Wednesday, 21 October 2015

Toronto Condo Bubble Still Hasn't Popped

Just because the bubble hasn't popped yet doesn't mean that the bubble isn't real. For the past two years I've been writing articles on this blog about the subject, presenting detailed analysis of my own and of others.

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.

Wednesday, 4 March 2015

And then there's Richmond Hill

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%

Sunday, 1 February 2015

Will 2015 be the year the Toronto Condo Bubble pops?

Who knows when Canada's housing bubble will burst. I've been writing this blog for over two years now and still nothing. Prices keep going up. But just because the bubble didn't burst yet doesn't mean that there isn't a bubble or that it won't ever burst.

Over the past two years things have gotten even more dramatic. See the quote at the beginning of this post and then take a look at the chart below.

toronto median wave vs home prices graphs

Oliver dismissing the idea that low interest rates spur people to buy homes they cannot afford is absurd. Torontonians make roughly the same amount of money they did two decades ago yet homes cost twice as much. Of course it has nothing to do with the low interest rates. 

"I’ve said again and again we don’t think there’s a bubble" said the Finance Minister. Notice the word "think". It's not that they actually think that there's no housing bubble in Canada, they're simply stating their position. 

Of course there is no bubble...

canada housing bubble

But what about the Toronto condo/housing market? What's the latest? Below I've updated most of my graphs with a little added commentary. 

Tuesday, 24 June 2014

No Housing Bubble in Canada?

"The advice we have received is that we are not in a bubble," told the Finance Minister to reporters

I wonder whose advice that was? Was it from the real estate cartel (CREA), was it from the banks or was it from the CMHC? What was that advice based on? The fact that Joe Oliver did not say anything else beyond 'receiving the advice' tells me that he is hiding something. 

Remember that just a year ago Ex-Finance Minister Jim Flaherty said the following

“I’m pleased in particular that the condo market in big cities has fallen back. I’m also pleased with some other moderation in new house construction and in demand for mortgages. I think these are healthy developments because I think we were beginning to see some indications of the beginning of a bubble.”

So a year ago Flaherty saw early indications of a bubble and he was glad that things were slowing down.

But wait a second, things didn't fall back.

Since that comment was made condo prices went up by 7.6% in the City of Toronto while detached dwellings went up by 9.2%. Overall in Canada the average home price rose by over 7%. That's right, there is no housing bubble in Canada - keep calm and carry on.

canada housing bubble,

Sunday, 22 June 2014

Who Are The Real Estate Doomers?

canada housing bubble, canada housing doom
A typical doomer is in his 30's, has a household income of $150,800 on average, is likely to be a renter and expects home prices to drop north of 20% down the road.

Not what you expected? Then keep reading.

A few days back Garth Turner asked few questions in his Who Are You post: "(a) rent or own, (b) family income, (c) age and (d) your outlook for real estate over the next one or two years."

Since Mr. Turner made it clear that he won't be producing any graphs based on the generated data I decided to do it myself. Below is what I got.


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