be an optimist but optimism does not indemnify from the consequences arising from the contempt for math. Today’s Bloomberg headlines:

    What It Was Like to Get Caught in Toronto’s Housing Slump
    https://www.bloomberg.com/news/articles/2018-04-12/what-it-was-like-to-get-caught-in-toronto-s-record-housing-slump

    ‘Dr. Debt’ Warns Canadians to Get Financial Houses in Order
    https://www.bloomberg.com/news/articles/2018-04-12/-dr-debt-warns-canadians-to-get-financial-houses-in-order

    And another one to top it off. It turns out Canadian banks are in big trouble, they have to figure out what to do with all that cash they have been raking in lately.

    Flush With Cash, Canadian Banks Poised for Expansion and Takeovers
    https://www.bloomberg.com/news/articles/2018-04-12/flush-with-cash-canada-banks-poised-for-expansion-and-takeovers

    Nope, here is another one. You know, since it’s a global trend… yada, yada, yada…

    Pick a New York City Borough: Rents are Falling There, and Fast
    https://www.bloomberg.com/news/articles/2018-04-12/pick-a-new-york-city-borough-rents-are-falling-there-and-fast

    Sorry for so many links but it’s just a bit bizarre to see all these at once on the front page of Bloomberg. Probably just losers complaining…

  • Reply
    Gord 6 years ago

    Interest rates may rise. But if you qualify for current rates with the current stress tests you will do fine. Personally, I think it will be a long time (at least 2 years or more) before rates substantially rise if they ever do. But you’re stress tested for that anyway correct? Again smart investors need not worry about these factors in a city like Toronto. Worry more about what area to buy in (location/location/Location) and the health of the condo corporation or the health of the home you’re buying/investing in.

    • Reply
      Mmr 6 years ago

      Location is very important and condo corporation as well. If you buy condo in underdeveloped area or any asset knowing there will be lot of development on pipeline that will help you in future. At the it’s all about seeing a value of an asset and also try to imagine what will happen in that area over next 10 year. One of my relatives wanted to buy condo in 2014 in king street west I told him buy city place. Back then it was really cheap there like 350k for a two bedroom. And he did now it’s almost double. It’s might be some part because of bubble but it did help cause now there are two schools and a community Center opening…new loblows and shopping center opening…new park and gardener express renovations taking place…all these help to make that area feel like community and it does increase the value over the year as undervalued areas start
      Too see lot of public investments as well as private investment as well.

    • Reply
      Alistair McLaughlin 6 years ago

      The price-rent metrics in Toronto are terrible. It might well be the worst metro environment in which to buy in North America. The fact is, even at 2.5% interest, once you throw in property taxes, condo fees, insurance, and incidentals, that property is cash flow negative.

      That means anyone buying is relying entirely on price appreciation for income. Which is completely nuts.

      • Reply
        Mmr 6 years ago

        No that’s is not true. I know tons of people who are cash positive bought in 2016 from re sale not pre con. It covers mortgage, condo fee, property tax. Normally insurance cover on condo fee so you don’t pay extra. As long as you put 20 percent down and take money from banks not sub prime. People buying after 2016 are losing in resale market cause it went up 20 percent from 2016 to 2017 and then again another 20 percent from 2017 to 2018. That changes everything.

        • Reply
          Alistair McLaughlin 6 years ago

          Normally insurance cover on condo fee so you don’t pay extra.

          If you’re renting a condo out to a tenant, you’d better believe you need insurance. No way does your condo fee cover damage done by a tenant. Also, if your tenant damages common property, the condo’s insurance company is going to tap your insurance company to pay for it. If you don’t have insurance, YOU are paying for it.

          In fact, if your condo board (or the management group they’ve hired to run the place) is not requiring you to provide documented evidence that you are fully insured each and every year, then they aren’t doing their job.

