# Kevin O'Leary- Why is he wrong about real estate? Fear mongering



## Marty Gordon (Nov 5, 2016)

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.


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## andrewf (Mar 1, 2010)

If house prices continue to appreciate at a 'slight' slowdown of 15% a year, the average Toronto house will be worth $16 million in 20 years. Does that seem likely to you?

The idea of just leveraging houses into more houses works as long as you are confident you can refinance when your mortgages come up for renewal. If you can't, you will be wiped out.


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## Marty Gordon (Nov 5, 2016)

andrewf said:


> If house prices continue to appreciate at a 'slight' slowdown of 15% a year, the average Toronto house will be worth $16 million in 20 years. Does that seem likely to you?
> 
> The idea of just leveraging houses into more houses works as long as you are confident you can refinance when your mortgages come up for renewal. If you can't, you will be wiped out.


 Not sure if you actually watched the video or not. Although leveraging is a great strategy, which I utilize, that was not mentioned in the video. Obviously you have to make sure you are investing in properties that fit the criteria I mentioned in the video.


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## Nelley (Aug 14, 2016)

andrewf said:


> If house prices continue to appreciate at a 'slight' slowdown of 15% a year, the average Toronto house will be worth $16 million in 20 years. Does that seem likely to you?
> 
> The idea of just leveraging houses into more houses works as long as you are confident you can refinance when your mortgages come up for renewal. If you can't, you will be wiped out.


For the GTA-at the price point of about 7 million and above there has been very little movement over the last 5-7 years. This is a different market than Vancouver, where very expensive properties have been in demand-in the GTA it is more debt driven-so the greatest % increases have been at the bottom end.


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## sags (May 15, 2010)

In our city of London, single family homes prices are rising rapidly and there are previously unheard of bidding wars.

People say this is the "Toronto effect" as more people are retiring or commuting the 2 hours each way

On the other hand, rental prices are falling. There is a surplus of rentals due to overbuilding by developers. 

I am not sure the strategies mentioned work in this environment. Raising rents isn't a practical solution for higher interest rates.


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## mark0f0 (Oct 1, 2016)

Oh good grief. "Alleged" housing bubble? Wow, these snowflakes are gonna have their butts handed to them on platter sooner or later.


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## sags (May 15, 2010)

Homes are already not affordable for many people, even at low interest rates.

Either wages have to go up or prices will come down.


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## sags (May 15, 2010)

The CRA are cracking down on speculators and the WSIB are auditing landlords for work done by outside labor on rental units to ensure premiums were paid. These may slow down the housing market a little.


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## gibor365 (Apr 1, 2011)

sags said:


> Homes are already not affordable for many people, even at low interest rates.
> 
> Either wages have to go up or prices will come down.


How it's "not affordable for many people",when so many people buying and buying?! This is a market, builders build a lot. but even more people want to buy .


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## carverman (Nov 8, 2010)

Marty Gordon said:


> 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.


Yawn! Whio are these two yuppie "youtubers"? Gen X or millenials. Hopefully nobody is paying attention to them.
Buying an AFFORDABLE home is the single most best investment in your life..otherwise your money just rots in the banks.


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## carverman (Nov 8, 2010)

gibor365 said:


> How it's "not affordable for many people",when so many people buying and buying?! This is a market, builders build a lot. but even more people want to buy .


That's what I say. It all depends on how much you make and what is an affordable mortgage. The house will appreciate naturaly due to inflation over the years and other economic reasons.

Look at the houses that were bought for $25k, like my old house in TO back in 1970. Today it may be valued at around $500K.

Is there a market for it..you bet! Is there a market for Donald Trump's several houses worth 100 million or more in the US..of course.


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## gibor365 (Apr 1, 2011)

> That's what I say. It all depends on how much you make and what is an affordable mortgage. The house will appreciate naturaly due to inflation over the years and other economic reasons.


 The current houses prices because of putr market conditions. All other taks are about artificail interference of the government to depress those prices. The simpliest solution, encoridge builders to build more , supply will increase more then demand and procise natuarally will go down, and in GTA there are tons of available places to build new houses and condos.
You want affordable house , save money and buy something cheaper in subburbs or go to NB or NS where you can buy husge house for 60-70K


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## sags (May 15, 2010)

This today on Garth Turner's blog.............does it sound like a normal housing market ?

_Janet and Alphonse own a crap semi located thirty minutes by speeding Uber from the downtown core of the Big Smoke. “Yes,” he says, “it is crap. You can hear the dog next door snoring through the wall.” Purchased for $218,000 six years ago, it went on the market last Monday for an unrealistic, reach-for-the-moon $588,000. *There were 104 viewings and 26 offers. It sold on offer night for $712,000*._

Garth also talks about people getting involved in bidding wars only to find the bank appraisal comes in much lower. 

Off to the subprime lender they go. 

A housing crash has been predicted for years, and the bubble kept expanding. It is now epic and the crash will be a hard landing.

http://www.greaterfool.ca/


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## yyz (Aug 11, 2013)

Let's see Kevin O'Leary was unable to attend a Conservative debate this weekend because his wife wanted him to spend time with her.But was able to be on TV tonight in New York. He is a complete waste of time ."Mr Wonderful" as he likes to be called. Prime Minister no thanks we already have a pompous ***.


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## gibor365 (Apr 1, 2011)

> does it sound like a normal housing market


 it's soundlike market when demand higher then supply  ... again, you want cheap house -> move to Maritimes


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## mordko (Jan 23, 2016)

At this point the demand is driven by speculation or "investors", whichever term you prefer. 

And being in the suburbs makes little difference. A house 120 km from Toronto has just sold 30% over asking with 12 bidders. The asking price was 30% more than sale prices a year ago.

The future is a probability not a certainty. With every day of this frenzy the probability of a crash goes up.


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## gibor365 (Apr 1, 2011)

> At this point the demand is driven by speculation or "investors", whichever term you prefer.


