Toronto Is in a Housing Bubble(greaterfool.ca)
greaterfool.ca
Toronto Is in a Housing Bubble
http://www.greaterfool.ca/2017/03/04/its-official-its-a-bubble/
126 comments
I don't know how to write this without sounding entitled, so here it goes anyway: I own a house in Toronto (purchased May 2016), I do not believe it's affordable for your average Canadian, but I do think it's still within reach for skilled people who are willing to make sacrifices to make it possible.
Single data point as an example: Last month a friend, who between he and his partner make approx. $200k (before tax) combined household income, bought a semi-detached property on the east end (west of the DVP, south of Dundas). "$200k you say, that is a lot!", right, it isn't insignificant, but it's also just two skilled people who make $100k in a major city. There are a significant volume of $100k jobs out there (so if they lose them, I suspect they will find another fairly soon). It's just not as impossible to do as people say, but most of us are not willing to pack a lunch every day, stop drinking lattes make it possible.
When hunting for a house in Toronto there were 3 things that really bugged me that would be great to have addressed before we freak out over the possibility of foreign money:
1) "Second round of offers". It's a trick relators play. Basically they get all the offers together and then come back and say "uh, they're all super close, we're looking to get an outlier". Of course some people come back with bigger offers...and the highest is accepted, or the highest offer from the previous round is accepted.
2) Poorly done home-owner renovations. People doing shitty renovations and then later selling the place (often these are flips). Uneducated buyers see these 'improvements' as positive things when most of the work will be to be re-done due to the job not being done properly. It just keeps Home Depot humming and inflates the cost of the house by the cost of materials + repairs down the road. It's compounded by the fact all offers [in practice] need to be unconditional or they won't get considered. So no inspection, the buyer doesn't get the chance to really find out until later. Sellers often include inspections, but these are always terrible sources of info.
3) Illegal housing; So many listings say "Potential basement suite", and people do the math expecting to get $800-1500 / month extra income from it. They say "potential" in the listing because it's nearly impossible to create an actual legal basement apartment in your house in Toronto [and they know it], but people are willing to risk it or simply unaware of the exposure this places on them. Legal basement apartments need fire rated rooms, to include a parking spot (which is super hard to do in Toronto!), have a separate HVAC system and much much more. 99% of basement apartments do not comply, but due to either people not knowing, or not caring, they rent them out to increase their housing budget. Banks are partly to blame here, they enable this by increasing the lending amount accordingly based on an assumption that the second unit will be rented 10/12 months per year.
I think the thing we're truly seeing here is what access to cheap capital produces in established major (aka historically low risk) cities. Interest rates are sub 3% with no signs of increasing, people make decent money and are willing to sign up for 30 year commitments. There is risk, but when you look at the key factors, it's pretty low give the likely outcome over that time horizon. This isn't a small suburb hours away from a major city [i.e. Hamilton Ontario - where prices are going up despite the fact lots of the residents commute hours to Toronto every day] where one company going broke will send everyone into the poor house, it's a major city with a very good history of having available skilled work.
I'm personally more worried about robots taking skilled jobs than I am the possible housing market crashing. Those things will probably be related events, and housing will be one of the many industries not ready for that shift.
Finally, having said all this, a well timed quote from a conversation i had on Friday "If i lose half the value in my house, i won't be upset or surprised...I went into it assuming things might not go my way". Not everyone has that luxury or time horizon to not mind waiting around like I do, but I'd encourage more people to not see a house as an investment but more as a cost (as you would rent) and use that emotional response you get to help you justify your next decision in the house buying process.
Single data point as an example: Last month a friend, who between he and his partner make approx. $200k (before tax) combined household income, bought a semi-detached property on the east end (west of the DVP, south of Dundas). "$200k you say, that is a lot!", right, it isn't insignificant, but it's also just two skilled people who make $100k in a major city. There are a significant volume of $100k jobs out there (so if they lose them, I suspect they will find another fairly soon). It's just not as impossible to do as people say, but most of us are not willing to pack a lunch every day, stop drinking lattes make it possible.
When hunting for a house in Toronto there were 3 things that really bugged me that would be great to have addressed before we freak out over the possibility of foreign money:
1) "Second round of offers". It's a trick relators play. Basically they get all the offers together and then come back and say "uh, they're all super close, we're looking to get an outlier". Of course some people come back with bigger offers...and the highest is accepted, or the highest offer from the previous round is accepted.
2) Poorly done home-owner renovations. People doing shitty renovations and then later selling the place (often these are flips). Uneducated buyers see these 'improvements' as positive things when most of the work will be to be re-done due to the job not being done properly. It just keeps Home Depot humming and inflates the cost of the house by the cost of materials + repairs down the road. It's compounded by the fact all offers [in practice] need to be unconditional or they won't get considered. So no inspection, the buyer doesn't get the chance to really find out until later. Sellers often include inspections, but these are always terrible sources of info.
3) Illegal housing; So many listings say "Potential basement suite", and people do the math expecting to get $800-1500 / month extra income from it. They say "potential" in the listing because it's nearly impossible to create an actual legal basement apartment in your house in Toronto [and they know it], but people are willing to risk it or simply unaware of the exposure this places on them. Legal basement apartments need fire rated rooms, to include a parking spot (which is super hard to do in Toronto!), have a separate HVAC system and much much more. 99% of basement apartments do not comply, but due to either people not knowing, or not caring, they rent them out to increase their housing budget. Banks are partly to blame here, they enable this by increasing the lending amount accordingly based on an assumption that the second unit will be rented 10/12 months per year.
I think the thing we're truly seeing here is what access to cheap capital produces in established major (aka historically low risk) cities. Interest rates are sub 3% with no signs of increasing, people make decent money and are willing to sign up for 30 year commitments. There is risk, but when you look at the key factors, it's pretty low give the likely outcome over that time horizon. This isn't a small suburb hours away from a major city [i.e. Hamilton Ontario - where prices are going up despite the fact lots of the residents commute hours to Toronto every day] where one company going broke will send everyone into the poor house, it's a major city with a very good history of having available skilled work.
I'm personally more worried about robots taking skilled jobs than I am the possible housing market crashing. Those things will probably be related events, and housing will be one of the many industries not ready for that shift.
Finally, having said all this, a well timed quote from a conversation i had on Friday "If i lose half the value in my house, i won't be upset or surprised...I went into it assuming things might not go my way". Not everyone has that luxury or time horizon to not mind waiting around like I do, but I'd encourage more people to not see a house as an investment but more as a cost (as you would rent) and use that emotional response you get to help you justify your next decision in the house buying process.
The fact that the market is still (barely) accessible to top 2% earners doesn't change the fact that it could be accessible to many more people, without harming anyone but a small cadre of real estate agents and speculators, if the city would allow responsible intensification of existing neighbourhoods with midrise infill construction.
3 years ago your friends might have needed only $100k income for that semi, and in 3 years it will require $400k. Will your friends be earning $400k in 3 years? I doubt it. It's Toronto, not San Francisco.
In 3 years the number of families that could afford that semi-detached home went down by a factor of 6. [1] That's a problem.
I agree with you that the Toronto situation isn't as bad as others because Toronto has the most robust economy in Canada. A lot of the demand is driven simply by the fact that the city is a magnet for people from all over the country. I don't think the market will ever "crash". But the city's growth will be limited if the income needed to live in its core continues to rise from top 20% (2005), to top 10% (2013), to top 2% (2017) to top 1% and beyond. How will business attract highly mobile tech workers when a home in Toronto comes the same as SF but salaries are 1/2 or less? Since you live in Toronto you know the city is doing a desperately bad job of building new mass transit to alleviate the shortage/cost of housing the central parts of the city.
[1] http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/f...
3 years ago your friends might have needed only $100k income for that semi, and in 3 years it will require $400k. Will your friends be earning $400k in 3 years? I doubt it. It's Toronto, not San Francisco.
In 3 years the number of families that could afford that semi-detached home went down by a factor of 6. [1] That's a problem.
I agree with you that the Toronto situation isn't as bad as others because Toronto has the most robust economy in Canada. A lot of the demand is driven simply by the fact that the city is a magnet for people from all over the country. I don't think the market will ever "crash". But the city's growth will be limited if the income needed to live in its core continues to rise from top 20% (2005), to top 10% (2013), to top 2% (2017) to top 1% and beyond. How will business attract highly mobile tech workers when a home in Toronto comes the same as SF but salaries are 1/2 or less? Since you live in Toronto you know the city is doing a desperately bad job of building new mass transit to alleviate the shortage/cost of housing the central parts of the city.
[1] http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/f...
> A lot of the demand is driven simply by the fact that the city is a magnet for people from all over the country.
So what's your theory about why Toronto has seen 20%+ YoY appreciation? Why now?
So what's your theory about why Toronto has seen 20%+ YoY appreciation? Why now?
In no particular order:
1. Historically low mortgage rates and weak rules on who can access government-insured high-leverage mortgages
2. Softness in the other, non-Toronto, engine of the Canadian economy - the Alberta oil industry. Lots of people who left the GTA to work out west are migrating back now
3. Redirection of foreign capital from Vancouver after growing public outrage and many disturbing investigative reports on fraud, money laundering and tax evasion in the Vancouver market - this probably accounts for a lot of the change from 2015 to 2016/2017
4. Positive feedback effect as boomers sitting on $1M+ houses sell them, downsize, but give much of the proceeds to their kids to buy back into the market at even higher prices
5. Weak CAD amplifying the effect of (3)
1. Historically low mortgage rates and weak rules on who can access government-insured high-leverage mortgages
2. Softness in the other, non-Toronto, engine of the Canadian economy - the Alberta oil industry. Lots of people who left the GTA to work out west are migrating back now
3. Redirection of foreign capital from Vancouver after growing public outrage and many disturbing investigative reports on fraud, money laundering and tax evasion in the Vancouver market - this probably accounts for a lot of the change from 2015 to 2016/2017
4. Positive feedback effect as boomers sitting on $1M+ houses sell them, downsize, but give much of the proceeds to their kids to buy back into the market at even higher prices
5. Weak CAD amplifying the effect of (3)
Perhaps I misunderstood your position. It sounded like you were saying that Toronto is a magnet for people from around the country, but when I asked you to clarify that, you only provided one reason that supports that position (#2). Have you seen data to suggest this is having an outsized impact on GTA demand?
