# Future of Canadian real estate



## borisdavenport (May 20, 2016)

I think this is the best place to discuss my concern as this community is mainly focused on the Canadian market. 
I know, tsunamis may occur at any time in the North American economy due to the policies of Trump.
I need an expert opinion on the stability of Canadian real estate. How bad it may affect us if the new president tightens his stand against immigrants and refugees. I am not interested in politics, but I know the answer will definitely have some political taste. 

Thanks 
Bman


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## carverman (Nov 8, 2010)

borisdavenport said:


> I think this is the best place to discuss my concern as this community is mainly focused on the Canadian market.
> I know, tsunamis may occur at any time in the North American economy due to the policies of Trump.
> I need an expert opinion on the stability of Canadian real estate. How bad it may affect us if the new president tightens his stand against immigrants and refugees. I am not interested in politics, but I know the answer will definitely have some political taste.
> 
> ...


I'm not an expert, but currently some experts are saying the in certain cities the real estate bubble is about to burst.

Housing prices have climbed as much as 16% in a year in larger metropolitan centres such as Vancouver, Toronto and it's surrounding area past the point of affordabilty of the property listed VS the down payments now required to purchase, typically 20% down payments of the closing price and qualification of income for an financial institution
approved mortgage.
No job/no skills or low income -> no credit rating -> no mortgage. 

I don't see the influx of immigrant refugees escaping from the US to Canada as a significant factor in affecting real estate prices, as these refugees generally come in with nothing, no assets, and in some cases not skilled enough to acquire enough assets in
a relatively short time (1-5yrs of being employed), to start to influence any change
in the real estate markets. 

So the short of is..No matter what polices the Trump adminstration come up to
deny illegal or other racial minorities in the US such as deportation, it isn't going to make any difference here in Canada.

How many of the Syrian refugees that Canada took in last year had the funds
and steady jobs to qualify for mortgages? 1-2% maybe, if they had "old money"
that they could get from relatives in Syria, but the majority is still living on gov't handouts because they are still leaning the official languages and skills.


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## Just a Guy (Mar 27, 2012)

Carverman's answer illustrates just another example of the differences between home ownership and investment properties...

I agree that immigration probably won't affect housing prices in terms of home owners very much. Canada already has limits on the number of immigrants it accepts each year, unless they open the door to more, we won't see any real impact.

However, immigration does have an effect on the rental market. The 25000 Syrians needed some place to live when they got here. Social services were left scrambling to find them places (yes, your tax dollars went to paying their rent). That, of course, took rentals off the market for others. Simple supply and demand effects on the market. The effects of the influx probably varied depending on the city where they were located, but I'm sure it had an effect.

Personally, I wouldn't worry to much about immigration, I'd be more worried about the announcement from the US fed yesterday where they talked about raising the interest rates over the next little while/years. That's going to have a major impact on the real estate prices if they follow through as it makes real estate less affordable.


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## STech (Jun 7, 2016)

The "experts" have been predicting a bubble burst since early 2000s. Draw your own conclusion.


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## Just a Guy (Mar 27, 2012)

Read the history of bubbles and what happened to those who believed it was "never going to happen". 

Personally, I invest based on the possibility that a correction is coming. If I'm wrong, my investments will be worth more, if I'm right, I bought with the correction at least partially built into my purchase price.


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## borisdavenport (May 20, 2016)

carverman said:


> I'm not an expert, but currently some experts are saying the in certain cities the real estate bubble is about to burst.
> 
> Housing prices have climbed as much as 16% in a year in larger metropolitan centres such as Vancouver, Toronto and it's surrounding area past the point of affordabilty of the property listed VS the down payments now required to purchase, typically 20% down payments of the closing price and qualification of income for an financial institution
> approved mortgage.
> ...


It seems you are correct, http://www.northwoodmortgage.com/housing-markets/how-the-u-s-election-will-impact-canadas-housing-market/
The housing prices are rising as you said and their policies boosted it to another level. People from the US are searching for houses in UK and Canada.