 All markets are driven by speculation


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## mordko (Jan 23, 2016)

Not really. To put it another way... Stock markets are driven either by long-term investment, greed or by fear, interchangeably. Commodity markets are driven by need-based demand most of the time, but occasionally by greed or fear. House prices are usually driven by need-based demand, but once in a generation - by greed or fear. Guess what is driving the house market right now.


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## gibor365 (Apr 1, 2011)

> Guess what is driving the house market right now.


 Where excetly?! House market in Toronto is very different from house market in New Brunswick or Nova Stotia...(just check what are prices there ). using your analogy with market, Toronto is just one big cap stock (or just one of the sectors). ...
The point is that many has a lot of manoy and they bidding and buying very expensive houses, others cannot afford those houses and buying a long disctance driving from Toronto or renting or moving to other cheaper places.


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## mordko (Jan 23, 2016)

Yes, Canadian housing market is fragmented. Even in Ontario the prices have been steady or trending down. Makes the issue even more apparent. What's going on within ~2 hours' drive from Toronto is not rational. Once in a generation people go nuts and drive something up in price to levels that don't make any sense at a neck-breaking speed. GTA is "it" right now. If I were a betting man, I would bet on a fall in the fall.


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## mark0f0 (Oct 1, 2016)

carverman said:


> Yawn! Whio are these two yuppie "youtubers"? Gen X or millenials. Hopefully nobody is paying attention to them.
> Buying an AFFORDABLE home is the single most best investment in your life..otherwise your money just rots in the banks.


There's lots of places that money can be invested other than just in loans to banks ("deposits").


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## kcowan (Jul 1, 2010)

carverman said:


> Buying an AFFORDABLE home is the single most best investment in your life..otherwise your money just rots in the banks.


Yes providing you do not buy at the start of a slump. High levels of leverage make it even more desirable. However the other alternatives include stock market investing which CAN produce greater returns (albeit at 50% leverage).


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## carverman (Nov 8, 2010)

gibor365 said:


> The current houses prices because of putr market conditions. All other taks are about artificail interference of the government to depress those prices. The simpliest solution, encoridge builders to build more , supply will increase more then demand and procise natuarally will go down, and in GTA there are tons of available places to build new houses and condos.
> You want affordable house , save money and buy something cheaper in subburbs or go to NB or NS where you can buy husge house for 60-70K


Only one problem GIBOR, there aren't many jobs or opportunities to make money in NB or NS, so naturally the housing prices affect that.

Toronto is the financial hub of Ontario and certainly Canada. It used to be Montreal, but after the FLQ uprising in the 70s , and the uncertainty of the Quebec laws treating English speaking Canadians, the big banks pulled out and made their headquarters in Toronto.

Rising real estate prices is based on what the buyer is prepared to pay...certainly affordability, and abundance of well paying jobs, and a sellers market seems to make a lot of difference.

Coupled with very low mortgage rates...and you get a bubble.

How long the bubble will continue is anyones guess..but there is a point that the prices are no longer affordable to the average working "Joe"...and that will start to change things..along with any political/economic decision from the Feds in power, and the central bank raising interest rates.


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## carverman (Nov 8, 2010)

sags said:


> Garth also talks about people getting involved in bidding wars only to find the bank appraisal comes in much lower.
> 
> Off to the subprime lender they go.
> 
> ...


http://www.msn.com/en-gb/lifestyle/...dian-housing-market/vi-AAi5JeQ?refvid=AAi7gBU


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## Nelley (Aug 14, 2016)

carverman said:


> http://www.msn.com/en-gb/lifestyle/...dian-housing-market/vi-AAi5JeQ?refvid=AAi7gBU


Garth heads a money management firm and a blog-he has been wildly wrong on his R/E prediction and has yet to even admit his mistake-not the kind of person I would ever consider giving a nickel to.


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## Just a Guy (Mar 27, 2012)

Well, I watched the entire video...interesting, perspective filled with their own misinformation, but what can one expect from people who got in at about the middle of the longest uptrend in Canadian real estate history. Heck, for most of their lives real estate has gone up, up, up...

While I agree, in principle, with some of the things they are saying...

1) there are places you can buy that cash flow
2) there are ways to increase value

There are also falicies which they probably have never encountered and thus don't know about...

1) banks do care about the value at renewal time if it's underwater 
2) banks probably won't lend you money to buy more in a down market if your current portfolio is underwater
3) prices can, and have corrected by large double digits (the USA in 2007 was the most recent, and shows what happens if interest rates go up, people can't renew, etc.)
4) rents also correct (ask an Alberta investor in the last two years).
5) if rates go up, you can just lock in, pay down, etc. It's easy, nothing to fear here...

I'd be interested to see their actual numbers to see just how much cash flow they really have...many people fudge the numbers (it's easy to do), to make things look better than they are. I'm not saying they don't have cash flow positive places, I do and it's not hard in a sub 3% market, but can it withstand a correction is another issue.

Anyways, I wouldn't say they are wrong, but I don't think they are any more "right" than the people they decry. Easy to feel smug when you are making money and have never been tested...I think Mr. wonderful has lived through a few down cycles, somewhat of an advantage over the video couple.

To me, I don't automatically respect those who've been successful once, or only in good times, I prefer to take advice from people who come out of the bad times ahead, or have had repeated success in multiple areas.

I've known plenty of successful and unsuccessful real estate investors, those who are successful are usually a bit paranoid....


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## DollaWine (Aug 4, 2015)

gibor365 said:


> How it's "not affordable for many people",when so many people buying and buying?! This is a market, builders build a lot. but even more people want to buy .


Just because people get in, doesn't mean they can afford it long-term. Thousands of people are stretching themselves very thin, living like peasants and penny-pinching just to pay their over-valued mortgage. People are buying houses that cost 8x more than than annual income just because they desperately want to get into the market (FOMO). That is not affordable. It's being house-poor.