          • Mmr 6 years ago

            It depends. For example my condo fee for one of the building is high because it cover expensive insurance coverage as well
            Hydro heat and water all includied on the condo fees. There are exceptions always of course. When you buy condo that’s another thing you look for what does condo fee cover. Plus I respect my tenents it’s been 10 years I rented fee places not once I have seen any one intentionally damage any of my properties neither any one defaulted on rent. If you respect your clients they will do the same it’s goes both way.

      • Reply
        vnm 6 years ago

        And why international authorities rank Toronto as the most bubbly city in the world. It certainly isn’t the free champagne.

        • Reply
          Mmr 6 years ago

          International authorities Should focus on all the other problems in the world instead telling what’s wrong with Canada. I will tell them to go fuck them self. It will correct as time goes by we have to wait. We don’t need foreigners giving us advise.

          • MH 6 years ago

            Yeah, baby! You tell it like it is!

            Foreigners with math – get the blip out of here, proud Canadians do not need your! Foreigners with cash… well, it’s a different story altogether.

          • Mmr 6 years ago

            Exactly. Want to invest here welcome. Give lecture and what to do with our economy and how to stop our pipeline increase the carbon tax to fuck us over yes fuck off then.

          • MH 6 years ago

            I am getting too old to deal with this level of greedy nuttiness. Life is a patient and if all other ways fail relentless teacher. I am not sure what else I can add here.

      • Reply
        Gord 6 years ago

        All good points and some sound strategies. I still think Toronto has many options/opportunities to offer. As an example. I bought a condo five years ago for 250K. It was not positive initially due to all the factors you state. But five years later it is (not to the degree of your examples) but positive never the less. Plus that fact that the mortgage is shrinking each year providing more income. Now I could sell the place in a week for 400K. It seems like it’s working. Yes, prices are higher now if you were to get into other properties…but so is my income and rents (and borrowing equity in this and other properties I own). Plus I’m not sure I want to have rental properties that are hundreds of kilometers away. That comes at a cost both financially (as you state) and mentally (stress). 2017 was an anomaly in Toronto. But I’ve been here since 1979 and other than the predictable uncertain periods (like now and in the late 80’s), things continue to go up. As do wages and rents. I don’t see that ending in my lifetime. Ask my father-in-law who is 88 what he could have and should have bought when he was younger. Will it all come to an end some day? Perhaps but I don’t see it anytime soon as I stated.

      • Reply
        Bob 6 years ago

        ” It might well be the worst metro environment in which to buy in North America. ”

        Uh, no. Prices in TO are a fraction of those in Vancouver, and rents are comparable.

    • Reply
      JTEpic 6 years ago

      Gord,

      Stop. Please. You must have ended up here mistakenly. Your logic is what this blog tries to STOP. And yes, I have a rental property, with positive cash flow,
      outside of Toronto. Sold my SFD primary residence in April 2017 to someone who was going to “invest”. I wish you and them luck.

      • Reply
        Gord 6 years ago

        You seem to know a lot about me? No one’s SFD should be an investment. Where did you buy? My bet is on Windsor.

      • Reply
        Mmr 6 years ago

        I have been land lord in Toronto since 2009 and it’s always been positive. Congrats on your rental I guess it’s on Detroit? I heard it’s 15k to buy a house you can rent it to thugs.

        • Reply
          vnm 6 years ago

          Mmr: Since 2009. Of course it has. Don’t confuse wisdom with luck.
          Since 2009 if you invested in real estate business you couldn’t lose.
          As they said of the 1950s, if you could put on a pair of pants, you could have a successful career.
          Making a killing in real estate over the past decade doesn’t make you a financial genius.
          You can come to right conclusion for all the wrong reasons.

          • Mmr 6 years ago

            Yes I know I got lucky and I didn’t say I am genius. In fact I find most ppl here way more smarter then me.

  • Reply
    Gord 6 years ago

    Vmn why so nasty?
    Look I find the in-depth analysis on why the market is in trouble interesting. Otherwise, I wouldn’t be on this site. But the fact of the matter is if you personally are financially stable, and make shrewd investment decisions in real estate in Toronto, you will do well. Simple fact. I don’t need pie charts and graphs to help me understand that.