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## tavogl (Oct 1, 2014)

borisdavenport said:


> It seems you are correct, http://www.northwoodmortgage.com/housing-markets/how-the-u-s-election-will-impact-canadas-housing-market/
> The housing prices are rising as you said and their policies boosted it to another level. People from the US are searching for houses in UK and Canada.


I remember reading the news a when Trump said he'd launch for president. RE search from USA to CAN increased more than 200%. (online statistics). Probably some people will move, I have family who already did and bought a place in Toronto, moved from Florida. Some more are coming, it is a reality, it's going to cause some sort of effect, how much? no idea.


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## STech (Jun 7, 2016)

Just a Guy said:


> Read the history of bubbles and what happened to those who believed it was "never going to happen".


Oh I don't doubt for a minute that we're in a bubble. I'm just saying that the "experts" have been saying a bubble burst is just around the corner for nearly 20 years now. I certainly wouldn't pay a penny for "expert opinion" and their crystal ball. Even a broken clock is right twice a day, every day.


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## new dog (Jun 21, 2016)

Just a Guy is right if rates go up it will hit the market. If they go up enough it will kill the market. If they stay the same and only tweak higher, then bubbles will burst someday but no one knows when.


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## logical (Feb 3, 2017)

I think there is two factor that will have important implication in GTA housing market:

1. Interest rate increase is in the corner. It will definitely happen. And will happen in next 2 years.
2. Currently in GTA, occupancy rate is as high as 97% and in Toronto it is more than 99%. There is really lesser number of places compared to demand. But that is going to change. A record number of residential properties are being built in the city. and that is going to hit the market in next two years. Supply problem will be solved partially.
3. Home ownership cost is going to increase in the form of increased property tax, mortgage insurance etc.
4. Some vancouver like new regulation for foreign buyers may come in place.

Considering all these, my timeline for GTA bubble being burst is 2-4 years. If it is a soft landing, financial sector may not hit very hard. If it is abrupt, it might be very bad for entire economy.


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## RCB (Jan 11, 2014)

Canada 2015/16 (Stats Can, July to June)

births 392,902
deaths 269,012

immigration per year 300,000

total est. annual increase = 423,890

Close to half a million new bodies to house annually. Just the immigration annual number alone is four times the population of my city. Just the immigration number, assuming a family of four, requires 75,000 further two or three bedroom housing units annually. Of course, not all are families of four, some are single, some are couples.

Regardless, more housing will be needed with 1.5 million immigrants arriving over the next five years. Then add in extra bedrooms that may be required for births, and increased numbers of international students being sought by the colleges and universities, with the assistance and blessing of the feds. FWIW


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## logical (Feb 3, 2017)

While these growth numbers are impressive, I am sure this number is not bigger than US. and not bigger than some other big populous countries around the world. But everywhere around the world that experienced such a upward run, has also experienced a following decline. So eventually if income does not go up for average people, number of people might not be enough to sustain the current price GTA market is experiencing. Already Canadians spend almost 40% of their income for housing and it is pretty high.


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## Just a Guy (Mar 27, 2012)

Better numbers to look at is average salary for Canadians, and average house price...I know what the average numbers are for Canada (about $50-60k income and about $450k for house prices), but prices vary widely by city, let alone province, so look it up for a specific area.

Sincehouses are actually bought by people who work and need to be able to pay for them, plug the average house price number into a mortgage calculator and see what happens when the interest rate gets closer to its historical average of 8%. 

Next, remember that most Canadians lock in their interest rates for 5 years or less, and the majority of mortgage payments for the first 10 years goes towards interest not principle, so renewal time can give current owners a big surprise of a much higher payment. (Hint, it works out to be about $50/month per $100k borrowed for each 1% rise in interest rates. Also remember that interest rates usually changed by .25% each quarter up or down, sometimes more). 