It seems clear than #3 and, less so, #1 and 5 are driving the majority of demand. I'm not sure how one can explain the decoupling of prices from incomes without either a massive influx of capital or lax lending from the banks. The latter doesn't seem to be an issue, which leaves the former.
If you're curious, read the PDF from the SFU prof that I linked to in the top comment in the thread. It's a summary of the data and is an excellent read if you're trying to unpack what's really going on (in Vancouver, but a lot is applicable to Toronto).
It seems clear than #3 and, less so, #1 and 5 are driving the majority of demand. I'm not sure how one can explain the decoupling of prices from incomes without either a massive influx of capital or lax lending from the banks. The latter doesn't seem to be an issue, which leaves the former.
If you're curious, read the PDF from the SFU prof that I linked to in the top comment in the thread. It's a summary of the data and is an excellent read if you're trying to unpack what's really going on (in Vancouver, but a lot is applicable to Toronto).
It's really difficult to conclusively measure the relative size of these impacts because they're all happening at the same time. I think comparing with Vancouver, Toronto has a larger share of organic demand vs induced or external demand because it has a larger and more diverse economy. I live in BC (moved from Toronto in 2014), so I've watched the very similar scenario play out in Vancouver and I think the case for foreign investment as the primary driving factor is pretty strong in Vancouver. It's difficult to prove because the government stubbornly refuses to collect data in a robust way, but what data does exist points to that conclusion. Vancouver is a smaller market, so it's easier to isolate the impact from, for example, the Immigrant Investor Program. But I agree that the only coherent reason why Toronto saw such a big spike in 2015/2016 is probably related to redirection of foreign capital that would have otherwise gone to Vancouver.
But to be clear, I didn't mean to say that the organic factors in Toronto justify the 20% YOY growth, just that in contrast with Vancouver there is more inherent strength in the market to cushion it from taking a big haircut if and when foreign investment tails off. In the Lower Mainland, real estate and associated construction industries account for around 1/3rd of total economic output - which means BC is more dependant on the Lower Mainland housing market than Alberta is on oil. Toronto at least doesn't have that potential double-whammy of having housing tank and losing its main economic driver at the same time. Housing is outpacing Toronto's economy, but housing IS Vancouver's economy. The latter scenario is a lot more dangerous, IMO.
But to be clear, I didn't mean to say that the organic factors in Toronto justify the 20% YOY growth, just that in contrast with Vancouver there is more inherent strength in the market to cushion it from taking a big haircut if and when foreign investment tails off. In the Lower Mainland, real estate and associated construction industries account for around 1/3rd of total economic output - which means BC is more dependant on the Lower Mainland housing market than Alberta is on oil. Toronto at least doesn't have that potential double-whammy of having housing tank and losing its main economic driver at the same time. Housing is outpacing Toronto's economy, but housing IS Vancouver's economy. The latter scenario is a lot more dangerous, IMO.
Thanks for clarifying. Totally agreed that economically speaking Toronto is more diversified and stronger than Van and a collapse in housing will crush Van. IIRC real estate, construction etc still produce more than 10% of Toronto's GDP.
Still don't totally understand "why now" wrt Toronto's market taking off if the answer doesn't include foreign money as a main driver.
Still don't totally understand "why now" wrt Toronto's market taking off if the answer doesn't include foreign money as a main driver.
Why now? Perhaps because millennials are getting older? Next to the boomers, they represent Canada's largest generation, and within the last 5 years started to reach the age where one normally starts to gain meaningful savings and starts to settle down to raise a family. They are also more likely than previous generations to want to live in the downtown of major cities. They also reached this stage of life as we dropped interest rates to practically zero, enabling them to afford much more than anyone before them. What was being served by dorm rooms (if you recall, the postsecondary schools had to go build-crazy in the early 2000s to accommodate these same people) and bachelor apartments rentals now wants to own multi-occupant homes – preferably of the detached type – without having to leave the area they established themselves in during early adulthood.
I don't think foreign money can ever explain "why now". Even if we agree that there is foreign money being invested, there still has to be some underlying driver to make them stand up and take interest in that investment opportunity. We can assert that it is not simply foreign money wanting to own a piece of Canada, as many parts of the country are only keeping up with inflation, and sometimes not even that. I think there had to be some change in the makeup of, most notably, Toronto and Vancouver that made it appealing now, and I suggest it is down to these demographic shifts.
I don't think foreign money can ever explain "why now". Even if we agree that there is foreign money being invested, there still has to be some underlying driver to make them stand up and take interest in that investment opportunity. We can assert that it is not simply foreign money wanting to own a piece of Canada, as many parts of the country are only keeping up with inflation, and sometimes not even that. I think there had to be some change in the makeup of, most notably, Toronto and Vancouver that made it appealing now, and I suggest it is down to these demographic shifts.
Honestly, I agree with you on all this. Just because I don't think it's too wild today, doesn't mean I love the trend.
We need to double down on education, support the creation of new businesses, make massive steps forward in terms of transit networks and reduce the future need for high "demand" side in Toronto. If we invest in other areas now (that is not to say we don't invest in TO any less), it's possible that a more sustainable growth curve for TO will come to exist.
Oh, and NOT let Kevin O'leary win the PC leadership.
We need to double down on education, support the creation of new businesses, make massive steps forward in terms of transit networks and reduce the future need for high "demand" side in Toronto. If we invest in other areas now (that is not to say we don't invest in TO any less), it's possible that a more sustainable growth curve for TO will come to exist.
Oh, and NOT let Kevin O'leary win the PC leadership.
> Single data point as an example: Last month a friend, who between he and his partner make approx. $200k (before tax) combined household income, bought a semi-detached property on the east end (west of the DVP, south of Dundas). "$200k you say, that is a lot!", right, it isn't insignificant, but it's also just two skilled people who make $100k in a major city. There are a significant volume of $100k jobs out there (so if they lose them, I suspect they will find another fairly soon). It's just not as impossible to do as people say, but most of us are not willing to pack a lunch every day, stop drinking lattes make it possible.
That single data point is in the top 3% of Canadian incomes.
That single data point is in the top 3% of Canadian incomes.
> There are a significant volume of $100k jobs out there (so if they lose them, I suspect they will find another fairly soon).
Are you sure you're talking about Toronto? My wife who is is an Executive in a particular industry has told me that there are engineers from Waterloo making 55-60k a year. At her last assignment there were several folks with CS Degrees making 55k and a UoT Grad with a Masters in CS making 65k. Being from the US she was surprised at the level these Grads were being utilized and quite astonished that they would be working for such poor wages.
Anyway, the home we had in Bloor West Village was purchased in 2005 for 440k.That same house (nothing was done to it) sold for 1.4 million within the last year. 11 years and a 1 million appreciation. Quite the investment.....
If things continue at the current rate that home will be worth about 10 + million in the next 10-15 years.
Are you sure you're talking about Toronto? My wife who is is an Executive in a particular industry has told me that there are engineers from Waterloo making 55-60k a year. At her last assignment there were several folks with CS Degrees making 55k and a UoT Grad with a Masters in CS making 65k. Being from the US she was surprised at the level these Grads were being utilized and quite astonished that they would be working for such poor wages.
Anyway, the home we had in Bloor West Village was purchased in 2005 for 440k.That same house (nothing was done to it) sold for 1.4 million within the last year. 11 years and a 1 million appreciation. Quite the investment.....
If things continue at the current rate that home will be worth about 10 + million in the next 10-15 years.
If there are Waterloo grads looking for less than 80k for their first job (and they're not idiots), send them my way. I currently have 7 open developer positions I'm struggling to fill (and i'm more than happy to pay market rates for any level of experience!)
What do you consider market rates to be? As a Canadian developer who isn't starving, but open to opportunity, it's always difficult for me to justify the time commitment required to explore those opportunities for a secret amount of money.
Depends on a few things, experience, job (or internship) history and what tools you want to / are open to work with. Attitude is also key (I really hate "rockstar" jerks).
I'd say the most common range I see new grads start at is between 65-80, sometimes 85-90 but that's rare, with the right experience and attitude later in life I regularly see people ranging from 100-150+ without any questions being raised.
It's complicated but at the end of the day you're worth what you can justify. To me this is a question of how much I expect you can realistically contribute, which will not be the same for every place you interview due to the factors I mentioned above.
I'd say the most common range I see new grads start at is between 65-80, sometimes 85-90 but that's rare, with the right experience and attitude later in life I regularly see people ranging from 100-150+ without any questions being raised.
It's complicated but at the end of the day you're worth what you can justify. To me this is a question of how much I expect you can realistically contribute, which will not be the same for every place you interview due to the factors I mentioned above.
You'd do better hiring 3 people at CA$160k (starting salary in SF for a fresh Waterloo grad) than 7 people at CA$80k. Even if the 10X developer is a myth, the 2X is very real and you're turning them away.
That's nice and all, but the median household income in Toronto is $76k.
Right, and I don't want to defend that, but here is what comes to mind: What percentage of houses do you think detached/semi-detached dwellings in toronto represent in terms of total available dwellings in Canada? Probably a pretty small number.
I think you nailed it.
1. On top of that, there is also the fact that 100K new ppl move into the GTA every year. A good chunk of the wants to live in DT Toronto, further reducing the small supply;
2. Toronto produces 30% of Canada's economic output;
3. By many metrics, Toronto is extremely underpriced for the job and quality of life you get compared to other countries' largest cities;
4. Toronto is the 3rd largest North American city;
5. It's possible part of the prices are just tracking the USD as the CAD dropped ;and
6. The truth is, the majority of the Canadian population won't know/accept that in this single city people make 5-10x the income they make, hence "bubble" being thrown around as the obvious answer.