    • Reply
      Werry 6 years ago

      Low cost of borrowing mitigates a lot of risk, and if you’re cashflow positive it’s almost a no brainer. Almost isn’t every time.

      The reason we hit bubble territory is people aren’t thinking about the mechanics of pricing in a low inventory environment. Subprime, and yes if you’re paying 9% you’re subprime, flooded the market to make “investments.” They drive up the cost for prudent investors, so if you’re in the market for an investment you should just wait. These investors are going to default, or sell off cheap. Scoop and continue.

      • Reply
        Mmr 6 years ago

        I agree werry. Seems these investors don’t understand basic investment model it has to be cash positive no matter what include all costs condo fee mortgage and property tax. But good thing if you have money once price fall pick up the best value ones increase your portfolio and life will go on.

    • Reply
      vnm 6 years ago

      Gord>>But the fact of the matter is if you personally are financially stable, and make shrewd investment decisions in real estate in Toronto, you will do well<<
      Again with the platitudes. If anything, this site is about exposing the the plague of misinformation, misdirection, and unsupported generalizations that have resulted in a greed driven financial and social catastrophe for large swaths of the population.
      OF COURSE if you make "shrewd" investments you will do well. LIKE DUH if you are financially stable you will make out fine with those "shrewd"investments.
      The whole gawdamn point is try and determine what "shrewd" means, and
      anything that involves shafting people or wrecking the city is automatically disqualified.
      Your posts are screamingly ingenuous.
      "I don't need pie charts and graphs to understand that".
      Well I don't like shifty salesmen insulting my intelligence.

      • Reply
        Bluetheimpala 6 years ago

        Here here

      • Reply
        Gord 6 years ago

        Vnm – Sounds like you have either been burned, should move or you are simply arrogant in your opinions. I am not saying the information isn’t useful. But when this site continues to portray things as the apocalypse, it becomes somewhat tiresome. There are sleazy characters around every corner. That’s not news. It has existed since the beginning of time. Get over it and stop “dwelling” on it. What a waste of time. Get out and invest/buy something to prevent the wrecking of your city for god’s sake! Or you can just continue to be negative and live your miserable life. You must be the life of the party.

        • Reply
          hot sauce 6 years ago

          Gord – congrats on your investments. you took risk you get reward. most commenters here are apocolypse losers . Blue, AM, VNM, Grizz in order of poverty. They have no money and are late paying renters waiting for crash.

          • Alistair McLaughlin 6 years ago

            Ketchup Chips! Our favourite broke amateur landlord is back under a new screen name!

            Did you find a trustee to handle your bankruptcy yet? The longer you put it off, the worse it’s going to be for you. Make that call.

        • Reply
          RM 6 years ago

          Gord, you seem like a fairly level-headed guy and it’s great if you’ve managed to make sound investments that will weather the storms, but you can’t dismiss math. As others have pointed out here, that’s the whole f*cking point of this site. We’d all be onboard with optimism if the numbers were optimistic. It’s no secret that the world is drunk on debt and we here just believe there are repercussions for that. Could we be wrong? Sure. I certainly have been for at least the last 5 years, but please don’t dismiss the obvious fundamental problems – low wages, rising interest rates, record debt levels, international trade instability, baby boomers dying, regulation changes, international investment slowing, etc. – because these are mostly quantifiable. And if you come here with optimistic, credible data, we will absolutely listen.

          Also understand that the homes you own will very likely be worth more in 25 years but that doesn’t make it a good investment. Historically, real estate has underperformed most other asset classes and is incredibly illiquid and generally requires more time to manage. That’s not to say that it can’t be a good investment but as Alistair pointed out, it’s just not the case right now in Toronto. To put it in perspective, a friend of mine is an investor in the US who works at one of the biggest investment firms in the country and he personally carries a portfolio of about 20 properties. None of them are in major cities because the ROI is generally much lower than secondary cities. He will not invest in a property unless it returns 12% after expenses (which includes property management because he sure as sh*t isn’t dealing with his tenants). He was buying $125k houses in Southern California after the crash and renting them for $1500 a month. He has no debt on those places either. THAT’S a good investment. Rents would have go WAY up to compete with anything close to that ROI, which can’t happen without wages increasing substantially. Again, math. I’m not an expert but if you’re below 5% ROI you’re way too close to more liquid investments in my opinion.