The main reason why the "experts" have been wrong for the last 20 years I'd because interest rates have fallen continuously for the past 20 years, allowing people to pay much more for a house, while still being able to "afford" the payments. 

All the minor "corrections" we've seen over the last 20 years have quickly been reinflated because the cheap interest allowed the fools to quickly bid the prices back up again...

The silliness will come to an abrupt end however when interest rates rise and these houses suddenly become unaffordable. They'll also be unable to sell, even with a growing population, because none of these people can afford the house prices any better than the ones stuck with overpriced places.

Supply and demand is meaningless if people can't afford to overpay anymore.


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## DollaWine (Aug 4, 2015)

Just a Guy said:


> Better numbers to look at is average salary for Canadians, and average house price...I know what the average numbers are for Canada (about $50-60k income and about $450k for house prices), but prices vary widely by city, let alone province, so look it up for a specific area.
> 
> Sincehouses are actually bought by people who work and need to be able to pay for them, plug the average house price number into a mortgage calculator and see what happens when the interest rate gets closer to its historical average of 8%.
> 
> ...


Except for those of us socking away cash and waiting to buy in ~5 years when home prices stagnate and/or go dowwwwn  Watching the bubble from the outside, waiting to capitalize on the aftermath when the dust settles

What's your personal prediction of when a major market correction will begin to happen in the GTA? Seems like 2017 won't be the year... everyone still want to buy, and for obscene prices


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## new dog (Jun 21, 2016)

I owe it to very high interest rates in moving me up in the housing market back in 1990. High interest rates were my friend even though payments were a little tough, but then again they always are when you first start out.


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## Just a Guy (Mar 27, 2012)

I don't have a crystal ball that works any better than anyone else. I rely on math, since it doesn't lie, to do forecasting. 

Unfortunately, forecasting only tells you what will happen, not when or even if it'll happen. Though anyone who doesn't believe interest rates will go up at some point is probably delusional.


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## Karlhungus (Oct 4, 2013)

Just a Guy said:


> I don't have a crystal ball that works any better than anyone else. I rely on math, since it doesn't lie, to do forecasting.
> 
> Unfortunately, forecasting only tells you what will happen, not when or even if it'll happen. Though anyone who doesn't believe interest rates will go up at some point is probably delusional.


So you rely on math to do your forecasting but forecasting does not tell you when or if it will happen? Doesnt really sound like forecasting to me. 

Also, to OP, there is no Canadian real estate.


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## Just a Guy (Mar 27, 2012)

Sorry, math can't predict when the government chooses to raise interest rates. I know no one ever thought interest rates would continue to drop for 20 years, nor that they'd get anywhere near 0. 

As for forecasting, I use the word as in running "what if" scenarios. I can only predict what will happen, not when a human will make a decision. 

The math can clearly show how a house worth $100k in a high interest market has the same payments as a 400k house in a low interest market. Which explains why the house prices increased so much. 

It also shows that prices are relative. When the market corrects, that $400k bungalow won't have millionaires bidding for it. All the prices will correct, and that house will probably be in for a huge correction. 

My math predicts a correction won't really happen until interest rates start to rise and continue to do so. When will he government do this? No idea, they've painted themselves into a corner and don't have anywhere to go from what I see...

Then again Europe has negative interest rates, so who knows.


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## sags (May 15, 2010)

I think we would see 100 year amortizations, before the government will allow a housing collapse.

Anything to keep the mortgage payments affordable and people in their homes.

The housing industry is a huge component of Canada's economy and the government simply can't let it collapse.

In 100 years, some of these new homes will probably have to be bulldozed, but the serviced land will still be there.


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## Just a Guy (Mar 27, 2012)

And any owners will be long dead. Then again, the banks are already landlords for most people.


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## sags (May 15, 2010)

Maybe not.