1. On top of that, there is also the fact that 100K new ppl move into the GTA every year. A good chunk of the wants to live in DT Toronto, further reducing the small supply;
2. Toronto produces 30% of Canada's economic output;
3. By many metrics, Toronto is extremely underpriced for the job and quality of life you get compared to other countries' largest cities;
4. Toronto is the 3rd largest North American city;
5. It's possible part of the prices are just tracking the USD as the CAD dropped ;and
6. The truth is, the majority of the Canadian population won't know/accept that in this single city people make 5-10x the income they make, hence "bubble" being thrown around as the obvious answer.
Toronto has been the economic and immigration centre of Canada for 20 years. Why has there suddenly been an inflection point in the rate of price growth in the last 2-3 years? [1] What about Toronto's economic fundamentals (i.e. the capacity of Torontonians to pay for housing) has changed in that period?
Don't get me wrong, there are definitely organic factors that contribute to the price growth in Toronto. But those cannot account for >15% year-over-year growth.
[1] http://www.torontohomes-for-sale.com/4a_custpage_2578.html
Don't get me wrong, there are definitely organic factors that contribute to the price growth in Toronto. But those cannot account for >15% year-over-year growth.
[1] http://www.torontohomes-for-sale.com/4a_custpage_2578.html
I think point 5 is likely important to recognize. The CAD to USD ratio has dropped dramatically (Currently 1 USD = 1.33 CAD). If you picked the exchange from 5 years ago you see it was 1 USD = 1 CAD, if you do 10 years it was 1 USD = 1.07 CAD.
I'd argue that at least 20% of the price increase we're dealing with today is related to inflation.
I'd argue that at least 20% of the price increase we're dealing with today is related to inflation.
Then how come there isn't a 20% increase in cities like Québec, Montréal, Calgary or Winnipeg?
Have you visited those cities? I don't find it surprising at all.
Quebec / Montreal: historical politics pushed investment to toronto when separation was on the table and pushed by certain political groups (again bumping toronto prices and not helping those areas at all!)
Winnipeg / Calgary: isolation from other large cities, colder climate, less immigration friendly.
Quebec / Montreal: historical politics pushed investment to toronto when separation was on the table and pushed by certain political groups (again bumping toronto prices and not helping those areas at all!)
Winnipeg / Calgary: isolation from other large cities, colder climate, less immigration friendly.
>Winnipeg / Calgary: isolation from other large cities, colder climate, less immigration friendly.
Isn't Manitoba one of the easiest provinces to immigrate to?
Isn't Manitoba one of the easiest provinces to immigrate to?
"A good chunk of the wants to live in DT Toronto, further reducing the small supply"
Toronto's population grew by 10% between 2001 and 2016. https://en.wikipedia.org/wiki/Demographics_of_Toronto#Popula...
There is currently a vast supply of condos in the city, and considering the average number of children per household (1.1 in 2011), the supply should cover the housing demand in the city.
Things are a little different in the GTA, but this still doesn't explain the magnitude of the jump in prices in the last two months.
Toronto's population grew by 10% between 2001 and 2016. https://en.wikipedia.org/wiki/Demographics_of_Toronto#Popula...
There is currently a vast supply of condos in the city, and considering the average number of children per household (1.1 in 2011), the supply should cover the housing demand in the city.
Things are a little different in the GTA, but this still doesn't explain the magnitude of the jump in prices in the last two months.
> Toronto produces 30% of Canada's economic output
Out of interest, who tracks economic output? It seems Statscan does not. Although it is worth mentioning that Toronto CMA is home to around 18% of the population, and represents about the same percentage of the nation's GDP.
Out of interest, who tracks economic output? It seems Statscan does not. Although it is worth mentioning that Toronto CMA is home to around 18% of the population, and represents about the same percentage of the nation's GDP.
"4. Toronto is the 3rd largest North American city;"
Not quite, that's only technically correct, due to the fact that major urban areas in the US don't 'incorporate' into major cities.
It's better to compare 'greater urban areas' with other regions. On that basis, it's not so big.
LA, Chicago, Dallas Ft/Worth, NYC all bigger, with Boston, Houston, Bay Area, DC, Seattle, (even Atlanta) about the same size. There's a few more on that list.
America is very populous and just outside many urban centres are vastly populated areas of slightly less density. Esp. in the North East.
Not quite, that's only technically correct, due to the fact that major urban areas in the US don't 'incorporate' into major cities.
It's better to compare 'greater urban areas' with other regions. On that basis, it's not so big.
LA, Chicago, Dallas Ft/Worth, NYC all bigger, with Boston, Houston, Bay Area, DC, Seattle, (even Atlanta) about the same size. There's a few more on that list.
America is very populous and just outside many urban centres are vastly populated areas of slightly less density. Esp. in the North East.
The average income in Canada is about $40K
1 $100K earner is in the top 20%. Having both is quite rare.
You've made the opposite argument: those people should easily be able to afford a relatively nice home.
Homes are completely out of range for normal Torontonians, and it's a problem.
1 $100K earner is in the top 20%. Having both is quite rare.
You've made the opposite argument: those people should easily be able to afford a relatively nice home.
Homes are completely out of range for normal Torontonians, and it's a problem.
Sure, so there is more demand than supply is my point. If we want to address that we need to diversify where we invest [not just toronto] so we can make alternatives available and not concentrate everyone's desire to live in a 50km radius.
Remember that next time you vote. And that isn't a jab at the current government, it's more a statement to remind people that tax cuts and other incentives we can expect to come up on offer come election time are not what we are complaining about here.
Remember that next time you vote. And that isn't a jab at the current government, it's more a statement to remind people that tax cuts and other incentives we can expect to come up on offer come election time are not what we are complaining about here.
I don't quite agree that there's more demand than supply.
That does not have to happen for a speculative bubble.
That does not have to happen for a speculative bubble.
Just a question. In Germany, a city earns also income from renter's.
So, something like that happened in Frankfurt in some areas.
Rent skyrocketed. Only offices.
Later in self interest the city changed some areas to living areas. With affordable living and rent.
Is this the same in Canada?
On other side note. I think why no city stops it. They are hoping to be the next new York. High rent, high income renter's. High income for the city.
Usually reality proves them wrong.
So, something like that happened in Frankfurt in some areas.
Rent skyrocketed. Only offices.
Later in self interest the city changed some areas to living areas. With affordable living and rent.
Is this the same in Canada?
On other side note. I think why no city stops it. They are hoping to be the next new York. High rent, high income renter's. High income for the city.
Usually reality proves them wrong.
I'm from New Zealand and we are having the exact same problem in our largest city, Auckland.
It's now at about 20% Chinese population as well.
I have no problem with immigration and foreigners buying houses, but they are making it basically impossible for the average Kiwi to consider purchasing in Auckland, and it is somewhat of a problem when a single group has been allowed to purchase in such intensity in a single area.
The wider New Zealand population is quite angry about it, but the government seems to be denying a problem. The problem was they were happy taking in foreign money, with complete disregard for the inevitable consequences.
They are now going to be implementing much increased tax on foreign buyers to try and stop the problem.
It's now at about 20% Chinese population as well.
I have no problem with immigration and foreigners buying houses, but they are making it basically impossible for the average Kiwi to consider purchasing in Auckland, and it is somewhat of a problem when a single group has been allowed to purchase in such intensity in a single area.
The wider New Zealand population is quite angry about it, but the government seems to be denying a problem. The problem was they were happy taking in foreign money, with complete disregard for the inevitable consequences.
They are now going to be implementing much increased tax on foreign buyers to try and stop the problem.
I'm from New Zealand and we are having the exact same problem in our largest city, Auckland.
The thing is it's happening everywhere in NZ. The provinces are getting worse as well. For reference, a median multiple of 3 is considered affordable.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&o...
Not a single region in NZ is affordable - and this is from 2012. It's only gotten worse.
The thing is it's happening everywhere in NZ. The provinces are getting worse as well. For reference, a median multiple of 3 is considered affordable.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&o...
Not a single region in NZ is affordable - and this is from 2012. It's only gotten worse.
Melbourne resident here. Same problem and real estate agents are playing along because they make more money that way. Politicians will say and do what has become the norm, "we strongly believe that the average Australian needs to be able to afford their own homes" but that's about it. I realize its not an easy problem to solve but it is also one that will not go away if you ignore it.
Its a very simple problem to solve, make property something only citizens (or at the least permanent residents) can buy.
No offense but if it was that simple, don't you think the government would've done it already? The Chinese cash looks good and shows growth on paper so politicians and bank managers can show great numbers in the short term. It's only in the long term that you'll destabilize the economy and do irreversible damage with money laundering behavior.
No offense but if it was that simple, don't you think the government would've done it already?
Governments will do what's in their best interest. You literally pointed it out yourself in the next paragraph..
Governments will do what's in their best interest. You literally pointed it out yourself in the next paragraph..
The biggest reason why these are preferred place for Chinese is that they are immigration country without extradition treaty with China. It is not even about investment. They can lose 50% money and still be happy to do it.
I've just moved to Auckland from Vancouver, and yeah it's pretty much the exact same thing happening in both cities. It's a bit bizarre to see and live here
It is too easy to blame certain people from certain countries. That's how Trump got his new job.
"So just rent, says the curmudgeon. Well that isn’t cheap either. The average rent price in Vancouver
proper in late 2015 was $1,079 for a one bedroom and $1,368 for a two bedroom.30 The latter is the
highest in the country, while the former is not far behind top spot. And there is anecdotal evidence
that rental rates on new units have surged.
Suck it up, says the curmudgeon."
As someone who wrote code to forecast the demise of the housing bubble back in 2008, RENT vs BUY is still the strongest argument in my mind.
In 2005 I could choose to rent a 3bdr/2bth for $800 per month or I could buy it for $1200 per month.