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## investorted (Feb 27, 2017)

DollaWine said:


> Just because people get in, doesn't mean they can afford it long-term. Thousands of people are stretching themselves very thin, living like peasants and penny-pinching just to pay their over-valued mortgage. People are buying houses that cost 8x more than than annual income just because they desperately want to get into the market (FOMO). That is not affordable. It's being house-poor.


I agree, many people have really leveraged themselves, and considering the job losses we are now seeing (Bombardier - the biggest one now) people are going to default and default hard. Maybe, we will not need the interest rates to rise up after all, job losses are going to be the nail in the coffin for the housing bubble we have.

I know people are hearing about the bubble crash from a long time now, but the signs are so evident now.

Me, I am waiting for a real estate crash, so i can get in this thing


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## gibor365 (Apr 1, 2011)

DollaWine said:


> Just because people get in, doesn't mean they can afford it long-term. Thousands of people are stretching themselves very thin, living like peasants and penny-pinching just to pay their over-valued mortgage. People are buying houses that cost 8x more than than annual income just because they desperately want to get into the market (FOMO). That is not affordable. It's being house-poor.


I doubt that any bank will allow such people to take mortgage


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## gibor365 (Apr 1, 2011)

> Only one problem GIBOR, there aren't many jobs or opportunities to make money in NB or NS, so naturally the housing prices affect that.
> 
> Toronto is the financial hub of Ontario and certainly Canada.


That's true, but retired people don't need jobs, so they can easily move there *if, of cause they are ready to change bad weather to a very bad weather )



> Toronto is the financial hub of Ontario and certainly Canada.


 This is a problem of Federal government! Instead of wasting money on refugees, "climate change" and African dictators, they can spend some money and encoridge businesses to move to Maritimes and also move their own (goverment's ) businesses.


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## DollaWine (Aug 4, 2015)

gibor365 said:


> I doubt that any bank will allow such people to take mortgage


It's happening every day. You think all the people buying $1.2m houses in Toronto are making $400k/year? They're putting down decent downpayment (a lot of the time part of it is gifts from family, or exhausting ALL savings and raiding their RRSPs), scraping together every dollar they can find, and getting their mortgage insurance from a private broker because CHMC rejected them. The banks don't have much skin in the game because the mortgage is insured, so they continue to hand them out.


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## gibor365 (Apr 1, 2011)

> It's happening every day. You think all the people buying $1.2m houses in Toronto are making $400k/year? They're putting down decent downpayment (a lot of the time part of it is gifts from family, or exhausting ALL savings and raiding their RRSPs)


 This is the point, they put "down decent downpayment" . Families who buying "$1.2m houses in Toronto" often has very decent salaries ,may be not 400K , but 200K -300K range. Our friends recently bought new huge house in Major Mackenzie area for 1.8M, they sold their old house for more than 1M and have family income 200K+. Noproblem for them to pay mortgage. They now planning to buy another house as an investment.
If you think that not many families in GTAhave household income in 200K+ range, you are mistaken


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## andrewf (Mar 1, 2010)

gibor365 said:


> This is the point, they put "down decent downpayment" . Families who buying "$1.2m houses in Toronto" often has very decent salaries ,may be not 400K , but 200K -300K range. Our friends recently bought new huge house in Major Mackenzie area for 1.8M, they sold their old house for more than 1M and have family income 200K+. Noproblem for them to pay mortgage. They now planning to buy another house as an investment.
> If you think that not many families in GTAhave household income in 200K+ range, you are mistaken


Maybe 5%-10% of families.


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## mordko (Jan 23, 2016)

800k mortgage is a lot, particularly so now that we are near the top. At 5% interest, that's 40k annual payment not counting repayment of the principle. And people on 200+k annual salary pay a lot of tax.


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## WGZ (Feb 3, 2017)

The more you make the more you spend and get taxed...but that's outrageous. You essentially NEED to make a six figure income in some of these places. No doubt jobs are higher paying but only because cost of living is higher as well. These big cities that seem so desirable to live in are just inescapable rat races.

Here's a great breakdown, very relevant to this thread right now:

http://www.financialsamurai.com/scraping-by-on-500000-a-year-high-income-earners-struggling/


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## mark0f0 (Oct 1, 2016)

DollaWine said:


> It's happening every day. You think all the people buying $1.2m houses in Toronto are making $400k/year? They're putting down decent downpayment (a lot of the time part of it is gifts from family, or exhausting ALL savings and raiding their RRSPs), scraping together every dollar they can find, and getting their mortgage insurance from a private broker because CHMC rejected them. The banks don't have much skin in the game because the mortgage is insured, so they continue to hand them out.


Most of the transactions in that price range are from people selling existing housing and/or from the "landlord families" (typically ethnicities that don't tend to do very well in the job market and have accumulated 10-30 properties over the years) mortgaging their other properties to the hilt to buy.

Its definitely not your typical $100k-$200k earning family. Nor is it foreigners.


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## gibor365 (Apr 1, 2011)

andrewf said:


> Maybe 5%-10% of families.


I think in GTA % will be higher. 



> Most of the transactions in that price range are from people selling existing housing


 Right. If family selling existing house for 1M and buying for 1.5M, they need additional 500K that is no big feal for many families


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## sags (May 15, 2010)

Are those families standing in line with 100 other people, inspecting a home in 10 minutes, signing an agreement without a home inspection or conditions, for 20% more than the asking price ?

That is how people are making the biggest investment/albatross decision in their lives these days.

With what I learned owning 5 homes in the past, I wouldn't even consider buying a home without a complete and thorough inspection.

The thrill of ownership can soon fade when the problems start appearing.


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## sags (May 15, 2010)

I also learned how clueless some buyers are when we were selling a home.

One guy asked me if he could build a double car garage on our single driveway. I told him he could put it lengthwise.

Then he asked how to fill up the natural gas for the furnace. I told him.....you keep paying and it keeps coming.

Take that person and sit him down in a realtor/mortgage office.....and happy days are here again for the realtor/lender.

The bank tells them what they qualify for and the realtor helps them spend all the money.

Neither the bank or realtor care if the happy couple will be able to afford food.


