Garth Turner - Real Estate in Canada

[wisdom]

http://www.cbc.ca/news/canada/british-columbia/richmond-bans-airbnb-1.3930551

 

A suburb of Vancouver bans short term rentals to free up available stock.

[bbarberayr]

FWIW - Another American Hedge Fund guy looking to short Canada Real Estate:

https://betterdwelling.com/city/toronto/marc-cohodes-short-canadian-real-estate/

[rb]

FWIW - Another American Hedge Fund guy looking to short Canada Real Estate:

https://betterdwelling.com/city/toronto/marc-cohodes-short-canadian-real-estate/

Nah, same guy. He's been doing this for a while

[wisdom]

^{http://www.cknw.com/2017/01/29/267389/}

 

^{The average sale price is 28% lower now. Though people are still holding on at this time and still in denial. Things should get interesting this fall if the market doesn't bounce back. Acceptance may set in}

[TBW]

At that price drop all flippers and investors have to be terrified. Any panic from that group? They should be first inline to head for the exits

[alpha]

Realtors predicting 10-16% rise in average house price in Greater Toronto Area this year:

http://www.theglobeandmail.com/real-estate/toronto/toronto-realtors-predict-another-price-surge-warn-against-foreign-buyer-tax/article33844568/

 

BC/Vancouver is creating exceptions for it's foreign buyer tax:

http://www.cbc.ca/news/canada/british-columbia/foreign-buyers-tax-exempt-1.3957470

 

 

[nodnub]

^{http://www.cknw.com/2017/01/29/267389/}

 

^{The average sale price is 28% lower now. Though people are still holding on at this time and still in denial. Things should get interesting this fall if the market doesn't bounce back. Acceptance may set in}

 

These kind of articles are not very useful.  They rarely look at any of the actual data and draw any provable conclusions.

 

If you look at the Zolo website you can see that the number of Detached Properties Sold in Jan 6-Feb3 is down 73%.  This could completely account for the lower average sales price. (fewer sales of expensive properties).  The number of townhouses and condos sold are down 61%.

 

Perhaps the author has no understanding of simple mathematics or perhaps they are just writing whatever is "popular" to get eyeballs on their crappy article.

 

 

[Liberty]

The new census gives new data about population growth in Toronto:

 

http://www.macleans.ca/economy/economicanalysis/population-growth-isnt-driving-toronto-house-prices-so-what-is/

[Liberty]

http://www.theglobeandmail.com/report-on-business/top-business-stories/drop-the-pretence-toronto-region-in-housing-bubble-bmo-warns/article34027681/

 

 

https://twitter.com/RenJohnston/status/832279432320659457

[longtermdave]

http://www.calculatedriskblog.com/2017/02/update-on-lack-of-chinese-residential.html

[Liberty]

http://www.bnn.ca/canada-s-financial-watchdog-warns-lenders-against-bundled-mortgage-loans-1.679621

[Liberty]

This is normal...

 

 

 

 

 

 

And the best for last:

 

[scorpioncapital]

It's most certainly the land, those houses will be demolished and new ones built. All these folks posting a decrepit picture and showing a large price tag maybe don't understand the game. Having said that, I don't think Canada is a desirable place to live, but for those who think it is, it's the land they're paying for.

[Liberty]

It's not the land in every case, the whole city isn't being demolished. And buying these tiny parcels of land at these prices and then spending a boatload more to build doesn't seem more financially sane to me.

[Peregrine]

It's not the land in every case, the whole city isn't being demolished. And buying these tiny parcels of land at these prices and then spending a boatload more to build doesn't seem more financially sane to me.

 

It's the lot that ultimately matters, not the dwelling itself. For example, there are plenty of shoddy looking homes in my area that have recently been sold for likely $million+ prices, but they are being taken down to build condos. Those shoddy-looking homes happen to sit right next to a main subway stop. Taking out a couple of shabby homes for a few million dollars each to build a 200 unit condo selling at average prices of $400-500K/unit is a slam dunk for developers - if they can get the requisite permitting.