Today, I feel like things are frothy but rent is actually more per month than "buying." I'd be curious to see when rental vacancies go up. That to me is a strong signal that a correction may take place in that local market.
As someone who wrote code to forecast the demise of the housing bubble back in 2008, RENT vs BUY is still the strongest argument in my mind.
In 2005 I could choose to rent a 3bdr/2bth for $800 per month or I could buy it for $1200 per month.
Today, I feel like things are frothy but rent is actually more per month than "buying." I'd be curious to see when rental vacancies go up. That to me is a strong signal that a correction may take place in that local market.
The rise of buy-to-let schemes have only made matters worse. Investors are buying real estate to rent at a high profit whilst a couple of decades ago individuals would buy a second and third home as a future investment for their children (or whatever other reason) and would put it in the rental market, which was competitive, in order to help pay the mortgage. Low interest rates meant by the time their kids were of age the house could have almost paid itself.
Many of us chose to rent because rent was cheap, we were young, not wealthy, and most importantly didn't know if we would love in this or that city for much longer (perhaps we came to study and moved on to look for our first jobs).
By the time rent became unaffordable, or at least much more expensive than a (lengthy) mortgage, we had also been prices out of home ownership because we don't make enough even with our partner's wages combined. We just couldn't get a mortgage at the prices houses are going. It feels like been between a rock and a hard place.
Many of us chose to rent because rent was cheap, we were young, not wealthy, and most importantly didn't know if we would love in this or that city for much longer (perhaps we came to study and moved on to look for our first jobs).
By the time rent became unaffordable, or at least much more expensive than a (lengthy) mortgage, we had also been prices out of home ownership because we don't make enough even with our partner's wages combined. We just couldn't get a mortgage at the prices houses are going. It feels like been between a rock and a hard place.
In my opinion what people are feeling now is a shadow tax in the form of increased cost because the US FED flooded the global markets with cheap USD and shored up the banks.
The psychology of pain applies to both the individual, the city, and all the way to the state and federal government. Which is that in comfort, no one changes. The only one motivated to change in this scenario currently is the individual (household).
In planning, I generally try and first determine if a market is frothy and then predict where the pain could/should/will come from. If I can't determine a pain point, I assume that either a) I missed something or b) there is yet to be a point of inflection.
My plan for housing ended up by waiting 7 years (2005-2012) to purchase my home as a foreclosure. So it certainly took some patience and planning. With that said, if I hadn't seen some pain in the local RE market by around 2009, I would have moved to some place that afforded me a similar lifestyle but one that I could purchase a home, given my priorities.
The psychology of pain applies to both the individual, the city, and all the way to the state and federal government. Which is that in comfort, no one changes. The only one motivated to change in this scenario currently is the individual (household).
In planning, I generally try and first determine if a market is frothy and then predict where the pain could/should/will come from. If I can't determine a pain point, I assume that either a) I missed something or b) there is yet to be a point of inflection.
My plan for housing ended up by waiting 7 years (2005-2012) to purchase my home as a foreclosure. So it certainly took some patience and planning. With that said, if I hadn't seen some pain in the local RE market by around 2009, I would have moved to some place that afforded me a similar lifestyle but one that I could purchase a home, given my priorities.
I own a semi-attached house in Toronto that I purchased last May with my fiancee. I have a few critiques of this article related to the context it places Toronto's housing market, and some of the souped-up language used.
Why compare the Toronto housing bubble with that in Japan or the US? You don't have to look further than Toronto for a direct comparison; [housing prices in Toronto decreased by 40%](http://www.torontocondobubble.com/2013/02/toronto-housing-bu...) between 1989 and 1997.
Second, a bully offer is not an "aggressively high" offer by definition. A bully offer is simply an offer that is submitted before an agreed upon offer date. He offers no evidence to his argument that houses are going for 6-figures above the asking price.
Last, ideally these statistics would have been given in context. Don't pull two historical housing bubbles and then compare their growth to Toronto's. Rather, pull all fast growth housing markets and compare their behaviour to Toronto's. In other words, how often is this growth not a bubble?
I'm 32 years old and consider myself very fortunate to be able to own in Toronto. This will allow my family to live in the city I love. Many of my friends are facing the choice where if they wait and growth continues they'll may be priced out permanently, but if they buy into the market they may be sitting on a bubble. There was tons of bubble talk when we bought, but we were more worried about being priced out.
Why compare the Toronto housing bubble with that in Japan or the US? You don't have to look further than Toronto for a direct comparison; [housing prices in Toronto decreased by 40%](http://www.torontocondobubble.com/2013/02/toronto-housing-bu...) between 1989 and 1997.
Second, a bully offer is not an "aggressively high" offer by definition. A bully offer is simply an offer that is submitted before an agreed upon offer date. He offers no evidence to his argument that houses are going for 6-figures above the asking price.
Last, ideally these statistics would have been given in context. Don't pull two historical housing bubbles and then compare their growth to Toronto's. Rather, pull all fast growth housing markets and compare their behaviour to Toronto's. In other words, how often is this growth not a bubble?
I'm 32 years old and consider myself very fortunate to be able to own in Toronto. This will allow my family to live in the city I love. Many of my friends are facing the choice where if they wait and growth continues they'll may be priced out permanently, but if they buy into the market they may be sitting on a bubble. There was tons of bubble talk when we bought, but we were more worried about being priced out.
> He offers no evidence to his argument that houses are going for 6-figures above the asking price.
This definitely is happening, but it's cherry-picked data. I live in what's considered a desirable area for chinese people (warden and steeles), and the latest sales around my area have mostly been for 6 figures over asking, with some being as high as 200k over asking. But around Unionville (a posh neighbourhood a few mins north), sales have actually been under asking (although, to be fair, the asking prices there are typically >1.5M)
Email me if you want a data source.
This definitely is happening, but it's cherry-picked data. I live in what's considered a desirable area for chinese people (warden and steeles), and the latest sales around my area have mostly been for 6 figures over asking, with some being as high as 200k over asking. But around Unionville (a posh neighbourhood a few mins north), sales have actually been under asking (although, to be fair, the asking prices there are typically >1.5M)
Email me if you want a data source.
Yes, Toronto is probably in a house bubble. Is it in a housing bubble, though? If doing more with less is the goal here (as opposed to less inflation on houses in Toronto) why are people missing the relative affordability of condos and apartments? A large flat structure with lots of mostly unused land (by percent utilization) is horribly inefficient.
A condo costs less to live closer to the interesting things like work and culture and the higher density means the bottleneck resource (land) is utilized much more efficiently. I know there are cultural reasons not to, but to me living in houses is not something we would necessarily ever choose if we started today with a blank slate.
I think a world more along the lines of 80-90% green space with a sprinkling of 100+ storey condos in variable sizes and trim levels would be more livable. I struggle to see why one would want a backyard let alone feel entitled to one.
I think the relative price of land to median income will increase as population does (pretty easy to assert) and that we should instead just build very high density buildings surrounded by green space instead of engaging in zero sum competition for an unused backyard.
We talk so much about AI making web services better as a form of progress but how much of the middle class budget goes to web services? Sure it could make life better in the future but housing density could make life significantly better now.
A condo costs less to live closer to the interesting things like work and culture and the higher density means the bottleneck resource (land) is utilized much more efficiently. I know there are cultural reasons not to, but to me living in houses is not something we would necessarily ever choose if we started today with a blank slate.
I think a world more along the lines of 80-90% green space with a sprinkling of 100+ storey condos in variable sizes and trim levels would be more livable. I struggle to see why one would want a backyard let alone feel entitled to one.
I think the relative price of land to median income will increase as population does (pretty easy to assert) and that we should instead just build very high density buildings surrounded by green space instead of engaging in zero sum competition for an unused backyard.
We talk so much about AI making web services better as a form of progress but how much of the middle class budget goes to web services? Sure it could make life better in the future but housing density could make life significantly better now.
Someone would be dismissed if they said Manhattan, London, Paris, and Rome are in a bubble. It's just accepted that only the rich can buy there.
Toronto's housing situation is called a "bubble" because it's transitioning to a similar, global city status, and a lot of people are having a hard time facing that owning a house there is not meant for them.
I live in High Park. In a one bedroom apartment. I see for sale signs everywhere plastered with 'sold above asking!' labels.
The cold reality in Toronto is that it's just supply and demand. There are a handful of houses, and a handful of people with the resources to buy them and live in this beautiful place.
For the rest, take the GO train.
Toronto's housing situation is called a "bubble" because it's transitioning to a similar, global city status, and a lot of people are having a hard time facing that owning a house there is not meant for them.
I live in High Park. In a one bedroom apartment. I see for sale signs everywhere plastered with 'sold above asking!' labels.
The cold reality in Toronto is that it's just supply and demand. There are a handful of houses, and a handful of people with the resources to buy them and live in this beautiful place.
For the rest, take the GO train.
The difference between Toronto and the oft-cited "global cities" of New York, London, Paris, etc. is that all of those cities have a proportionate number of extremely high-earning or high-wealth individuals to support their astronomical housing costs. Manhattan is expensive, but if you work for Goldman or Google you can still afford it. And you can see that this is true because New York, London and Paris all easily support a huge number of businesses catering to the everyday needs of high-wealth individuals. High-end restaurants, luxury car dealerships, tailors - whatever luxury stuff you can imagine, you will easily find it in London or New York.
That is not the case in Toronto. The issue is not that prices are going up, but that they are going up exponentially in a way that doesn't relate at all to the growth of the local economy. Toronto is a city where an expensive restaurant is one that charges more than $40 for an entree. You will not find $100 cocktails or $500 tasting menus a la Hong Kong or New York in Toronto, because there would be nobody to buy them. You can still get a haircut for under $20 and see people in $300 off-the-rack suits in the Financial District, because the people there earn $70,000 or $80,000 not $800,000 or $8,000,000 as in NYC/London.