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## sags (May 15, 2010)

There is a new story that some rental company in Toronto handed out notices for a rent increase.

Effective in July the rent doubles. It went from $1700 a month to $3400 a month.

People say they will have to move out and find something else, or live in their cars.

Greedy landlords are going to cause the government to step in with rent controls for ALL units.

If rents in Toronto spiral upwards, there will be a problem finding workers to fill average jobs.

It will be a city where only those earning $100,000 a year can afford to live and will have to do their own "service work".

People earning $50,000 a year will have to live in a cardboard shack beside the garbage dump.


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## mordko (Jan 23, 2016)

Sags is actually making a good point.

Right now it is impossible to buy a house in GTA if you have any conditions in the offer. So nobody does. They are paying millions for a cat in the hat. Many bet that they would get a mortgage even though they may not. That is a sign of mass insanity which grips people once every generation and is called "a bubble".


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## mordko (Jan 23, 2016)

FT thinks that Sydney is in a bubble because house prices jumped by 18% year on year. GTA is laughing at such anemic growth. https://www.ft.com/content/ac7e3960-181c-11e7-a53d-df09f373be87


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## carverman (Nov 8, 2010)

sags said:


> There is a new story that some rental company in Toronto handed out notices for a rent increase.
> 
> Effective in July the rent doubles. It went from $1700 a month to $3400 a month.





> Their two-bedroom condo located near Liberty Village was going up from $1,660 to $3,320.


 http://www.cbc.ca/news/canada/toronto/rent-toronto-condo-tenants-1.4054056



> Greedy landlords are going to cause the government to step in with rent controls for ALL units.



Funny you should mention that...


> If rents in Toronto spiral upwards, there will be a problem finding workers to fill average jobs.





> Some of the recommendations include expanding rent control to buildings built after 1991, improving the supply of rental units and *building homes in the city's laneways.*
> 
> Premier Kathleen Wynne hinted Tuesday that the days may be numbered for the 1991 rule.





> "The reality is, that there hasn't been rental built. There have not been rental buildings built in any comprehensive way and so that argument does not actually hold water with me at this point," Wynne said.


 Priemier Wynne to the rescue of the tenants affected..25% rollback on all 100% rent increases..there..that should solve the problem!




> It will be a city where only those earning $100,000 a year can afford to live and will have to do their own "service work".
> People earning *$50,000 a year will have to live in a cardboard shack beside the garbage dump*.


Maybe the Feds should raise the income tax poverty level from $10,000 to $25,000 for Toronto. pay no taxes up to $24,999 and get the HST refunds too. 
City can allocate more social housing for these people.


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## Just a Guy (Mar 27, 2012)

Funny how the words "greedy landlords" suddenly comes out...has no one run the numbers on what it would cost to run these properties at these prices? What if the building changed hands over the last year, what if they refinanced? At these market price, a landlord is probably still losing money even after doubling the rent.

Not every landlord is a long term holder. Welcome to the realities of high real estate prices.


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## carverman (Nov 8, 2010)

Just a Guy said:


> s "greedy landlords"
> What if the building changed hands over the last year, what if they refinanced? At these market price, a landlord is probably still losing money even after doubling the rent.
> 
> Not every landlord is a long term holder. Welcome to the realities of high real estate prices.


What does changing ownership or incurring more maintenance costs go to do with the tenants living there?
The landlords are being unreasonable with a 100% increase. If they continue with gouging the tenants, they
won't be ablle to rent out their rentals. If they can't operate within budgets, they should't be in the business
of being a landlord.


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## andrewf (Mar 1, 2010)

gibor365 said:


> I think in GTA % will be higher.
> 
> Right. If family selling existing house for 1M and buying for 1.5M, they need additional 500K that is no big feal for many families


Median household income in the GTA is around $90k.


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## nobleea (Oct 11, 2013)

carverman said:


> What does changing ownership or incurring more maintenance costs go to do with the tenants living there?
> The landlords are being unreasonable with a 100% increase. If they continue with gouging the tenants, they
> won't be ablle to rent out their rentals. If they can't operate within budgets, they should't be in the business
> of being a landlord.


That's the point. They're trying to legally kick out their tenants so they can sell and monetize their units during this craze.


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## Pluto (Sep 12, 2013)

*be wary of the euphoiric stage of cycles.*

The words that come to mind when I view this video are over confidant, manic, euphoric. It reminds me of the late 80's early '90's real estate boom in To. the euphoria lasted maybe a year or two. Then reality set in as prices stopped rising, reversed a bit, tenants moved out, new tenants were impossible to get at the previous rents, down payment equity vanished, and investors were practicaly begging buyers to take the property off their hands. 

Too there was a guy, I think his name was Silverstein, who by the late '80's was a self proclaimed multi millionaire off of realestate who was getting into writing books, and maybe tapes and what not. After the boom ended, I recall reading a couple of articles about his bankruptcy. 

So these two are leveraged, and they have placed their faith in cash flow positive properties. I think Silverstien did too. But the positive cash flow evaportated after the bust due to tenants leaving, and not being able to get the same high rent with new ones. 

Any way, I wish these two luck. Maybe they will make it, time will tell. If I was them, I'd take a cold hard look at their leverage, and maybe take steps to reduce it even if it means selling a property a property or two to pay down debt because rent levels are not guaranteed in a downturn. 

Euphoric times are times to get conservative. 

Although they got O'Learly with a couple of early dire warnings about real estate that currently make him look hysterical, O'Leary might have the last word.


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## Just a Guy (Mar 27, 2012)

Let's say I'm the landlord, bought the place for 100k years ago. I can afford to rent the place for $1000/month (1% rule is a good rule of thumb which covers all expenses). 

Here we now are in 2017, my place is worth 500k now, so I decide to sell it. The new owner, using the same 1% rule now needs $5000/month to cover his higher mortgage, property taxes, and other expenses. 

He's not being greedy, he's not trying to run out his tenants, his expenses are just higher because he paid market price. 

