Wednesday, 11 January 2017
Vice has recently picked up the following chart with regard to Canada's housing market.
Housing prices in the US with regard to income were still cheaper during the peak of the bubble than they were in Canada in 2015. In 2007 the home price to income ratio was 12.5x in the US and 16x in Canada in 2015.
Canadians also withdraw more money from their homes than the Americans ever did. Home equity line of credit withdrawals accounted for 12% of GDP in Canada in 2015 while the same number was 4.5% in the US in 2007. Scary.
Labels: canada housing bubble
Tuesday, 3 January 2017
Is Canadian real estate going to crash in 2017? According to Motley Fool the answer is yes. The big reason for the potential crash, Motley says, is the fact that demand is drying up from buyers. Well, demand for housing was up and down for the past decade, so I don't really buy their reason.
Furthermore, Motley Fool writes that new mortgage rules will have a great impact on already stretched first time buyers. Hm, really? Mortgage rules have been tightened up before. Not once, not twice, but many many times!
Finally, Motley mentions the possibility of mortgage rates going up. While true, people have been saying this since 2011! Who knows when the rates are going to go up by a substantial amount that would shock the waves through the housing market.
Anyway, why am I writing all of this? Simply to tell you that I have no idea whether the market is going to crash this year or not - I really don't!
The Toronto housing market went up over 20% last year. Interestingly prices tend to rises at the fastest rate just before the peak of the bubble. Is this a sign? I don't know. We can have another 20% increase this year, I don't know.
In any case Happy 2017 everyone!
Monday, 5 September 2016
Wednesday, 21 October 2015
Yet nothing happened. Prices didn't fall. In fact, they went up. During the past two years alone, condos in the city went up by 15% and detached homes increased by 23%. (comparing September 2013 vs September 2015).
You may justify detached homes going up more in price than condos due to the limited amount being built. For instance only 11 new low rise homes were sold in the 416 in August 2015 while 660 high rise units were sold.
Fine, limited new inventory of low rise units justifies the 8% difference in price between detached units vs condo units in the 416.
But why did condos go up by 15% ? Is it because we make more money? Is it the immigrants? Or maybe it's the green belt?
Or maybe it's just because real estate prices always go up!
Hmm, maybe I should jump in the market and buy. The average price of a condo in the city of Toronto was $418,603 in September. Five percent down would be under $21,000. But hey, all it takes is for prices to go down by 5% or more to wipe out my down payment. I would be down $100,000 if prices were to drop 23%.
Of course prices won't go down 20% overnight as it may take a decade or more. Bubbles tend to be remarkably symmetrical.
And if I were to choose to live in that shoe box for next 10 years, not only would my properties go down, but maintenance costs would go up, and never mind the opportunity cost of investing my original down payment somewhere else.
Point being, I am a renter, and will continue to be for some time.
Till next time.
Labels: toronto condo bubble
Wednesday, 4 March 2015
Is there a housing bubble in Richmond Hill, a suburb north of Toronto? You tell me. Compare the definition above to the graph below.
Meanwhile in the City of Toronto, detached home prices went up by almost 9% to $1,040,018 in February 2015 compared to a year earlier. Toronto condos went down by 1%.
Labels: Toronto Housing Bubble