Supply and demand are both issues, there is a lot of the latter and too little of the former. But to say that Toronto has transformed into one of the richest cities on Earth simply isn't true in any regard except its housing market. And that is precisely the problem - it has the housing market of London with the salaries of Cleveland.
That is not the case in Toronto. The issue is not that prices are going up, but that they are going up exponentially in a way that doesn't relate at all to the growth of the local economy. Toronto is a city where an expensive restaurant is one that charges more than $40 for an entree. You will not find $100 cocktails or $500 tasting menus a la Hong Kong or New York in Toronto, because there would be nobody to buy them. You can still get a haircut for under $20 and see people in $300 off-the-rack suits in the Financial District, because the people there earn $70,000 or $80,000 not $800,000 or $8,000,000 as in NYC/London.
Supply and demand are both issues, there is a lot of the latter and too little of the former. But to say that Toronto has transformed into one of the richest cities on Earth simply isn't true in any regard except its housing market. And that is precisely the problem - it has the housing market of London with the salaries of Cleveland.
>> in the Financial District, because the people there earn $70,000 or $80,000 not $800,000 or $8,000,000 as in NYC/London.
Uh, that is way, way off. A person making 70-80K/year in Toronto Financial district is like... junior analyst, junior software developer or so. That person is not going to make 10X or 100X as much in NYC or London.
Uh, that is way, way off. A person making 70-80K/year in Toronto Financial district is like... junior analyst, junior software developer or so. That person is not going to make 10X or 100X as much in NYC or London.
My point is that the 10x and 100x jobs simply don't exist in any significant quantity in Toronto, and that's why it's not reasonable to say Toronto's housing market should mirror Manhattan's.
Sure.
But then, Google "Most expensive homes in NYC" (result: $72M-$120M) vs ""Most expensive homes in Toronto" (result $14.8M-$27.5M)
I guess it is clear that most expensive homes in Toronto are not even close to most expensive homes in NYC.
But then, Google "Most expensive homes in NYC" (result: $72M-$120M) vs ""Most expensive homes in Toronto" (result $14.8M-$27.5M)
I guess it is clear that most expensive homes in Toronto are not even close to most expensive homes in NYC.
I think the median would be more relevant, since it seems that's what is shifting upward in Toronto.
OK, can you provide a comparison of median prices growth Toronto vs NYC?
But make sure you also index that with median salary growth TO vs NYC. And also, you need to take into account CAD vs USD over the time period.
So... not easy.
But make sure you also index that with median salary growth TO vs NYC. And also, you need to take into account CAD vs USD over the time period.
So... not easy.
The rocket ship rise of real estate in the GTA and indeed the entire Golden Horseshoe has certainly been bizarre to witness. I live in Hamilton and commute into the GTA for work. We bought our modest 3 bedroom townhome here in 2015. About four months ago our neighbour (who had a basically identical home) sold their unit for 100k higher than we paid. This week, a comparable home was listed for about 180k higher than we paid. So, in under 2 years, the current market value of our house would have seem to appreciated by almost 200k. This is a solid hour commute (by car) from the Toronto core.
So yeah, I'm not too sure whether to be extremely happy or extremely worried..
So yeah, I'm not too sure whether to be extremely happy or extremely worried..
It's difficult for me to judge the significance of that because you report the $ increase instead of %, without a base value.
This article: http://www.cbc.ca/news/canada/toronto/toronto-real-estate-fe...
Claims a 35.4% year over year increase. So that's a hot market.
Claims a 35.4% year over year increase. So that's a hot market.
>you report the $ increase instead of %, without a base value.
Think of the $200k in terms of average annual household income, which is relatable.
Think of the $200k in terms of average annual household income, which is relatable.
The toronto bubble has begun spilling outwards to much of southern ontario as toronto homeowners cash out and move to the smaller cities. Here in Kitchener-Waterloo about 1.5 hrs from toronto house prices leapt 20-30% in the last year, primarily though all cash deals far above asking or assessed value. People flush with toronto cash are over the moon about spending so little on a house (even though it's still an insane figure divorced from reality). And they don't care what shape it's in since they since have more than enough cash leftover to gut the house and redo it.
Foreign money being injected into the process isn't helping, but I think the real problem in Toronto is unbelievably low interest rates and easy access to mortgages. Families are being approved for loans of such absurd proportions that everyone who has entered the real estate market in the last 10 years is house poor. Even small interest rate increases will make payments unaffordable and the whole teetering mess will come down.
Governments have exactly zero incentive to do anything about it, since greater property values means more revenue without the mess of a tax increase. The Ontario land transfer tax isn't high enough to stop anyone from speculating, but it's plenty to cash in on the situation.
Foreign money being injected into the process isn't helping, but I think the real problem in Toronto is unbelievably low interest rates and easy access to mortgages. Families are being approved for loans of such absurd proportions that everyone who has entered the real estate market in the last 10 years is house poor. Even small interest rate increases will make payments unaffordable and the whole teetering mess will come down.
Governments have exactly zero incentive to do anything about it, since greater property values means more revenue without the mess of a tax increase. The Ontario land transfer tax isn't high enough to stop anyone from speculating, but it's plenty to cash in on the situation.
but I think the real problem in Toronto is unbelievably low interest rates and easy access to mortgages.
Think of it as housing prices rising to capture most of the cheap money available on loan. If we see a significant and quick increase in prime rates it could see a real bloodbath develop.
It's weird, former UK colonies don't usually have a problem with land speculation, artificial scarcity and money laundering.
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Seems like a bubble when Asians are buying Canadian properties instead of just buying petroleum or cars etc.
So is Lisbon
Of course it is. The central bank has inflated.
Is there any city that is actually managing to provide enough housing inventory these days? SF, London, NY, Vancouver, Toronto etc - all seem to have low inventories.
Is it simply that there is a multiyear lag before inventory starts coming on stream, or is there some fundamental reason why these larger cities can't provide enough housing?
Is it simply that there is a multiyear lag before inventory starts coming on stream, or is there some fundamental reason why these larger cities can't provide enough housing?
Zoning laws and building heights restrictions and other regulations are to blame. Basically, it's hard to provide enough inventory when doing so in a way that would help (build more buildings and higher ones that can receive more people) is illegal. Why do such regulations exist? Several reasons:
* nepotism, current owners want to keep the inventory low so the price of their property and demand remain high
* nepotism, because owners are afraid tall building will make their city less appealing and lower the price of their property.
* silly zoning laws, because many believe central planning is actually a good thing despite the ridiculous amount of evidence that it doesn't work.
* simple inertia, bad laws and regulations are created all the time but almost never repealed.
I'm probably missing a few other reasons I'm sure others will point them out.
Also something worth saying, owners love to say that adding taller buildings and more buildings and people would kill the spirit of the city. But preventing new buildings has a effect of super high prices that makes it impossible to live in the city, in the end only billionaires can buy homes as investment and don't even live there while the few other building are rented to a few lucky high salary people which creates tension with the rest of the population. So you get a city full of empty houses, super rich people, high salary folks and regular people who are getting kicked out. Real people start living outside the city and its spirit is gone anyway.
* nepotism, current owners want to keep the inventory low so the price of their property and demand remain high
* nepotism, because owners are afraid tall building will make their city less appealing and lower the price of their property.
* silly zoning laws, because many believe central planning is actually a good thing despite the ridiculous amount of evidence that it doesn't work.
* simple inertia, bad laws and regulations are created all the time but almost never repealed.
I'm probably missing a few other reasons I'm sure others will point them out.
Also something worth saying, owners love to say that adding taller buildings and more buildings and people would kill the spirit of the city. But preventing new buildings has a effect of super high prices that makes it impossible to live in the city, in the end only billionaires can buy homes as investment and don't even live there while the few other building are rented to a few lucky high salary people which creates tension with the rest of the population. So you get a city full of empty houses, super rich people, high salary folks and regular people who are getting kicked out. Real people start living outside the city and its spirit is gone anyway.
Eh, if anything Toronto works against this theory. Skyscraper development has been a constant part of Toronto for the last ~ 15 years, to the point that the skyline is unrecognizable from what it looked like in 2000. More skyscrapers are built in Toronto than anywhere else in North America.
current owners want to keep the
inventory low [...] owners are
afraid tall building
In big cities the value of a low-rise house is almost entirely the value of the land on which it sits, and the owners would vastly increase their wealth if the zoning laws were changed so as to allow high-rise construction. Source of information: I own a low-rise house in the center of one of the world's biggest and most expensive cities, and I've tried hard to get building permission for adding a single floor, but that was denied on ground of making my building "out of character" with the neighbouring building.
I suspect that re-zoning is simply not a vote-winner (like e.g. adding a new runway to an airport), so politicians from all sides shy away from it.
"Nepotism" is favoritism shown to family relatives. I think the word you're looking for "NIBMYism".
NIMBYism itself is just a friendlier way of saying "selfish, greedy, and exclusionary".
I'm not sure it's friendlier... I think it's plenty pejorative. Regardless, it's not the same thing as nepotism.
Some planning seems to work. Portland is one of the most planned cities with its border definition yet it remains very livable. Although I suppose the lack of jobs means pressure is reduced.
Some zoning rules could be beneficial. For instance, if cities started mandating 15% of new apartments had to be rentals, or 40% have to be 3 bedrooms, etc. Right now, much of the new housing stock coming online isn't really useful for anyone but single wealthy individuals or speculative investors. And so, without zoning restrictions, we are ending up with cities full of $400,000 empty 1-bedroom condos.
> if cities started mandating 15% of new apartments had to be rentals
Why is it so desirable for your landlord to be a business instead of a private individual who bought a condo? What problem does this solve?
> 40% have to be 3 bedrooms
What is this supposed to do? Yuppy roommates are still going to outbid working-class mom and dad every time. See San Francisco.
Why is it so desirable for your landlord to be a business instead of a private individual who bought a condo? What problem does this solve?
> 40% have to be 3 bedrooms
What is this supposed to do? Yuppy roommates are still going to outbid working-class mom and dad every time. See San Francisco.