Of course, you probably can't get $5000/month rent, so the new landlord is actually subsidizing his tenants.


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## gibor365 (Apr 1, 2011)

Today on business report they said that as per new March data, average home prices in Toronto , in 1 year, jumped 33%. Yeap, this is crazy . A prediction that this "bubble" will burst sooner or later, CDN$ will be crushed futher and interest rates will be as low as possible for next 5-7 years (btw, i know that in last 2 years Canadian major banks were inplementing new soft considering negative interest rates).
The question is who better to prepare to scenario "Canada goes down the tube"?!
Couple of months ago I started to buy in my IE account US cash (ATL5500 that gives .55% rate) and investment grades bond ETF (VCIT and VCSH)... I thing I need to resume buying the same, on small CDN$ rebounds (it didn't happen in last couple of months) ...


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## sags (May 15, 2010)

People made $300,000 to $500,000 profit just living in their house in Toronto in the last year.

It sure beats the heck out of working for a living.


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## mordko (Jan 23, 2016)

^ that is a very active approach. Timing the market is hard. You need to do it twice to make a real gain, which is nigh impossible. 

While we know that, at the very least, the house prices will do an S-curve; more likely they will peak and fall. We don't know where we are on the curve, when and at what level the peak will occur. 

The answer to "preparation" is, naturally, in Talmud:

" One should always divide his wealth into three parts: invest a third in land [real estate], a third in merchandise [stock], and [keeping] a third ready to hand [bonds]."

Which means: diversify; keep no more than 1/3 in any given asset class and re-balance if something jumps out of wack.


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## gibor365 (Apr 1, 2011)

sags said:


> People made $300,000 to $500,000 profit just living in their house in Toronto in the last year.
> 
> It sure beats the heck out of working for a living.


That what some analyst said on 680 news , that for majority of home owners in Toronto, their house was their biggest earner


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## gibor365 (Apr 1, 2011)

> While we know that, at the very least, the house prices will do an S-curve; more likely they will peak and fall. We don't know where we are on the curve, when and at what level the peak will occur.


True.
However, regardless of bubble and it's burst, i don't see any reason that CDN$ will go higher than USD$ and investing in US investment grade bonds will be like natural hedge when CDN$ will be crushed


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## andrewf (Mar 1, 2010)

Just a Guy said:


> Let's say I'm the landlord, bought the place for 100k years ago. I can afford to rent the place for $1000/month (1% rule is a good rule of thumb which covers all expenses).
> 
> Here we now are in 2017, my place is worth 500k now, so I decide to sell it. The new owner, using the same 1% rule now needs $5000/month to cover his higher mortgage, property taxes, and other expenses.
> 
> ...


I think things work the other way. Landlords change rents that the market will bear, and that drives home prices. Speculative bubbles occur when prices become disconnected from rents.


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## Just a Guy (Mar 27, 2012)

Oh, don't get me wrong, rents are not driven by housing prices...

I was explaining why landlords may have to jack up rents in an attempt to not lose their shirts...it's not always about being greedy, it's about being stupid. 

How many people have we seen on this forum alone come here asking about buying really overpriced properties so that they can become wealthy landlords...the tenant pays your mortgage after all...


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## mordko (Jan 23, 2016)

The rents appear to be subsidized by landlords. I presume this is occurring because there is an expectation of property price appreciation built in. 

Rent control is nuts, which is why I fully expect Ontario to have it in place in the not too distant future. Market is market though, can't beat it. Particularly so now with Air B&B and all.


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## andrewf (Mar 1, 2010)

^We'll have a new government in 14 months, if the PCs don't snatch defeat from the jaws of victory.


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## sags (May 15, 2010)

It appears even the super rich are not immune from euphoria of real estate.

Jared Kushner (Ivanka Trump's husband) bought 666 Fifth Avenue at the real estate peak for $1.8 Billion.

He leveraged the purchase and ever since the building has fallen in value, and the buildings revenues have fallen for 10 years.

The Kushner family has paid a fortune to keep the place, but they can't keep up with the debt payments.

The building is for sale..............if anyone is interested.


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## mrPPincer (Nov 21, 2011)

andrewf said:


> ^We'll have a new government in 14 months, if the PCs don't snatch defeat from the jaws of victory.


Haha, well said. You mean like they already did last time ofc 

Don't underestimate the supposed opposition's ability to totally shoot themselves in the foot, they seem to have a knack for that here in Ontario.


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## mark0f0 (Oct 1, 2016)

sags said:


> People made $300,000 to $500,000 profit just living in their house in Toronto in the last year.
> 
> It sure beats the heck out of working for a living.


No they didn't. The Realtor "averages" you're seeing in the media is largely due to the fact that only high-end houses are selling.

Individual single houses, what people actually own, haven't appreciated in years.

This sort of 'sales mix' induced price change is very typical of the tail end of a bubble.


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## mark0f0 (Oct 1, 2016)

gibor365 said:


> True.
> However, regardless of bubble and it's burst, i don't see any reason that CDN$ will go higher than USD$ and investing in US investment grade bonds will be like natural hedge when CDN$ will be crushed


As the RE bubble deflates, there will be huge, almost insatiable demand to buy CAD$ to repay the CAD$-denominated mortgages. Also, investors will prefer to buy CAD$, than to own obligations for CAD$ in the future, such as mortgages, etc. 

Remember what happened when the US bubble collapsed? The USD$ shot sky-high and basically stayed there for a while.


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## gibor365 (Apr 1, 2011)

mark0f0 said:


> .
> 
> Remember what happened when the US bubble collapsed? The USD$ shot sky-high and basically stayed there for a while.


Are you sure?!


> The United States housing bubble was a real estate bubble affecting over half of the U.S. states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012


 and in 2012USD was falling so hard that CAD$ was higher than USD$


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## mordko (Jan 23, 2016)

mark0f0 said:


> No they didn't. The Realtor "averages" you're seeing in the media is largely due to the fact that only high-end houses are selling.
> 
> Individual single houses, what people actually own, haven't appreciated in years.