  • Reply
    Grizzly Guys 6 years ago

    Literally the definition of Minsky’s Ponzi borrowers.

    Heres a great speech by Janet Yellen in 2009 admitting central banks had been asleep for the GFC, while Minsky’s theories predicted it to a T.

    https://www.frbsf.org/our-district/press/presidents-speeches/yellen-speeches/2009/april/yellen-minsky-meltdown-central-bankers/

  • Reply
    Grizzly Guys 6 years ago

    I fancy that over-confidence seldom does any great harm except when, as, and if, it beguiles its victims into debt. – Fisher 1933

    • Reply
      vnm 6 years ago

      Exactly, brilliant, thanks Grizz.
      Sociopaths believe that if they are doing well, the world is doing well, because they are the world.

  • Reply
    Justin Thyme 6 years ago

    And in other world news,

    ‘Shanghai new home sales down 44% in Q1

    ‘SHANGHAI – New house sales in Shanghai fell 44.2 percent in the first quarter of this year as a spate of measures to rein in the property sector took effect.’

    ‘The sales slump drove down the average price by 9.8 percent to 42,888 yuan ($6,830) per square meter, it said.

    ‘Wu Huimin, a senior director with Cushman and Wakefield, said the slump in sales is a result of supply as well as tightening lending policy.

    ‘Since 2016, local authorities have introduced a series of measures, including higher downpayments and mortgage rates, to rein in the hot property market.

    ‘China is also planning to build more rental housing in big cities to help cool down the mark’

    from http://usa.chinadaily.com.cn/a/201804/11/WS5ace2ce1a3105cdcf6517adc.html

    Only in Canada?

    Nope, we are just following.

    • Reply
      Grizzly Guys 6 years ago

      We have already seen the response to the debt squeeze by big conglomerates such as Anbang, HNA, Wanda, CEFC………. liquidate foreign assets.

      I wonder what the response will be from private individuals.

  • Reply
    Justin Thyme 6 years ago

    I believe your figures assume 100% financing.

    If the buyers are using exclusively their own money, as in money laundering, or trying to get their money out of their country, the numbers would look very different indeed.

    I doubt if today’s real estate market has anything to do with investing.

    It is more a tool to use to absorb exuberance.

    Certain people, but enough of them, have too much exuberant money, and they need a place, ANY place, to put it. This just increases exuberance.

    Until excess exuberant money dries up, or another venture is found to absorb it, the trend will continue.

    Methinks, in all sincerity, it will be in extra-terrestrial colonization. It has the potential to absorb trillions of exuberance dollars
    .

    • Reply
      vnm 6 years ago

      JT… there is always the guillotine. It had a successful run in France.
      Anthropologists will tell you that people are nice when they can afford to be nice. That can turn on a dime. When financial systems fail, and people are desperate, heads roll.
      That’s what enlightened conservatism was all about, born of the industrial revolution and a desperate working class.
      There are at least two really good reasons to work for equality,
      a belief in a fair and equitable world, and self preservation.
      The trend to the top 5% to the top 1%, it will inevitably continue to the top 0.5% to the top 0.1%, and in finality 0%.
      Whether it happens the easy way or the hard way, the outcome is always the same.