>What problem does this solve?
It prevents them from being bought by speculative investors and taken off the market. An alternative solution to the same problem is an empty-home tax, which is being rolled out in Vancouver.
> What is this supposed to do?
Its pretty obvious isn't it? It increases the supply of viable housing options for families.
I'm not trying to say this is the silver bullet - Its just some ideas.
My honest opinion is that Canadian housing should only be able to be owned by Canadian citizens, but that ship sailed long ago.
It prevents them from being bought by speculative investors and taken off the market. An alternative solution to the same problem is an empty-home tax, which is being rolled out in Vancouver.
> What is this supposed to do?
Its pretty obvious isn't it? It increases the supply of viable housing options for families.
I'm not trying to say this is the silver bullet - Its just some ideas.
My honest opinion is that Canadian housing should only be able to be owned by Canadian citizens, but that ship sailed long ago.
we have cities full of $400k empty 1br condos because of zoning regulations on minimum sizes of apartments.
"some zoning rules" is a veeery slippery slope.
"some zoning rules" is a veeery slippery slope.
I don't follow your logic here. Smaller condos obviously cost less in absolute dollars, but they aren't viable options for families. So we are still left at a housing inventory that is great for speculative investors and individuals, and not much else.
I'm not convinced that all of these places are suffering a shortage of accommodation (a shortage of property investment opportunities, certainly).
It's worth remembering that a speculative boom creates extra demand.
As far as I recall it was almost universally accepted that Ireland had a shortage of supply ten years ago. Then the GFC happened and it very quickly became apparent that the shortage was of investment opportunities, not homes.
EDIT:
For some actual data related to this phenomenon, consider the Speculative Vacancies Report[0] published each year by Melbourne group Prosper Australia. Melbourne is, like many major anglosphere cities (London, Sydney, Vancouver, Auckland, etc), suffering something of a property price crisis. Each year Prosper Australia determines which Melbourne properties are vacant using water consumption data provided by the city's water utilities[1].
If you accept the narrative that is usually presented in the media; "prices are high because of a shortage of homes", then you would expect areas with the highest capital gains to be closely correlated with the areas that have the lowest vacancy rates. In actual fact the correlation is unintuitively the other way around - the areas with the highest capital gains have the highest vacancy rates (approaching 30% in the case of Melbourne's Docklands area).
[0] https://www.prosper.org.au/2015/12/09/speculative-vacancies-...
[1] Compare with the method for determining vacancy rates that is typically reported in the media: asking property managers what proportion of properties on their books are currently vacant.
It's worth remembering that a speculative boom creates extra demand.
As far as I recall it was almost universally accepted that Ireland had a shortage of supply ten years ago. Then the GFC happened and it very quickly became apparent that the shortage was of investment opportunities, not homes.
EDIT:
For some actual data related to this phenomenon, consider the Speculative Vacancies Report[0] published each year by Melbourne group Prosper Australia. Melbourne is, like many major anglosphere cities (London, Sydney, Vancouver, Auckland, etc), suffering something of a property price crisis. Each year Prosper Australia determines which Melbourne properties are vacant using water consumption data provided by the city's water utilities[1].
If you accept the narrative that is usually presented in the media; "prices are high because of a shortage of homes", then you would expect areas with the highest capital gains to be closely correlated with the areas that have the lowest vacancy rates. In actual fact the correlation is unintuitively the other way around - the areas with the highest capital gains have the highest vacancy rates (approaching 30% in the case of Melbourne's Docklands area).
[0] https://www.prosper.org.au/2015/12/09/speculative-vacancies-...
[1] Compare with the method for determining vacancy rates that is typically reported in the media: asking property managers what proportion of properties on their books are currently vacant.
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Good info. Just to add onto the speculation as to why so many new places are vacant at Docklands I would say that it has to do with foreign owners who want to park (secure) their money outside of their country. We've never had so many empty properties and at the same time so many homeless people around the city area (there seems to be direct correlation between the two).
Tokyo: http://www.ft.com/cms/s/0/023562e2-54a6-11e6-befd-2fc0c26b3c....
Houston and Dallas: http://time.com/80005/why-texas-is-our-future/ or, somewhat less usefully, http://www.forbes.com/sites/scottbeyer/2016/08/31/why-is-aus....
The big problem is zoning: https://object.cato.org/sites/cato.org/files/serials/files/r... as it was implemented in the '70s: http://www.amazon.com/Zoning-Rules-Economics-Land-Regulation...
By the way, there is much heat in discussions about housing prices and urban development, but very little light and much misunderstanding. A good rule of thumb is simple: If you don't see any reliable sources being cited, there's a good chance that the assertions aren't true or don't encapsulate the most important parts of the supply-demand picture.
Houston and Dallas: http://time.com/80005/why-texas-is-our-future/ or, somewhat less usefully, http://www.forbes.com/sites/scottbeyer/2016/08/31/why-is-aus....
The big problem is zoning: https://object.cato.org/sites/cato.org/files/serials/files/r... as it was implemented in the '70s: http://www.amazon.com/Zoning-Rules-Economics-Land-Regulation...
By the way, there is much heat in discussions about housing prices and urban development, but very little light and much misunderstanding. A good rule of thumb is simple: If you don't see any reliable sources being cited, there's a good chance that the assertions aren't true or don't encapsulate the most important parts of the supply-demand picture.
The real reason Dallas and Houston are growing fast while remaining affordable is because we can sprawl forever.
The Dallas area has no natural boundaries whatsoever; there are no mountains and no coast, nothing to stop development from sprawling out constantly. I was born in 1984, and I've lived in Dallas my entire life. I've seen the suburbs balloon in size like you wouldn't believe; and I'm not just talking population here, but area. The idea that we have continuous suburban development extending all the way north to Prosper (and soon Celina) blows my mind. Suburban development used to peter out in the northern half of Plano, and honestly southern Plano wasn't fully built-out either (there even used to be huge unincorporated enclaves in Plano).
Another is business culture; companies, especially tech companies, have largely chosen to avoid the central business district and instead locate their offices in the edge cities [0] and the boomburbs [1]. Blame historical happenstance: this phenomenon was entirely thanks to two companies who decided in the 1950s to locate their offices in Richardson instead of Dallas. One was Texas Instruments, which was founded as a startup in Richardson (none of the founders were native Texans, oddly enough), and the other was Collins Radio (now Rockwell-Collins), an established company from Iowa who decided to put their Texas campus in Richardson. Between the two of them, anyone in North Texas who wanted into the tech industry worked in Richardson. After that, the founders of TI decided to start a technology-oriented university so they can grow their own talent right there in Richardson. Soon, they handed over the university to the state, who promptly renamed it the University of Texas at Dallas (despite it actually being in Richardson). Since then, UTD has become the most prominent school for engineering and computer science in the entire southwest (when I went there, the phrase "MIT of the southwest" was bandied about a lot), cementing Richardson as the home of the tech industry in North Texas.
I find it interesting; housing prices actually have spiked in the Dallas area thanks to an unexpected surge of demand (I expect prices to go down soon, as new sprawl catches up to the demand), but Richardson is still one of the most affordable cities in the Dallas area, and it's still recognized as being one of the best cities in the US to live. That combination of affordability and quality of life is rare; usually, the two are inversely proportional. You can still find a good house in Richardson for under $300k, and if you look carefully, you can go below $250k.
Now, I don't know too much about Houston, but it's pretty low on natural boundaries. Sure, it's not too far from a coast, but that's only to the south, and right now Houston's sprawling north and west. No mountains, either. I don't know much about how the business culture evolved, though.
[0] https://en.wikipedia.org/wiki/Edge_city
[1] https://en.wikipedia.org/wiki/Boomburb
The Dallas area has no natural boundaries whatsoever; there are no mountains and no coast, nothing to stop development from sprawling out constantly. I was born in 1984, and I've lived in Dallas my entire life. I've seen the suburbs balloon in size like you wouldn't believe; and I'm not just talking population here, but area. The idea that we have continuous suburban development extending all the way north to Prosper (and soon Celina) blows my mind. Suburban development used to peter out in the northern half of Plano, and honestly southern Plano wasn't fully built-out either (there even used to be huge unincorporated enclaves in Plano).
Another is business culture; companies, especially tech companies, have largely chosen to avoid the central business district and instead locate their offices in the edge cities [0] and the boomburbs [1]. Blame historical happenstance: this phenomenon was entirely thanks to two companies who decided in the 1950s to locate their offices in Richardson instead of Dallas. One was Texas Instruments, which was founded as a startup in Richardson (none of the founders were native Texans, oddly enough), and the other was Collins Radio (now Rockwell-Collins), an established company from Iowa who decided to put their Texas campus in Richardson. Between the two of them, anyone in North Texas who wanted into the tech industry worked in Richardson. After that, the founders of TI decided to start a technology-oriented university so they can grow their own talent right there in Richardson. Soon, they handed over the university to the state, who promptly renamed it the University of Texas at Dallas (despite it actually being in Richardson). Since then, UTD has become the most prominent school for engineering and computer science in the entire southwest (when I went there, the phrase "MIT of the southwest" was bandied about a lot), cementing Richardson as the home of the tech industry in North Texas.
I find it interesting; housing prices actually have spiked in the Dallas area thanks to an unexpected surge of demand (I expect prices to go down soon, as new sprawl catches up to the demand), but Richardson is still one of the most affordable cities in the Dallas area, and it's still recognized as being one of the best cities in the US to live. That combination of affordability and quality of life is rare; usually, the two are inversely proportional. You can still find a good house in Richardson for under $300k, and if you look carefully, you can go below $250k.
Now, I don't know too much about Houston, but it's pretty low on natural boundaries. Sure, it's not too far from a coast, but that's only to the south, and right now Houston's sprawling north and west. No mountains, either. I don't know much about how the business culture evolved, though.
[0] https://en.wikipedia.org/wiki/Edge_city
[1] https://en.wikipedia.org/wiki/Boomburb
Toronto and SF are very different cities with different housing problems.