^La-la land. 

All sorts of houses are selling in the GTA and lately beyond GTA. There isn't a single owner of a shack who has sold in the last 6 months without making hundreds of thousands of dollars.

In fact, it's the lower end properties that are going nuts right now. People snatch townhouses in the $500k range of the spectrum (double of 12 months ago) like there is no tomorrow. They buy these townhouses more than hours' drive from Toronto for the prices that are sometimes higher than larger, better, detached family homes in the same town. Depending on location, properties in certain places in the 1M range and above further away from Toronto haven't gone up all that much in percentage terms. The gain on properties over $2m is even smaller. Everyone wants a poxy townhouse.


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## andrewf (Mar 1, 2010)

mark0f0 said:


> No they didn't. The Realtor "averages" you're seeing in the media is largely due to the fact that only high-end houses are selling.
> 
> Individual single houses, what people actually own, haven't appreciated in years.
> 
> This sort of 'sales mix' induced price change is very typical of the tail end of a bubble.


You need to provide evidence. It sure seems to me that like houses have been increasing in value substantially.


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## gibor365 (Apr 1, 2011)

andrewf said:


> You need to provide evidence. It sure seems to me that like houses have been increasing in value substantially.


Interesting how proces got increased not average in GTA, but per region


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## sags (May 15, 2010)

People are paying $500,000 for a 1 bedroom apartment condo in Toronto.

Only 2 hours west down Highway 401, the could buy this home for about the same price.

https://www.realtor.ca/Residential/.../539-ROSECLIFFE-Terrace-LONDON-Ontario-N6K4H5

People in Toronto have lost all sense of reality.


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## mordko (Jan 23, 2016)

200 km does not mean 2 hours' actual travel. Commuting to Toronto isn't plausible so can't really compare. And the asking price of 570k does not mean the sale price of 500k. Can easily be 700 to 800k.

More interesting that in places like London or Georgetown townhouse prices can be the same as for a much larger detached home. I think people are assuming townhouse is all they can afford, so they rule out everything else.


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## sags (May 15, 2010)

Maybe a lot of people just don't want all the work that comes with a lawn and backyard.

Parents also raise kids differently these days. They don't allow them outside to run around freely so they don't want a yard.

A townhouse or linked home suits a lot of people's lifestyle.....retirees, young professionals, singles, small families.

I don't know that the house would sell for much above that asking price.

A $700K - $800K home is on a whole different level around here and they stay on the market for quite a while.

The high end market has been overbuilt around here.


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## mordko (Jan 23, 2016)

700k might not happen (although plausible) but will go over the asking not under, assuming no major problems with the property. My acquaintances have been searching in the area. Their budget was 500k. They bid 4 times. Lost every time. Every time the sale price was significantly over the asking, up to 100k with up to 12 families bidding. They gave up, decided to rent. 

Townhouses... Sure, if people prefer noise, lack of space for kids and lack of privacy then townhouses are the dream. I don't get it.


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## sags (May 15, 2010)

True, but privacy isn't much in a subdivision tract home either. The homes take up most of the lot space and they are all two storey which look down into everyone else's backyard. If you want privacy you have to buy an older home on a big lot or move to the country.

Personally, if I was buying a townhouse type.........I would look for an end unit that backs onto green space.

Or for more money, an end unit linked home with a double garage between the units..........and a park in the back.

The two storey townhouse we rent backs onto a park, but yea............no privacy at all because of the neighbors on both sides.


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## gibor365 (Apr 1, 2011)

sags said:


> People are paying $500,000 for a 1 bedroom apartment condo in Toronto.
> 
> Only 2 hours west down Highway 401, the could buy this home for about the same price.
> 
> ...


My son got co-op job in the bank in downtown Toronto. Because he should start work at 7am or earlier (he will be working on trading floor), he cannot live in our house and must rent (transportation in GTA is complete ****), so he's renting 1 bedroom with den with his friend for $3,000/month . This is ridiculous!
btw, my wife's boss is renting 2 bedrooms condo in downtown Toronto for $4,000!


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## lifeliver (Aug 30, 2010)

gibor365 said:


> My son got co-op job in the bank in downtown Toronto. Because he should start work at 7am or earlier (he will be working on trading floor), he cannot live in our house and must rent (transportation in GTA is complete ****), so he's renting 1 bedroom with den with his friend for $3,000/month . This is ridiculous!
> btw, my wife's boss is renting 2 bedrooms condo in downtown Toronto for $4,000!


Have your son look for some of the older low rise buildings at St.Clair West or Eglinton and Avenue. You can get a 1 bedroom place for about $1,000 - $1200. These places are on the subway line so its super convenient for working downtown. Sure its not a brand new fancy condo but the value of these places is fantastic and they are usually much bigger than condo's that cost a lot more. When I lived in Toronto I was paying $940 including utilities for a 700 sqft 1 bedroom at Bathurst and St.Clair. It was 5 min walk to St.Clair west station, which was a 15 min ride to Yonge and King where I worked. I saved a ton of money living there. Best decision I made in my life probably.


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## gibor365 (Apr 1, 2011)

> Have your son look for some of the older low rise buildings at St.Clair West or Eglinton and Avenue. You can get a 1 bedroom place for about $1,000 - $1200


 I was telling him similar things , My son told me that the problem that he needs to rent only for 4 months and it's rather diffucult to find, the best place he and his friebd were able to find was what I described above


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## marina628 (Dec 14, 2010)

The problem with the older buildings is they are not always maintained.I moved my oldest out of their apartment 19 months ago because the place was falling apart and that is being very generous .I am in a wheelchair and the accessibility solution was a piece of plywood covering 3 stairs in a back door.At first it was not as bad but at start of year 3 it went seriously down hill.With rent ,hydro ,tenant's insurance and cable/internet it cost us $1200 a month .Now with a new work location we have to go through the process again and weighing the pros and cons of Renting vs Purchasing ,we have already decided if we buy it will be a 50/50 ownership ,rather do that than just cosign a mortgage.