100 years ago in 1917 :

_Federal spending: $1.95 billion
Consumer Price Index: 12.8
Unemployment: 4.6%
Cost of a first-class stamp: $0.02
*Average wage: $720*_

_Average cost :

loaf of bread: $0.09
*house: $6,313*
car: $360_

Inflation would simultaneously make the home more valuable and easier to pay for as the years roll on by.


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## Mukhang pera (Feb 26, 2016)

Just a Guy said:


> Then again, the banks are already landlords for most people.


With the local property taxing authority constituting the landlord for the rest of us.


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## mark0f0 (Oct 1, 2016)

Falling housing prices will continue nationwide, especially in Toronto/Vancouver. Toronto prices only appear to be rising because low-end entry-level activity has disappeared and the mix has moved to the higher end. The peak of the Canadian market was in 2013, including Vancouver/Toronto. Calgary was actually a bit earlier, and Edmonton never even returned back to 2007 prices. Individual identical properties do not sell for more practically anywhere in Canada than they did in 2013.

Risk premia is rising on mortgages considerably as creditworthiness and prices are stagnating/falling. This is great for the banks, which will pick up even more spread as the BoC drops rates again in response to consumer-demand-led deflation (negative CPI). The 1990s may very well repeat themselves, with the banks putting in 300-500% returns, while housing was, decade over decade, at best, flat.

Long-term bottom will be somewhere between 1-2X average income. Which means that the current crop of young people are going to be making 20-30 years of payments on their hyper-inflated houses and not accumulate any equity. The combination of falling prices and rising interest rates.


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## Just a Guy (Mar 27, 2012)

sags said:


> Maybe not.
> 
> 100 years ago in 1917 :
> 
> ...


In 1917 most people didn't buy houses, they were farmers. I believe you could still get free land if you developed it out west still. The idea of living in cities hadn't really caught on. People still built their own homes.

You can't really compare the two times.


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## NOOB (Apr 26, 2012)

borisdavenport said:


> I need an expert opinion on the stability of Canadian real estate.


I'm no expert, but let me speak to my location: My neighbour sold her North Oshawa home yesterday. The price set a new record on her street. It went over asking and sold in 7 days with multiple offers. A group of 20 Asian investors from Toronto arrived on a bus. Yes a bus. Her house was one of many they were looking at that day and buying investment properties for people back in China. 

So yes, I believe my location is and will remain stable for at least another year and likely longer.

NOOB


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## OnlyMyOpinion (Sep 1, 2013)

NOOB said:


> I'm no expert, but let me speak to my location: My neighbour sold her North Oshawa home yesterday. The price set a new record on her street. It went over asking and sold in 7 days with multiple offers. A group of 20 Asian investors from Toronto arrived on a bus. Yes a bus. Her house was one of many they were looking at that day and buying investment properties for people back in China.
> So yes, I believe my location is and will remain stable for at least another year and likely longer.
> NOOB


Noob, What did you do with your primary that you were thinking of going rental on?


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## mordko (Jan 23, 2016)

NOOB said:


> I'm no expert, but let me speak to my location: My neighbour sold her North Oshawa home yesterday. The price set a new record on her street. It went over asking and sold in 7 days with multiple offers. A group of 20 Asian investors from Toronto arrived on a bus. Yes a bus. Her house was one of many they were looking at that day and buying investment properties for people back in China.
> 
> So yes, I believe my location is and will remain stable for at least another year and likely longer.
> 
> NOOB


What is this belief based on?

When lots of people buy houses as investment, it is usually a sign of a bubble. Speculative bubbles can pop at any time. The risk is higher when the source of money is overseas. Now... this can go on for another 2-3 years but there is nothing telling me GTA won't slow down in 2017.


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## CrazyEights (May 17, 2016)

I think Real Estate is generally regional. However having said that, If the "bubble" did hit the fan, obviously Toronto and Vancouver would get hit way harder than the other regions of Canada, but other areas across Canada would be affected mainly due to credit tightening as a result of real estate bursting.