My interpretation is that in SF, NIMBYism and city council members have blocked most efforts to build high-density housing. This means that it forces the prices on available housing up. SF is experiencing a huge influx of people wanting to live there, and there just aren't enough houses. Affordability is a big issue, and probably the biggest, but there are people that are able to afford the high prices. That line won't go on forever though.
Toronto has not shunned construction, far from it. We've built thousands of condo units. The problem is that they were built for investors in mind. Oh sure, if you're single or a couple, you could manage to get by in a 450-600 sf. 1BD 1BA condo, but as soon as you start to have a family, it feels cramped. A 2BR unit helps, and they exist, but there are not that many. Furthermore, our mentality in Toronto is that to raise a family, you must live in a house. That means moving out to suburbia.
A single-family home, townhouse, semi-detached, or detached, is always going to be in high demand, no matter where you are. In Toronto, it's what most of us were raised in. Getting us to move families into condos is a huge undertaking, and it's made impossible by the fact that developers don't want to build these units simply because no one buys them. It's a vicious cycle. So Toronto's issue isn't a lack of construction, it's a lack of foresight.
Finally, all large cities have this issue because of commuting. In Toronto, your options to get to work in the city are:
1) Live downtown, close to work to walk, bus, or subway in
2) Live in suburbia and spend 0.75-1.5 hours each way driving and/or commuting by bus or train
If you try to find more affordable housing by living further from the city, you start hating your life as you commute the 2+ hours in. It's like trying to live in Walnut Creek and work in SF. It can be done, but why?
Housing is a multi-faceted problem that isn't simply solved by just building more houses. You need to adjust people's expectations, habits, and start building viable transportation options to help move people.
My interpretation is that in SF, NIMBYism and city council members have blocked most efforts to build high-density housing. This means that it forces the prices on available housing up. SF is experiencing a huge influx of people wanting to live there, and there just aren't enough houses. Affordability is a big issue, and probably the biggest, but there are people that are able to afford the high prices. That line won't go on forever though.
Toronto has not shunned construction, far from it. We've built thousands of condo units. The problem is that they were built for investors in mind. Oh sure, if you're single or a couple, you could manage to get by in a 450-600 sf. 1BD 1BA condo, but as soon as you start to have a family, it feels cramped. A 2BR unit helps, and they exist, but there are not that many. Furthermore, our mentality in Toronto is that to raise a family, you must live in a house. That means moving out to suburbia.
A single-family home, townhouse, semi-detached, or detached, is always going to be in high demand, no matter where you are. In Toronto, it's what most of us were raised in. Getting us to move families into condos is a huge undertaking, and it's made impossible by the fact that developers don't want to build these units simply because no one buys them. It's a vicious cycle. So Toronto's issue isn't a lack of construction, it's a lack of foresight.
Finally, all large cities have this issue because of commuting. In Toronto, your options to get to work in the city are:
1) Live downtown, close to work to walk, bus, or subway in
2) Live in suburbia and spend 0.75-1.5 hours each way driving and/or commuting by bus or train
If you try to find more affordable housing by living further from the city, you start hating your life as you commute the 2+ hours in. It's like trying to live in Walnut Creek and work in SF. It can be done, but why?
Housing is a multi-faceted problem that isn't simply solved by just building more houses. You need to adjust people's expectations, habits, and start building viable transportation options to help move people.
> If you try to find more affordable housing by living further from the city, you start hating your life as you commute the 2+ hours in. It's like trying to live in Walnut Creek and work in SF. It can be done, but why?
The answer to this is to pressure companies to move their offices out to the suburbs.
One of the reasons why Texas still has affordable housing with good commutes is because a lot of companies have abandoned the traditional central business districts and moved into boomburbs and edge cities.
I live in the burbs, and of the four jobs I've had here, I've commuted farther out into the burbs for three of them (with a 15-20 minute commute by car). The one company I worked for that had offices downtown was the most poorly-run company I've ever worked for; them having offices in a place where no other tech company has offices was the least of my problems with them, but I did think "what tech company in Dallas makes people commute downtown?" when I was working there.
Why are people in Toronto's suburbs not just working in the suburbs? Is it because the businesses there are still stuck in the old model of having all their offices downtown? If so, let's throw huge financial incentives at them to get them to move their offices to the suburbs.
I've been mulling around an idea for a while of placing massive tax penalties on companies that hire people to work in a different county from where they live. Let's make employers pay ten times the income tax on every employee that lives outside the county where they work, and at the same time make it illegal for companies to make a current employee move or discriminate against a potential hire based on where they live. This will make them relocate to where their employees actually live. Or at least get them to switch as much of their workforce to remote as they can. I'm fine either way.
The answer to this is to pressure companies to move their offices out to the suburbs.
One of the reasons why Texas still has affordable housing with good commutes is because a lot of companies have abandoned the traditional central business districts and moved into boomburbs and edge cities.
I live in the burbs, and of the four jobs I've had here, I've commuted farther out into the burbs for three of them (with a 15-20 minute commute by car). The one company I worked for that had offices downtown was the most poorly-run company I've ever worked for; them having offices in a place where no other tech company has offices was the least of my problems with them, but I did think "what tech company in Dallas makes people commute downtown?" when I was working there.
Why are people in Toronto's suburbs not just working in the suburbs? Is it because the businesses there are still stuck in the old model of having all their offices downtown? If so, let's throw huge financial incentives at them to get them to move their offices to the suburbs.
I've been mulling around an idea for a while of placing massive tax penalties on companies that hire people to work in a different county from where they live. Let's make employers pay ten times the income tax on every employee that lives outside the county where they work, and at the same time make it illegal for companies to make a current employee move or discriminate against a potential hire based on where they live. This will make them relocate to where their employees actually live. Or at least get them to switch as much of their workforce to remote as they can. I'm fine either way.
>let's throw huge financial incentives at them to get them to move their offices to the suburbs
Aren't companies already highly incentivized to not locate in the downtown core, simply by the astronomical cost of real-estate downtown?
It seems to make sense that highly specialized industries would locate downtown, because that gives them access to workers from virtually the entire metropolitan area, since all transportation infrastructure points downtown. If a company were to locate in some arbitrary suburb/exurb, sure the people in that area would be knocking down their door to work there, but people cross-town from there probably wouldn't even consider it, since the commute would be even worse (assuming they can't move).
Aren't companies already highly incentivized to not locate in the downtown core, simply by the astronomical cost of real-estate downtown?
It seems to make sense that highly specialized industries would locate downtown, because that gives them access to workers from virtually the entire metropolitan area, since all transportation infrastructure points downtown. If a company were to locate in some arbitrary suburb/exurb, sure the people in that area would be knocking down their door to work there, but people cross-town from there probably wouldn't even consider it, since the commute would be even worse (assuming they can't move).
I don't quite understand the often made claim that there is simultaneously a dearth of 2+ bedroom apartments in Toronto, as well as a huge demand for them, as well as them being unprofitable for developers.
Shouldn't savvy investors be able to see the market opportunity and put money into larger units?
Shouldn't savvy investors be able to see the market opportunity and put money into larger units?
Its a misalignment where you're talking about private citizens having an incredible demand for something that's only sold in a marketplace flooded with financial speculators. One group wants a place to live that's permanently affordable at their income, the other group bought what boils down to a financial option contract on the hopes a greater fool will pay twice as much for the commodity next year. Those groups can't coexist in the same neighborhood or marketplace.
The city I live in only builds 1%er apartments for investors, and construction is absolutely booming for them, which is very nice for those investors. Those are some very nice empty condo towers. The market for the lower 99% percentile income is totally separate and different, and frankly empty. There is no crossover.
Perhaps its like gold, in that its a commodity for investment but once price exceeds practical use levels for connector plating and tooth capping, its no longer relevant to the practical use fields at all, and its price can completely decouple and head to the moon. At some point the concept of owning a box full of air downtown will completely decouple from the concept of a place where humans live. At that point investment prices can and will go infinite with no effect on human housing, solely dependent on national fed rates and international currency exchange rates.
The city I live in only builds 1%er apartments for investors, and construction is absolutely booming for them, which is very nice for those investors. Those are some very nice empty condo towers. The market for the lower 99% percentile income is totally separate and different, and frankly empty. There is no crossover.
Perhaps its like gold, in that its a commodity for investment but once price exceeds practical use levels for connector plating and tooth capping, its no longer relevant to the practical use fields at all, and its price can completely decouple and head to the moon. At some point the concept of owning a box full of air downtown will completely decouple from the concept of a place where humans live. At that point investment prices can and will go infinite with no effect on human housing, solely dependent on national fed rates and international currency exchange rates.
2+ BR apartments rent for less per square foot than 1 BR and studios. If demand for 1 BRs isn't being fully met, then there's no reason to consider building larger apartments.
Surely for a growing city what you need is 1bed apartments, for young workers moving to the city? At least in London 1 or 2bed apartments go very quickly off plan, but 3 and 4 bed apartments are really slow to move.
I can't speak about other places, but the design and construction industry in Vancouver is working flat-out and has been since the slowdown in 2008-2010. My employer (engineering consultant) has a backlog of several months of design work. And if the developers want it sooner? Nothing they can do, because all our competitors are the same way.
And if they somehow got it sooner? Still nothing they can do, because all the supply chain is also backlogged! You need to contract with a rebar installer now if you want to start building your fancy new condo in 2019.
And if they somehow got it sooner? Still nothing they can do, because all the supply chain is also backlogged! You need to contract with a rebar installer now if you want to start building your fancy new condo in 2019.
This is why the "just add more supply" argument is so flimsy. It assumes that cities aren't adding more supply, and it assumes that there are no real physical constraints to growth.
The City of Vancouver raised development fees in order to hire more people to approve development faster. Some will say they're still apparently not adding supply fast enough. Maybe the rate of supply creation isn't the problem here...