  • Reply
    CJ Ray 6 years ago

    This market got so crazy, even the flippers won’t be able to make ends meet now. Broken-down shacks are going for ridiculous amounts as ‘tear-downs’. If you’re an investor, I can’t see how you can look at this GTA with positive spin. Welcome to the Big Smoke….& mirrors!!
    There are still lots of RE investment opportunities in Canada, you just have to be smarter about it than this last bunch of ‘green’ speckers that can’t rationalise a good investment from a bad one.
    ‘Hey honey, lets take a HELOC out and buy a condo or two. Everybody’s doing it!’
    Look at New Brunswick or Nova Scotia. Prices definitely can’t go down from where they’re at there, though I’m not sure what the rental opportunities would be unless your close to a college or university. Maybe Montreal or beautiful Quebec City? Anyway, rigor mortis is setting into this TO market now.

  • Reply
    Russ 6 years ago

    “At the height of the mania, investors accounted for one in five home sales in parts of the GTA, says a new report ”

    Nice report from Toronto brokerage Realosophy Realty Inc.
    http://www.macleans.ca/economy/realestateeconomy/how-speculators-inflated-the-toronto-housing-bubble/

    • Reply
      Grizzly Guys 6 years ago

      Yup. And condo speculation was 48% of sales for 2013-2014 based on completions for 2017.

  • Reply
    hot sauce 6 years ago

    very scary charts.

    • Reply
      Alistair McLaughlin 6 years ago

      Only scary for indebted amateurs like you who bought at the top. The rest of us find it entertaining.

  • Reply
    Gord 6 years ago

    A good decision is based on knowledge and not on numbers.
    “Plato”
    The only source of knowledge is experience.
    “Albert Einstein”

    • Reply
      vnm 6 years ago

      Plato was all about living in caves, not condos.
      In addition to being a physicist Einstein was a humanist, philosopher, and musician. Based on many years of experience in the field, I can say with absolute authority based on years of experience in the field, physics is all about charts, graphs, numbers and mathematical models.
      You continue to embarrass yourself.

      • Reply
        Du dirt 6 years ago

        This group keeps talking about condos like they were ever a good idea, if you can’t take a Piss in your backyard, then you my friend have purchased a cement box in the sky with no room to grow, no where to go up, no where to add an addition to create more $, you pay into some bullshit maintenance fee that gets pocketed by management company’s.

    • Reply
      Grizzly Guys 6 years ago

      “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it” – Einstein

      • Reply
        Gord 6 years ago

        Again…another pretender hiding behind a keyboard. I bet you pay cash for everything and grow tomatoes in the yard.

        • Reply
          Alistair McLaughlin 6 years ago

          I do both. It means I spend smarter and eat better tomatoes than you.

        • Reply
          Grizzly Gus 6 years ago

          Lol you’re the one who brought Einstein into this. I just chose a quote the had something to do with the economy and our system.

          And no tomatoe garden for me right now. Living in 500 ft of construction materials right now. Brand new. Have some socialist Landlord investor subsidizing me right now. How about that

          • Alistair McLaughlin 6 years ago

            Landlords sure are a benevolent bunch these days aren’t they? They can’t even claim the charitable donations credit for the negative cash flow they subsidize their tenants with. It’s almost unfair.

  • Reply
    Gord 6 years ago

    I bet you googled that.
    BTW your sentence is incoherent.
    Your likely too dumb or lack the insight to catch the inference of the quotes.
    You display no sense of humor and no signs of any ability to have a two-way conversation.
    Keep on trolling loser.

    • Reply
      vnm 6 years ago

      Let me put it in terms you can understand (sorry pigs)
      Oink, oink.

      • Reply
        Gord 6 years ago

        That’s all you got????
        At first, I thought maybe I went too far. Now not so much.
        Don’t snort too loud…your landlord might not like it.

        • Reply
          vnm 6 years ago

          Garbage in garbage out my friend.
          Insulting gardeners and renters?
          You gotta give me something to work with.

          fyi, here’s a link with a photo of the apartment Einstein rented from 1902-1905 in Germany, a third world country where more than half the citizens are “loser” tenanats.