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## andrewf (Mar 1, 2010)

gibor365 said:


> My son got co-op job in the bank in downtown Toronto. Because he should start work at 7am or earlier (he will be working on trading floor), he cannot live in our house and must rent (transportation in GTA is complete ****), so he's renting 1 bedroom with den with his friend for $3,000/month . This is ridiculous!
> btw, my wife's boss is renting 2 bedrooms condo in downtown Toronto for $4,000!


Getting dt for 7 am should be a breeze. Traffic at that time is fine.


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## gibor365 (Apr 1, 2011)

andrewf said:


> Getting dt for 7 am should be a breeze. Traffic at that time is fine.


What traffic?! My son takes public tranit and even if he takes the first Go train, he will be late.


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## andrewf (Mar 1, 2010)

Buy him a car. Cheaper than rent.


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## gibor365 (Apr 1, 2011)

andrewf said:


> Buy him a car. Cheaper than rent.


Is it a joke?! For 4 months co-op, my son will pay 6K. Now,how much cost car + insurance for young driver?! + parking in downtown Toronto... and if you think that at 7 am there won't be traffic driving from Mississauga/Milton border to downtown Toronto, you are mistaken


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## mordko (Jan 23, 2016)

There definitely is traffic at 7am coming from the west. Not as bad as at 7-30 but busy and you will have to stop and crawl.


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## Nelley (Aug 14, 2016)

gibor365 said:


> Is it a joke?! For 4 months co-op, my son will pay 6K. Now,how much cost car + insurance for young driver?! + parking in downtown Toronto... and if you think that at 7 am there won't be traffic driving from Mississauga/Milton border to downtown Toronto, you are mistaken


I don't know where you live but if the kid leaves home at 5.30 am and arrives at work at 6.30 am traffic should be OK-there is a lot right near Yonge/Front for I think $8 all day early bird special.


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## gibor365 (Apr 1, 2011)

Nelley said:


> I don't know where you live but if the kid leaves home at 5.30 am and arrives at work at 6.30 am traffic should be OK-there is a lot right near Yonge/Front for I think $8 all day early bird special.


Probably $8 was 20 years ago , The cheapest parking I found at Yonge/Front was $36 daily. http://toronto.bestparking.com/

Also, sometimes he's expected to work until 9-10pm , this is trading floor, investment banking ,,,,not some teller in the branch...


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## tygrus (Mar 13, 2012)

Why live in Toronto. If the commute is hell, the prices are insane and you can be a multi-millionaire just by selling your home, why wouldnt you. Move to Ottawa or something and drive in once a month for the leaf games if you just cant stand it.


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## gibor365 (Apr 1, 2011)

tygrus said:


> Why live in Toronto. If the commute is hell, the prices are insane and you can be a multi-millionaire just by selling your home, why wouldnt you. Move to Ottawa or something and drive in once a month for the leaf games if you just cant stand it.


First of all I'm talking about my son who is a student in UofW/Laurier... He willbe working in investment banking.... what the hell he's going to do in Ottawa?! 
btw, my wife also works in banking industry and except downtown Toronto there are no such jobs. When she retires , we may move, but it will take many years


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## Nelley (Aug 14, 2016)

gibor365 said:


> Probably $8 was 20 years ago , The cheapest parking I found at Yonge/Front was $36 daily. http://toronto.bestparking.com/
> 
> Also, sometimes he's expected to work until 9-10pm , this is trading floor, investment banking ,,,,not some teller in the branch...


You read it wrong-if you look at your link it is $12 (IMPARK) 5 am to 7 pm, 7 bucks more if he works all day and night.


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## joetheneighbour (Apr 17, 2017)

tygrus said:


> Why live in Toronto. If the commute is hell, the prices are insane and you can be a multi-millionaire just by selling your home, why wouldnt you. Move to Ottawa or something and drive in once a month for the leaf games if you just cant stand it.


Couldn't agree more, just by not living in the GTA you are already ahead financially. People keep telling me that they won't be able to find a job in cheaper city. I can tell you this, I have moved to a few city in Canada and my wife who doesn't have a university degree was able to find a job that pay a similar salary to her Toronto Job. My house in those cities was about $250,000 and my household income was about $100,000+ from two income. I can pay off my mortgage faster, retire earlier and be financially free where if I stayed in Toronto I'll probably be paying my mortgage for a heck longer.

To the OP's post, move away from Toronto then it doesn't really matter if there is a bubble or not. I am just amaze that some people are willing to pay $1mil to buy a house where they have to listen to the GO Train or Car drive by every morning. If I pay that much for a house it better be nice and quiet, have at least 3 acreage so my dog can run around, and a view of a lake or the ocean.

Just my $0.02.


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## gibor365 (Apr 1, 2011)

> Couldn't agree more, just by not living in the GTA you are already ahead financially. People keep telling me that they won't be able to find a job in cheaper city. I can tell you this, I have moved to a few city in Canada and my wife who doesn't have a university degree was able to find a job that pay a similar salary to her Toronto Job.


My wife is a senior director in one of the biggest Canadian banks. To have similar income she can move only to NYC , maybe London or Frankfurt 



> and a view of a lake or the ocean.


 better not to have "ocean view" if this ocean is very cold 360 days per year and 5 days just cold . Better to have good income and travel to normal oceans 



> I have moved to a few city in Canada and my wife who doesn't have a university degree was able to find a job that pay a similar salary to her Toronto Job.


 depends on the job. for low-qualifying job iit's really doesn't matter



> I can pay off my mortgage faster, retire earlier and be financially free


 we paid off our mortgage 10+ years ago living in GTA. I'm semi-retired, my wife can retire right now, but she enjoying her job


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## sags (May 15, 2010)

Average price of a newly built single detached home in Toronto was $1,124,600 in March 2016.

In March 2017, the price had risen to $1,783,417 .............a $716,711 increase in one year.

