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Toronto Housing Bubble- Why you shouldn't listen to the Fear-mongerers!

Marty Gordon

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Ok so at this point, it's a daily assertion about the Toronto real estate bubble. There's no shortage of articles being pumped out about how we are about to be devastated in to bankruptcy. Well to all of the fear mongering folks, I have my own views and I'm sure that many of you full time investors might also agree with me. The reality is, if you have a good investment strategy, you needn't worry about whether or not the market is ACTUALLY in a bubble, and if it bursts....it's not a concern.
Watch to see why:
 

Colin Forrest

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I have a number of close friends that have been calling for a housing correction since we moved to BC in 2009. Their mantra has, and continues to be 'this is the time to rent!' I'm really glad we ignored the sage advise. When I hear about Toronto and Vancouver markets correcting 60, even 80%, I wonder why these fear mongers seem to be 'licking their lips' like they hope that their predictions come true. I think I know the reason because I've seen this type of housing correction first hand when I lived in Hong Kong during the Asian Financial Crisis. These doom and gloomers are the very people that want blood on the streets so that they can use their wealth to accumulate more properties at an even faster rate. No one in Hong Kong that was cash rich worried about the housing crash because they could purchase assets that they knew would go back up at bargain basement prices - and they did. Does anyone think for a moment that Micheal O'Leary isn't secretly wishing for a housing crash so that he can take advantage of the low prices? I often argue that if prices went down to levels of early 1990 in Vancouver it wouldn't stay there for long as inventory would be swept up in a New York minute by those with deep pockets, leaving those with less deep pockets in the exact same place as they are today - renting. Yes, some less wealthy would get in but not nearly by the numbers most think. A housing bubble may happen but it will need a significant outside event to trigger it.
 

Thomas Beyer

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Unclear why people think there is a bubble in Vancouver or GTA.

We have 11 or so factors converging, resulting in high demand and thus, high prices!

1) Interest rates are low low LOW .. and they will not go anywhere. They might head lower, like in Europe. A Canada 5 year bond is 1%, and a 10 year bond is a whooping 1.5%. Prime rate is at 0.5%.Yes, they may rise 50% .. to 1.5% and thus 5 year mortgages from 2.7 to 3.2% .. woohoo !

2) Baby boomers working longer, living longer and not moving in very large numbers to areas outside of MetroVan or GTA. Yes some folks move to the Okanagon, Sunshine Coast or Vancouver Island from Vancouver, or Barrie, Muskoka, PEI or Kingston, but it is not a very large percentage.

3) Baby boomers kids – the Gen Y folks now in their late 20’s and early 30’s – want to buy, and with mom’s and dad’s bank are flush with downpayment cash

4) Supply is non-existent except condos and far away tiny homes or townhouses. Almost no single family houses (SFHs) are developed anywhere in the MetroVan or Toronto area. Only further out, outside the greenbelt in GTA and Fraser Valley or Langely in MetroVan. A few hundred maybe. Condos remain affordable further out appeal to some but not to folks that wish to stay near the water or close to subways or downtown.

5) No more land is created due to pressure by radical environmentalists, green movement, sheer laziness and a political class unwilling to make a bold move to create more land, say in Boundary Bay, off Delta in the Fraser River delta, off UBC even or up the mountains, say Indian Arm. GTA does some Don Lands and water front redevelopment and that is a great area to buy I think as the prices are still much lower than downtown. Check out some links here on the West Don Lands, very close to downtown Toronto

6) Property gains are untaxed if it is a personal residence, unlike any other investment that is taxed at at least capital gains rates (around 22-25% tax) or as investment income (close to 50% tax)

7) No inheritance tax in Canada, allowing cash to be gifted down the line

8) 1% or so immigration into Canada, many with cash, and the first thing folks want to acquire is a home. A higher concentration of immigrants arrive in MetroVan or GTA than say, Saskatoon, Calgary, Montreal or Yukon where housing is cheaper but climate is not as desirable.