          Photo: “The apartment (the 2nd floor) that Einstein rented from 1902-1905 and where he published his Spe”

          The caption on the page is cut off. If you can tell me what comes after “Spe” and what Einstein accomplished there without googling it, you get the booby prize.
          Call me a cynic, but somehow I doubt it.

          https://www.tripadvisor.co.za/LocationPhotoDirectLink-g188052-d196123-i23775468-Einstein_House_Einsteinhaus-Bern_Bern_Mittelland_District_Canton_of_Bern.html

          Apparently Einstein was not a good gardener, this I confess I googled. But that implies he at least gave it a go and gardening, while maybe not up to your land lordly standards, apparently wasn’t beneath the greatest physicist since Newton, who while not a tomato guy, was big into apples. (don’t tell me, that doesn’t mean anything to you either.)

          • Alistair McLaughlin 6 years ago

            Indeed, he finds it amusing that I grow tomatoes and am not in debt. All the really smart people are tapping their HELOCs and growing weed I guess.

          • Gord 6 years ago

            I feel like Batman talking to the Riddler. Nice soliloquy and excellent use of links.
            I prefer my apples without bruises and in the morning.
            I must confess I didn’t know it was special. But then none of us know everything there is to know correct?

          • backwardsevolution 6 years ago

            I’m guessing, but I think it’s something like “Special Theory of Relativity”.

          • vnm 6 years ago

            Backwardsevolution:

            Good answer! Interesting user name, this is scene from
            a fantastic movie if you haven’t scene that relates to devolution:P

  • Reply
    Tommy 6 years ago

    Condos will head in the same direction as detached houses, by the end of the year.

    • Reply
      Gord 6 years ago

      Depends on a lot of factors. The economy is only one of them. Also, not all condo’s are created equal.

      • Reply
        Foxxy 6 years ago

        Please elucidate, other than economic fundamentals what factors contribute to the sustainability of housing price appreciation?

        • Reply
          Gord 6 years ago

          Unless you like camping people need a roof to live under. People keep having little people who grow up and don’t like camping.

          • Alistair McLaughlin 6 years ago

            That’s why new houses – hundreds of thousands of them – get built every year.

          • vnm 6 years ago

            >>I must confess I didn’t know it was special. But then none of us know everything there is to know correct?<<

            Music to the ears … there may be hope for you yet!

          • Foxxy 6 years ago

            Gord – that doesn’t seem like an actual factor in housing appreciation. Otherwise home prices would never go down through out all of history, which is demonstrably not true. I don’t think you have a real understanding of the socio-economic factors that play out in the larger world.

      • Reply
        vnm 6 years ago

        Ah, you’ve seen one bat cave, you’ve seen em all.

      • Reply
        Grizzly Gus 6 years ago

        I’d say the two biggest factors are the economy and interest rates. On trending down the other up

  • Reply
    vnm 6 years ago

    AM: And even stoners get joints by rolling numbers.

  • Reply
    Loomis 6 years ago

    Hot Sauce – Yesterday you were Ketchup Chips. Two days ago you were Frank Diesel. Your atrocious grammar and lack of capitalization are a dead giveaway. Tomorrow, what will you call yourself?

    Let’s pick tomorrow’s name for Hot Sauce/Ketchup Chips/Frank Diesel:
    1) Underwater Landlord
    2) Insolvent Specuvestor
    3) House Poor

  • Reply
    Du dirt 6 years ago

    Detached is the only way to go, why, because if you need to create income to make the cost of the land justifiable, a few pieces of wood, a few pieces of drywall, a few Chinese people, equals more income,
    Development potential is key when looking at properties. We stole this land, and now liberals want to cry about what’s fair, fair for Canadians, affordable housing is a Canadian right. Wrong. Until people live in coffins stacked one over the other, and fed through intravenous, this won’t stop. How many people during the late 90’s or any time for that matter said this “ that property will never sell for that price” every one of those people ate their words or died to soon to see the price increase.

  • Reply
    Owemanco 6 years ago

    Detached house prices in the GTA are dropping. Not so much on the low end but on the high end for sure.

    I am curious to see how things will be when the condo prices get near the low end houses. I guess the low end house prices will go up a little bit and condos down a little bit.

    John

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