[scorpioncapital]

One can even argue it's low pollution licensing fee :) If you look at numbeo, you'd be hard pressed to find major countries/cities with moderately low pollution ratings as Canada and Europe.

 

[Liberty]

It's not the land in every case, the whole city isn't being demolished. And buying these tiny parcels of land at these prices and then spending a boatload more to build doesn't seem more financially sane to me.

 

It's the lot that ultimately matters, not the dwelling itself. For example, there are plenty of shoddy looking homes in my area that have recently been sold for likely $million+ prices, but they are being taken down to build condos. Those shoddy-looking homes happen to sit right next to a main subway stop. Taking out a couple of shabby homes for a few million dollars each to build a 200 unit condo selling at average prices of $400-500K/unit is a slam dunk for developers - if they can get the requisite permitting.

 

Sometimes that's the case, but prices for houses and condos across the whole region are crazy and it's not condo developers and chinese princelings buying everything. Many of the houses you see are in residential neighborhoods full of other tiny houses on tiny lots, nothing much above 1-2 stories on the horizon. I doubt the whole neighborhood is getting razed and massive towers are being built there in every case.

[Peregrine]

It's not the land in every case, the whole city isn't being demolished. And buying these tiny parcels of land at these prices and then spending a boatload more to build doesn't seem more financially sane to me.

 

It's the lot that ultimately matters, not the dwelling itself. For example, there are plenty of shoddy looking homes in my area that have recently been sold for likely $million+ prices, but they are being taken down to build condos. Those shoddy-looking homes happen to sit right next to a main subway stop. Taking out a couple of shabby homes for a few million dollars each to build a 200 unit condo selling at average prices of $400-500K/unit is a slam dunk for developers - if they can get the requisite permitting.

 

Sometimes that's the case, but prices for houses and condos across the whole region are crazy and it's not condo developers and chinese princelings buying everything. Many of the houses you see are in residential neighborhoods full of other tiny houses on tiny lots, nothing much above 1-2 stories on the horizon. I doubt the whole neighborhood is getting razed and massive towers are being built there in every case.

 

I would also say that the supply of single family detached homes in the city area is practically non-existent. So to satisfy the demand of an ever-growing city, condos and townhouses need to be built. Some parts of Toronto are trending more like Manhattan where those who own detached homes are the ultra-rich. New home-buyers in the Toronto region need to get used to the idea of living in a condo.

[jeffmori7]

It's not the land in every case, the whole city isn't being demolished. And buying these tiny parcels of land at these prices and then spending a boatload more to build doesn't seem more financially sane to me.

 

It's the lot that ultimately matters, not the dwelling itself. For example, there are plenty of shoddy looking homes in my area that have recently been sold for likely $million+ prices, but they are being taken down to build condos. Those shoddy-looking homes happen to sit right next to a main subway stop. Taking out a couple of shabby homes for a few million dollars each to build a 200 unit condo selling at average prices of $400-500K/unit is a slam dunk for developers - if they can get the requisite permitting.

 

Sometimes that's the case, but prices for houses and condos across the whole region are crazy and it's not condo developers and chinese princelings buying everything. Many of the houses you see are in residential neighborhoods full of other tiny houses on tiny lots, nothing much above 1-2 stories on the horizon. I doubt the whole neighborhood is getting razed and massive towers are being built there in every case.

 

At a smaller scale, where my parents live in Quebec city, they are taking down a lot of old bungalows that have been renovated in years and replacing them with townhouse, duplex, triplex, etc. Density at a more human scale, not a bad idea.

 

I'm not saying it is justifying the prices across the board, but it can be the case in some specific markets.

[Liberty]

I understand that growing cities have more pressure on pricing, and that old buildings get torn down over time to be replaced by new ones. I just think that there are many places in the world where the same factors are present yet prices are nowhere near what they are in Toronto and Vancouver.