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## CrazyEights (May 17, 2016)

NOOB said:


> I'm no expert, but let me speak to my location: My neighbour sold her North Oshawa home yesterday. The price set a new record on her street. It went over asking and sold in 7 days with multiple offers. A group of 20 Asian investors from Toronto arrived on a bus. Yes a bus. Her house was one of many they were looking at that day and buying investment properties for people back in China.
> 
> So yes, I believe my location is and will remain stable for at least another year and likely longer.
> 
> NOOB


I would argue its not just asians going on a bus, and investing in properties.
This is happening even with domestic investors


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## naysmitj (Sep 16, 2014)

I don't pretend to understand real estate but I can tell you that I bought and sold real estate in Burlington Ontario in 2012 and that today both would be priced substantially higher (more than 40% for each) than the 2012 sale price.


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## mordko (Jan 23, 2016)

mark0f0 said:


> Falling housing prices will continue nationwide, especially in Toronto/Vancouver. Toronto prices only appear to be rising because low-end entry-level activity has disappeared and the mix has moved to the higher end. The peak of the Canadian market was in 2013, including Vancouver/Toronto. Calgary was actually a bit earlier, and Edmonton never even returned back to 2007 prices. Individual identical properties do not sell for more practically anywhere in Canada than they did in 2013.


Totally. Also the sun rises in the west and people go to bed in the morning.


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## NOOB (Apr 26, 2012)

OnlyMyOpinion said:


> Noob, What did you do with your primary that you were thinking of going rental on?


Still deciding. At the moment, I'm leaning towards selling as I believe my house is not an ideal rental.

Deciding factors: it's new home kept in pristine condition, was never bought to be a rental, just finished the basement with higher end finishings, selling and relocating will allow me to be mortgage free at 35.

After I get settled into our new home, I will be looking to buy a purpose built rental, in an area I have researched fully.

I got my eye on the four new GO Train East station locations: two new stations in Oshawa, one at Thornton Road and the other at Ritson Road. The Courtice station off of Courtice Road and Bowmanville’s on Martin Road.

I got my eye on the new the 407 connection to Courtice Road they are calling the 418. 

My rental will likely be bought as pre-construction, close to GO, shopping, schools, new highway and rented to OPG office staff contractors working temporarily at Darlington. Their refurbishment which started last year is scheduled to run till 2026. These workers are currently having trouble locating accommodations. 

NOOB


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## catharinebow (Jul 28, 2017)

Vancouver is expected to lead all Canadian cities with 3.3% in GDP growth in 2017, while Toronto’s economy remains healthy and growing, with construction, transportation, warehousing, retail, wholesale and manufacturing all contributing to this growth.


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## rl1983 (Jun 17, 2015)

catharinebow said:


> Vancouver is expected to lead all Canadian cities with 3.3% in GDP growth in 2017, while Toronto’s economy remains healthy and growing, with construction, transportation, warehousing, retail, wholesale and manufacturing all contributing to this growth.


That's pretty optimistic considering the fact no one can afford real estate here. It's going to be an interesting year to say the least as to how the NDP will deal with the out-of-control prices.


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## Eder (Feb 16, 2011)

The NDP as usual will kill the economy in a couple years...hopefully someone will follow their conscience and cross the floor to the Liberals in time to save the province.


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## marina628 (Dec 14, 2010)

NOOB said:


> Still deciding. At the moment, I'm leaning towards selling as I believe my house is not an ideal rental.
> 
> Deciding factors: it's new home kept in pristine condition, was never bought to be a rental, just finished the basement with higher end finishings, selling and relocating will allow me to be mortgage free at 35.
> 
> ...


Courtice /Bowmanville new construction prices don't make sense for rentals and as for tapping into OPG ,my friend rented to a guy who was suppose to be there 3 weeks and he worked 6days only.By time she cleaned up the mess he left she had very little profits .Definitely not ideal unless you manage to get longer term contracts out of them.


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