9) foreign money is arriving in record numbers from unstable regions of the world with autocratic governments, corruption or mere undesirability.

10) even new condo supply is getting more expensive due to more and more rules, levies or surcharges heaped onto developers. Add land scarcity and condo prices will continue to climb, albeit not as much as SFH.

11) This is not restricted to GTA or Vancouver, we see high prices in many desirable cities with decent climates and jobs: Boston, New York, Munich, Vienna, Singapore, Sydney, Auckland, Berlin, Paris, London, etc .. and $800-1000/ sq ft is not all that high compared to these cities.

Yes, we may get a speculation tax to take away some element of popular gambling with housing, and yes we may get a surcharge tax on foreigners in GTA like in BC (a good idea in my opinion), but that still leaves 9 - 10 reasons why demand is high and prices will not drop.
 
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BREAKRZ

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Toronto is booming. Nuff said

Yes it's booming but buy today and you might get burnt tomorrow. Foreign buyers tax like BC could drop your newly acquired investment 10 points. Go ahead and pull the trigger.
 

RELover

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Do you really believe that a foreign buyers tax will "correct". the market?

Maybe it will slow down the growth, but to say market will decrease 10%. Currently there are like 1000 ppl ready to buy 100 homes, let's say out of 1000 there are 100 foreign investors, there are still 900 who are ready to snap up the 100 properties. Aybe the 30% will become 10-15%, which is pretty decent. But who knows what else they might do and that makes me nervous

Disclaimer: I have been a watcher of real estate since 2008. I just got started investing four years ago I.
 

BREAKRZ

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Foreign tax, increase in rates, regulations on foreign investors from their own government and of course World War 3 just started. You can't buy in toronto and cash flow anymore.
 

Thomas Beyer

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Taxation changes can have a substantial cooling effect on the market, as did happen in Vancouver with the 15% foreigner tax, the filing requirements to state residency of seller, the increased land transfer tax to 3% over $2M and the reporting requirements with CRA.

Of course SFH are in short supply in most cities and as such you will see a disconnect between house and condo prices.

The current frenzy is in part to get in before the likely ( or merely possible) foreigners tax kicks in in GTA.
 

Rickson9

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Like the title of this thread: Don't listen to the fear. Toronto is a world-class city with a short supply of real estate and heavy demand. The economy is diversified and strong, and unemployment is low. Toronto is booming and will continue to boom as one-industry cities wither.
 

Marty Gordon

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Glad to see some good comments in this thread. It's insane to see the difference between RE investor's comments, or if you go to the video page and look at the comments there. Many Nay-Sayers, and Kevin O'Leary fans just have nothing positive or valuable to contribute in the comments and are there for the sole purpose of trolling the crap out of me and Amanda. Calling me everything from "clown" to "steroid addict"<- lol.... glad to see the REAL investors on this forum have valid points from all directions. Much appreciated guys!
Cheers
 

Marty Gordon

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This is a good time to bump this post. Any thoughts on the gta market today vs 6 months ago? We never saw the crash as many self-proclaimed experts thought we would.

Sent from my SM-G920W8 using myREINspace mobile app
 

Matt Crowley

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If you want 2 - 3% cap rates lower than the cost of debt, Toronto makes great sense.

I'd much rather invest in an asset where you can improve NOI, drive values up in market that still has some legs to go up higher. It's a value play and I think a lot safer, as the value creation is very evident.

Cap rates are going to rise in Toronto and Vancouver, are rents going to keep up? The assets trading are pricing in economic perfection in my opinion.
 

Thomas Beyer

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Condo presales may make good sense just like they do in Vancouver. Tie up an $800,000 condo with $200,000 for 2-3 yrs then sell it for $1M+ when finished. It doesn’t make sense to hold at these prices as rents are too low. Many firms in Vancouver now disallow assignments do this may happen in GTA too. As such you must be able to close, then re-sell.

Amid Vancouver’s condo inventory at an all time low prices jumped 17% Y/Y & huge pre-sales lineups http://vancitycondoguide.com/vancouver-condo-october-2017/
 
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