[physdude]

I understand that growing cities have more pressure on pricing, and that old buildings get torn down over time to be replaced by new ones. I just think that there are many places in the world where the same factors are present yet prices are nowhere near what they are in Toronto and Vancouver.

 

I think a lot of demand is coming from Asia where those prices don't look all that high. The prices I saw in the Twitter feed, while quite high by North American standards, are quite cheap compared to HK or Singapore (and many tier 1 Chinese cities are not far behind).  Property taxes in major Asian cities are, however, low or even non-existent so the comparison is more complicated than that but it is entirely possible that the prices are just re-valuing to more reasonable levels.

[Liberty]

I understand that growing cities have more pressure on pricing, and that old buildings get torn down over time to be replaced by new ones. I just think that there are many places in the world where the same factors are present yet prices are nowhere near what they are in Toronto and Vancouver.

 

I think a lot of demand is coming from Asia where those prices don't look all that high. The prices I saw in the Twitter feed, while quite high by North American standards, are quite cheap compared to HK or Singapore (and many tier 1 Chinese cities are not far behind).  Property taxes in major Asian cities are, however, low or even non-existent so the comparison is more complicated than that but it is entirely possible that the prices are just re-valuing to more reasonable levels.

 

What percentage of houses in Toronto would you estimate are bought by wealthy Chinese or Singaporean nationals?

[gary17]

Liberty

IMO, it's not about if substantial amount of RE is driven by foreign money, but if whatever amount that is - even if small - is having an impact on how other market participants will value the asset. 

it's just like we have an efficient market where for example Popeyes was valued at X  , and then 3G came along and said we are willing to pay Y , and now the market agrees and the price jumped, as well as other similar assets in the industry. 

 

Also, RE is very illiquid , not like stocks, and it also happens to be people's principal residence a lot of times, so a lot of effort is put in by the seller to not easily let the asset go cheaply unless it's a very unique circumstance (divorce, estate sale, etc). 

 

We are seeing a correction now in Vancouver, but i just don't expect to see the correction we saw south the boarder a few years ago.  And even if we did, we know over the long time the asset will be worth more.  It's in WEB's letter -  don't time the market. if it's something you want to use for a long time - 10 , 20 or 30 years, you might as well be in now.  The relatively low rate also makes RE not expensive -  while prices may have gone up significantly in Canadian dollar terms, it hasn't really gone up that much in US$ terms which is what international buyers are basing the valuation on.

 

 

 

Gary

 

[gary17]

The other aspect is paying rent that is just gone and not into the equities is just a crazy idea for me 

 

if i rent in Vancouver the rent is $ 2500 for two bedroom

i can pay $700K mortgage with that, an amount of that goes into principal repayment and then i get to participate in future up side - i'm not flipping it tomorrow, but if i want to retire 15 years from now and move to the suburbs, it'll be good , and all that capital gain is tax-free.    why leave money on the table by renting ?    if you look at the history, major cities in Canada, US and many developed countries just tend to worth more over time than the less-developed 

Gary

[RichardGibbons]

if i rent in Vancouver the rent is $ 2500 for two bedroom

i can pay $700K mortgage with that, an amount of that goes into principal repayment and then i get to participate in future up side - i'm not flipping it tomorrow, but if i want to retire 15 years from now and move to the suburbs, it'll be good , and all that capital gain is tax-free.    why leave money on the table by renting ?    if you look at the history, major cities in Canada, US and many developed countries just tend to worth more over time than the less-developed 

 

Because rent for a 2 bedroom in Vancouver is less than $2,500, and because the cost of that condo isn't just the interest on the mortgage, but rather includes things like depreciation, insurance, and taxes. What's more, that $2,500 mortgage cost isn't fixed, but rather can increase dramatically with interest rates at the same time as the value of the assets decline. Plus, big, costly things can go wrong.  The risk of owning is far higher than renting, and ignoring those costs is a mistake.

 

So, if you actually care about the math, the math on renting in Vancouver is far superior to buying right now--I'm grateful that my landlord subsidizes my living expenses by hundreds of dollars a month (my two bedroom is $1,600).