Prices rose at an average $60,000 a month rate of increase.

http://business.financialpost.com/p...ch-as-market-faces-new-government-regulations

Prices in London are soaring for big homes. Potential buyers are getting frustrated with bidding wars.

This is a phenomena that we haven't seen before. 

There are still lots of small homes for less than $200,000. 

Toronto sellers with deep pockets aren't interested in living in blue collar neighborhoods of small homes.

Fortunately for Londoners, our city was built with lots of those kinds of neighborhoods which were neglected for a long time, and as young people are forced into buying those homes the areas are undergoing a nice renaissance. People and families move in and businesses start to open up to accommodate them.

In a way, it kind of works out well for our city but the Highway 401 is getting busier by the day and the Board of Education has to re-think their school placement strategies.


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## sags (May 15, 2010)

As I drive through our older neighborhoods, that did nothing for decades.....it is noticeable how many construction dumpsters placed out front and the number of construction companies working on homes. If someone buys a smaller home for $200,000 and spends $100,000 in renovations, they can have a pretty nicely finished home. Garages are being built in big backyards. Solariums added to the back..........lots of activity. The older areas tend to have small homes on big lots, so the potential is there.

Maybe the silver lining is that our city is getting renovated because of high Toronto home prices.


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## kcowan (Jul 1, 2010)

We had an enormous back yard in London (on Cowan Avenue too).


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## TomB16 (Jun 8, 2014)

I watched the clip. These two didn't seem all that bright to me. lol!

They don't see how waiting is a strategy?

Kcowan's market prediction game in the Investment forum has been very educational. I've always known people's fear causes them to predict gloom but I didn't realize the extent until the game.

I have been buying equities for the last three years because I know my gut is a moron. If I hadn't, I would not have done well.

R-E is more difficult. Anything could happen from crash, correction, stagnation for years, it could continue to go up..... I don't know and I have been watching my market on a daily basis for years.

We've come off two stagnant years. This year, I knew we would have a hot spring but I didn't know the extent. It's turned out to be a warm spring. Fortunately, I do not gamble on micro trends. All I need to know is the property I buy this year will be worth significantly more in 10~20 years time.


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## mark0f0 (Oct 1, 2016)

TomB16 said:


> All I need to know is the property I buy this year will be worth significantly more in 10~20 years time.


It took more than a decade for Toronto RE to return to its bubble prices after the 1990s crash. In a falling interest rate environment no less. 

RE stagnation can last years, particularly with rising rates. And there is dramatically better places to put capital these days instead of having it tied up in a dead asset class which hasn't appreciated in Canada since the 2013 apex.


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## mordko (Jan 23, 2016)

> dead asset class which hasn't appreciated in Canada since the 2013 apex.


Well said! Now click the "Start" button to shut down the computer and watch the sun rise in the west.


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## mark0f0 (Oct 1, 2016)

mordko said:


> Well said! Now click the "Start" button to shut down the computer and watch the sun rise in the west.


If it makes you feel better, the Canadian stock market hasn't gone anywhere since 2008. So RE was a better investment between 2008 and 2013.


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## mordko (Jan 23, 2016)

Now back to the real world: 

- while Canadian RE is highly regionalized, and the market is different for different type of housing, there has been a massive jump in the prices of detached houses in Southern Ontario and Vancouver region between 2014 and 2017. That's where most Canadians live. 

- My RE more than doubled between 2004 and 2016 and that includes 60% jump in 2016 alone.


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## mark0f0 (Oct 1, 2016)

mordko said:


> Now back to the real world:
> 
> - while Canadian RE is highly regionalized, and the market is different for different type of housing, there has been a massive jump in the prices of detached houses in Southern Ontario and Vancouver region between 2014 and 2017. That's where most Canadians live.


In the real world, prices on individual identical units have not moved since 2013 in the major cities of Vancouver and Toronto. What has changed is the actual properties changing hands -- significantly towards the upper quartile of pricing as entry-level buyers have been pretty much completely priced out. 

So while the 'averages' may have risen, prices on individual identical units have not.

Delude that your individual units' valuation has gone up due to the market, rather than one-off factors, since 2013 at your own peril. 



> - My RE more than doubled between 2004 and 2016 and that includes 60% jump in 2016 alone.


Very likely not the truth, and not supported by any sort of objective statistics especially your latter claim. Unless you made massive improvements in 2016 alone which would have justified such value.


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## andrewf (Mar 1, 2010)

^ You have never provided any evidence. Extraordinary claims require extraordinary evidence.


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## mordko (Jan 23, 2016)

This is a fascinating case. How can anyone actually living in Canada be so divorced from the real world? There must be some kind of personal financial issue here combinined with psycological problems so that mark0f0 is putting a lot of effort into buring his head in the sand in an effort not to be aware of what's going on around him. 

Here is my case:

- Purchased at the end of 2004 for $780K
- No improvments, except for routine maintanance like changing the furnace and roof circa 2010.
- Price at the end of 2015 ~$1.2M based on the sales of comparables in the area.
- Sold at the end of 2016 within a week or two for $1.8M to a Chinese student.

Note how the sale wouldn't have been impacted by the new Ontario rules; while the money is obviously coming from China a local resident/student is always the figurehead. 

Had we waited a couple more months the price would likely be higher, possibly by $200K, although you can't guarantee. 

Putting my case aside, houses purched 2-3 years ago in the Toronto suburbs are selling now with substantial gains, up to 100%. 

And objective statistics is telling the exact same stories, e.g. 

- http://business.financialpost.com/p...ch-as-market-faces-new-government-regulations 
- http://www.cbc.ca/news/canada/toronto/toronto-house-price-1.4056093

Everyone who knows anything about the subject went on record discussing huge price increases, all the way up to the Finance Minister and Bank of Canada, as well as every single Canadian Bank.

How anyone can be quite so oblivious to reality is beyond me.


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## Pluto (Sep 12, 2013)

I'm curious if Marty Gordon is going to show up and give us an update on his portfolio of properties.


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