View Single Post
      11-17-2010, 07:05 PM   #26
aspiring335
Major
 
aspiring335's Avatar
 
Drives: 2010 E91 6MT
Join Date: May 2006
Location: Toronto, Canada

Posts: 1,445
iTrader: (0)

Garage List
2006 330i  [0.00]
I don't think I agree. The relevant stats from NYC are the prices BEFORE real estate crashed not after when no-one wanted to buy. I have no doubt that people buying real estate in NYC post-crash made out like gangbusters. But at the same time, the collapse of real estate wiped out millions of people who had bought near the top of the bubble. The reason there were prices that later turned out to be bargains was because people were afraid of real estate and didn't want to buy.

It's only the persistent availability of cheap credit throughout the 2000s that has really juiced the housing market, despite all the myths about it being a product of wealthy foreign investors, etc. We still have cheap credit, but not for ever, and we've also pulled a huge amount of demand forward from the future in Canada in a pretty desperate effort to stave off more economic hardship.

My concern isn't for the savvy real estate investor, but for the poor sap who buys with 5% down, gets cashback to recoup that 5% and has a 35-year amortization. Despite the myth of Canada's conservatism and restraint, these types of buyers make a very large number of those buying new homes and condos. Prices don't even have to fall to put them underwater -- closing costs if they need to sell will do that.

Our banks are in good shape, yes, but partly because all of the risk in the mortgage market has been offloaded to the taxpayer via CMHC. Think we don't have sub-prime in Canada? Well to me, mortgages that need to be underwritten by a federal agency because the buyer has no actual money sound pretty sub-prime and they're only viable if the value of the asset increases rapidly forever.

Does this mean a housing collapse is likely in Canada? I doubt it, but I would be comfortable predicting at least a 15% decline in prices over the next 18-24 months, then at the very least three years of pretty stagnant prices.

It's not different in Toronto, different in Vancouver, different in Calgary, etc. All these markets are driven by basically the same variables, and generally these variables are international and national, not local. A single family house in Kitsilano or Rosedale will probably fare a lot better than a condo in Brampton or Richmond, but history shows that nowhere is immune to these kinds of cycles.

Quote:
Originally Posted by BavFan_08 View Post
Aspiring made some good points but consider this example:

Manhattan.

In the early 90s, properties in Manhattan and the rest of NYC were worthless.

For those youn'gns out there, you may not know this but a 1 bedroom apartment near Times Square sold for $98,000 (in 1990-1991) This was after Real Estate CRASHED both in Canada and the USA. Donald Trump almost went bankrupt? If you do not believe me, check out his autobiography.

Today, That same apartment/condo is over 30-35 years old and is worth nearly $1,000,000. (Even with the slow down in the US economy.)

Why? It's New York City, and the demand out lasts the supply. Simple economics.

Condo investors in Toronto, most of the smart ones at least, are banking on the long term.

IMHO, Short-term flipping has indeed slowed down for now. For a lot of people though condo investing is for the long term.

Also, in Toronto, condo prices have already dropped. In fact new developments are offering lower prices because even the developers realize that there are to many units out there. However, eventually the Condo boom will end. Either we as consumers will stop buying, Toronto becomes the crappiest city to live in or the builders just run out of room to build. The best scenario is the NYC example. No where to build, lots of jobs/opportunity in Toronto, increased immigration. High Demand, Low Supply makes the condo investors of today winners.



Also, Vancouver has historically always been more expensive. Even in the 80s and 90s. The supply has never kept up with demand. In downtown Vancouver, the supply will always be low because from what I can tell (after visiting there so many friggn times) there is hardly any more room to build in the city. Vancouverites, please correct me....

Also, another thing about Vancouver...the city itself doesn't have a big population. The actual City of Vancouver's population is less then Mississaugas. What makes Vancouver the 2nd or 3rd populated city is the surrounding areas (i.e. North Van, West Van, Richmond, Burnaby, Couquitlam (sp?) etc etc.)

The above is based on my research, opinions. if you disagree you disagree or please correct me on anything you feel is incorrect.
__________________
2010 E91 328i xdrive. 6MT, Sports, Premium Sound, Navigation

2010 VW Touareg TDI, 2006 E90 330i, 2004 E46 325iT, 2003 MINI Cooper S (Retired)
aspiring335 is offline   Canada
0
Reply With Quote