The City of Vancouver raised development fees in order to hire more people to approve development faster. Some will say they're still apparently not adding supply fast enough. Maybe the rate of supply creation isn't the problem here...
I think New York is doing great. They're rezoning neighborhoods in Queens and Brooklyn to allow for more high-density housing. One of my favorite little factoids is that Brooklyn had four different tallest buildings in 2016 and they were all residential. And it's working -- average rents in Brooklyn are dropping.
Chicago is doing a pretty good job. In fact, condo values in the downtown area are flat over the last 5 years because of all the new inventory that comes on every 6 months. We could do so much better here, but it's a start.
Chicago is doing a good job. Lots of construction, lots of good returns for investors, and a lot of perks associated with being a large city.
The media focused on the south side murder rate but if you are north of the city there are plenty of safe and wonderful places to live.
The media focused on the south side murder rate but if you are north of the city there are plenty of safe and wonderful places to live.
I think there's lots of cities that are providing "enough" housing inventory, and I'd put Vancouver and Toronto into that category. These cities have more housing starts than ever before. They are building aggressively.
The problem is that of speculative investment driven demand that is detached from local realities. This sort of irrational demand is endless and cities can't possibly be expected to keep up.
At this point this new housing supply is being partially left empty due to absentee owner/investors. It doesn't make sense.
Cities need to keep adding supply, but higher levels of government also have to have a look at new tools to control demand, such as more stringent lending rules and unoccupied housing taxes. In Canada foreign capital is an issue that has fuelled the housing bubble, but lax lending requirements and low residential taxes have also contributed.
The problem is that of speculative investment driven demand that is detached from local realities. This sort of irrational demand is endless and cities can't possibly be expected to keep up.
At this point this new housing supply is being partially left empty due to absentee owner/investors. It doesn't make sense.
Cities need to keep adding supply, but higher levels of government also have to have a look at new tools to control demand, such as more stringent lending rules and unoccupied housing taxes. In Canada foreign capital is an issue that has fuelled the housing bubble, but lax lending requirements and low residential taxes have also contributed.
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Cleveland!
Montréal?
No Montréal is horrible don't go there you won't like it.
Is that to prevent people from gentrifying MTL next, or is that a serious comment? Having visited, I think the sentiment can easily swing either way.
It was totally to prevent gentrification. After Vancouver and Toronto, Montreal is on that same path. Just a bit farther from Asia.
Aren't the French-language laws a powerful barrier against an influx of outsiders?
Definitely. I think Berlin as well, the housing there seems remarkably affordable relative to incomes.
Fiat supply is infinite. Give the banker overlords your labour. Now.
> With stocks hitting new all-time highs almost every day, global bond yields at or near zero, and Canadian home prices at nose-bleed levels, it seems like everything these days is in a bubble.
A photo-sharing app with a market capitalization of 34.69 billion. Yes, it's a bubble.
A photo-sharing app with a market capitalization of 34.69 billion. Yes, it's a bubble.
I've downvoted your comment because the article is referring to a very specific localized housing bubble in Toronto due (potentially) to the behavior of foreign investors.
This is not an article about startup or the US stock-market bubble.
This is not an article about startup or the US stock-market bubble.
The fact that there are bubbles in numerous places isn't irrelevant though.
Actually it is irrelevant. I can find bubbles in Africa and 10 other countries across the world. Screaming "bubbles" in 100 random places, doesn't mean your current place is a bubble. Unless you can justify how those other bubbles are related to the housing situation in the original article, we can't assume they are relevant simply because "there are a lot of bubbles elsewhere".
The 2 issues might be relevant to each other, they might not. But you can't assume there is a relationship between the 2 issues.
The 2 issues might be relevant to each other, they might not. But you can't assume there is a relationship between the 2 issues.
10+ years of excessive quantitative easing and negative interest rates by multiple governments around the world might have a little to do with it.
Do you think $1 trillion++ of new debt per year affects nothing?
Do you think $1 trillion++ of new debt per year affects nothing?
Hey man, nothing personal.
Not saying there aren't negative things going on in the world. Heck, it's probably true what you said, the 2 might be related somehow.
But without pointing out why, I can't just assume the 2 are related, right?
I just bought a house in Toronto last June. In Etobicoke, quite literally on the outskirts of what you can still call Toronto before entering the suburb of Mississauga.
We got extremely lucky with our home purchase. We had an amazing agent that we've known for years, and we had only started looking in February. By April, we had our home purchased, with a June closing. We had one offer fall through, which in hindsight, thank God that it did. This was our first home purchase (and property).
We managed to snag our house for $5k under listing, after offering $10k under listing. We managed to avoid a bidding war, as no other offers came in. When we found this home, we moved quickly, making an offer that night, and giving them 24 hours to respond (we extended it to 48 for goodwill). This was a home that was renovated from top-to-bottom, and as an engineer, I'm happy to say was done properly.
With that context, now you know why I say we got extremely lucky. We worked hard to make our own luck, but I can't control the opportunities presented to us.
Anyway, we've watched many of our new neighbours sell their homes for 6-7% higher than what we paid. One of our neighbours has an open house going on right now and there are dozens of families coming in cars to check it out. It's listed $20k higher than what we paid for our home, and it's likely to go for $50k above that. We've seen the pictures, and it does not compare to the quality of our home.
So yeah, we might be in a bubble, but people are trying to buy. Speculators and investors may be the ones driving up the prices, but I think there really is just that much demand. People want to live here, and they'll find a way to pay for it.
Personally, I'm not too bothered by it since I didn't buy it as an investment. Sure, I do care about my home value, I want to make some money when I sell in 10 years to move to another home. But that's my unfair advantage compared to everyone else: I can live in my home as long as necessary to wait until the market recovers if this bubble were to pop.
We got extremely lucky with our home purchase. We had an amazing agent that we've known for years, and we had only started looking in February. By April, we had our home purchased, with a June closing. We had one offer fall through, which in hindsight, thank God that it did. This was our first home purchase (and property).
We managed to snag our house for $5k under listing, after offering $10k under listing. We managed to avoid a bidding war, as no other offers came in. When we found this home, we moved quickly, making an offer that night, and giving them 24 hours to respond (we extended it to 48 for goodwill). This was a home that was renovated from top-to-bottom, and as an engineer, I'm happy to say was done properly.
With that context, now you know why I say we got extremely lucky. We worked hard to make our own luck, but I can't control the opportunities presented to us.
Anyway, we've watched many of our new neighbours sell their homes for 6-7% higher than what we paid. One of our neighbours has an open house going on right now and there are dozens of families coming in cars to check it out. It's listed $20k higher than what we paid for our home, and it's likely to go for $50k above that. We've seen the pictures, and it does not compare to the quality of our home.
So yeah, we might be in a bubble, but people are trying to buy. Speculators and investors may be the ones driving up the prices, but I think there really is just that much demand. People want to live here, and they'll find a way to pay for it.
Personally, I'm not too bothered by it since I didn't buy it as an investment. Sure, I do care about my home value, I want to make some money when I sell in 10 years to move to another home. But that's my unfair advantage compared to everyone else: I can live in my home as long as necessary to wait until the market recovers if this bubble were to pop.
"Speculators and investors may be the ones driving up the prices, but I think there really is just that much demand. "
Only 5% of buyers need to be speculative. They drive the 'price anchoring' for the rest - including the banks who 'deem the property to have x value'.
That's how bubbles work - a small number of 'price insensitive buyers' create poorly anchored prices which drive everyone else into the mania.
Those 'buyers' are there only because the banks are happy to give them loans using the asset as backing.
You don't need to be bothered by it as long as you are willing to sit on it for 10+ years and can afford to make the payments.
Only 5% of buyers need to be speculative. They drive the 'price anchoring' for the rest - including the banks who 'deem the property to have x value'.
That's how bubbles work - a small number of 'price insensitive buyers' create poorly anchored prices which drive everyone else into the mania.
Those 'buyers' are there only because the banks are happy to give them loans using the asset as backing.
You don't need to be bothered by it as long as you are willing to sit on it for 10+ years and can afford to make the payments.
sigh..take bubble predictions with salt (people are really bad at predicting this stuff) http://greyenlightenment.com/crying-wolf-holding-the-pundits...
You also have to take into account for the fact the Canadian dollar has fallen 25% to the Greenback since 2013
You also have to take into account for the fact the Canadian dollar has fallen 25% to the Greenback since 2013
A fair point, given that blog has been calling for a crash in Toronto since 2010. :D
I've downvoted your comment because the article is referring to a very specific localized housing bubble in Toronto due (potentially) to the behavior of foreign investors.
This is not an article about startup or the US stock-market bubble.
Addressing your actual comment by paraphrasing Burton Malkiel: "The market can invest irrationally for a surprisingly long period of time."
This is not an article about startup or the US stock-market bubble.
Addressing your actual comment by paraphrasing Burton Malkiel: "The market can invest irrationally for a surprisingly long period of time."
Everyone always uses that quotation to make unfalsifiable claims. Either the prediction is true or the market is irrational.
So then why the house prices in many cities in Canada went down in last couple of years except Toronto and Vancouver ?
Watching Toronto's market explode is like watching a horror movie that I saw take place in Vancouver over the last two years. The politicians, press, and real estate industry are spinning the same stories their counterparts in Vancouver did without providing an even plausible explanation for the rocket ship growth.
The key issue with Vancouver's market is that prices have become decoupled from local incomes. The same thing is happening in Toronto.
In Vancouver, the main driver of decoupled home prices is foreign investment dollars, mainly from China. I suspect the same is true in Toronto because prices there started exploding after Vancouver instituted a 15% tax on foreign buyers in August 2016.
If you're interested in understanding the key drivers of the Vancouver real estate market, this paper by a SFU professor summarizes the data, provides a sensible solution, and convincingly refutes the tropes that are often provided as reasoning for the market's explosion:
http://www.sfu.ca/content/dam/sfu/mpp/pdfs/Vancouver's%20Hou...
1 - where unaffordable is defined as the ratio of median home price to median income.