# Future of Real Estate



## jane21august (Jan 29, 2018)

What do you think about the future of Real estate will there be a downfall or uprising in the real estate market?


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## Mortgage u/w (Feb 6, 2014)

No one can predict this so your odds are always going to be 50/50 no matter the conditions.

One can speculate on a short term horizon but when you consider home ownership to be long term, my speculation is positive.


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## Just a Guy (Mar 27, 2012)

My speculation is, as interest rates rise, and the cost of borrowing gets more expensive, housing prices will corrrect as people can't afford to pay as much for the same properties.


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## can_84 (Jul 2, 2011)

I would have to agree with Just a Guy --> debt is what drives modern day real estate if you look at our finance system the banks just cycle money. As the cost of borrowing goes up home prices will stabilize or come down.


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## grayemma (Jan 23, 2018)

The simple fact is that house prices are rising much faster than incomes. Houses will become unaffordable to many Canadians. US interest rates are on a slow path upwards and Canadian rates will eventually follow. Toronto is in a bubble but the real question is whether we will see an orderly slow decline in prices or more like a crash.


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## rl1983 (Jun 17, 2015)

I've been following a certain Miami Beach property for a while. The current owner purchased the house in 1999 for 1.5million. Its currently up for something like 8.5 million. That period of time has gone through the worst RE crash in US history. So I don't know what the future holds. It looks like it's up, up, up.


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## AltaRed (Jun 8, 2009)

rl1983 said:


> I've been following a certain Miami Beach property for a while. The current owner purchased the house in 1999 for 1.5million. Its currently up for something like 8.5 million. That period of time has gone through the worst RE crash in US history. So I don't know what the future holds. It looks like it's up, up, up.


That is so stupid of people when Miami Beach will be under water before the end of the century and beat to death long before that. People are soooooooo stupid.


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## rl1983 (Jun 17, 2015)

That might be true, but the same could be said for some areas of Vancouver too. Richmond especially.


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## AltaRed (Jun 8, 2009)

rl1983 said:


> That might be true, but the same could be said for some areas of Vancouver too. Richmond especially.


Yes indeed. There is a tremendous lack of seriousness and foresight about sea level rises. Whether one is a climate change zealot or denier, glaciers will continue to melt and sea levels will rise, all within the natural cycle of ice ages, etc. Oceanfront property near sea level is pretty much toast everywhere.


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## BigMonkey (May 31, 2016)

I personally think Canada is due for a big correction. It simply doesn't make sense that cities in the states have higher average income (by a substantial amount) and cheaper real estate. http://www.huffingtonpost.ca/2017/01/24/toronto-nyc-affordability-house-prices_n_14344230.html

I don't know why Canada's real estate hasn't popped with the rest of the world during 2008 when our underwriting practices are terrible. I think it would have been better overall for Canada had real estate popped back in 2008, as this run up is going to cause us more pain in the future.

I think expensive real estate is a bad thing. Wouldn't be better if houses were cheaper and people could afford to live in nicer and bigger homes. Rather than bug infested homes or tiny shoeboxes that costs over $1m?


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## AltaRed (Jun 8, 2009)

It was low interest rates and gov't continually relaxing qualification rules that drove up prices (it is demand that drives up prices). They should have left well enough alone a long time ago.


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## TomB16 (Jun 8, 2014)

I predict that people who have predicted R-E crashes every year for over a decade will also predict a crash this year. Further, one of these years they may be correct.

I have no interest or abilities in terms of short term predictions but I have near perfect vision in what is going to happen in the R-E market on the long term: It will go up.

Investment R-E is a business. You buy when the project will return on a level that is better than a guaranteed return plus the time investment. From there, you hold and troubleshoot for 6~30 years.

IMO, it makes no sense to hold R-E investments without leverage so any property needs to be remortgaged every 6~10 years to expand the holdings, as it makes sense. To hold a property for 30 years with the last 5 years being paid off, seems silly to me. Once the LTV goes much below 0.50, it's time to extract money and buy more houses.

If you can time the market, more power to you. I can't so I just look at it on a project level.

Quick story...

My highest returning property is a multi family that was an absolute wreck, purchased in 2012 which was a peak year. This market has gained very little, since then. We picked up the property for a song, converted it into dorm style accommodation for young jerseys and interns, and have done extremely well. LTV on that property is around 0.10, due to forced appreciation and the adjacency of new construction. The whole area is turning over. If I were a younger man, I'd remortgage and buy a bunch more property.

For those who don't recall, 2012 was a year in which R-E was almost guaranteed to crash. We ignored the market predictions due to great looking project numbers. If market values halve in a few years, when we sell it, we will still be exposed to a monstrous capital gains liability.

It seems to me, investors make out well most of the time. Speculators make out well some of the time. For some reason, the vast majority people prefer to speculate.


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## BigMonkey (May 31, 2016)

TomB16 said:


> I predict that people who have predicted R-E crashes every year for over a decade will also predict a crash this year. Further, one of these years they may be correct.
> 
> I have no interest or abilities in terms of short term predictions but I have near perfect vision in what is going to happen in the R-E market on the long term: It will go up.
> 
> ...


I agree that real estate does gone up over time. But given the current status, the valuation for real estate does not makes sense. It is simply too high for the average family income. There are many factors such as: people buying with money they don't have which are lent out by banks on investors behalf who typically wouldn't lend out to these borrowers. But have received a guarantee from that the government the investment will be covered them if the borrower defaults. Artificially suppressed interest rates, foreign investments.

No one can predict when the real estate will decline, but it is agreed by many world renowned think tanks that the fundamental characteristics for Canada simply doesn't make sense. 

I disagree with investors coming out unscathed, as their investment is highly dependent on people continuing to rent at current market prices. If there is shift in economy, rental revenue could decrease, leading to negative cash flow. This combined with increased interest rates and increase maintenance cost will result in being forced to sell property or eventual bankruptcy if their pockets are deep enough to keep paying the bills during this negative cash flow period.

The analogy to current Canadian real estate I would use is drinking soda everyday and getting physically bigger over time. No one can predict when this person will run into health problems, and just because it hasn't happened yet, it is quite clear that if something doesn't change, something unfortunate will happen.


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## Just a Guy (Mar 27, 2012)

Don’t confuse rents with housing prices. The two are not really related. They are driven by different markets. If the housing market collapses, and people lose their homes, that will put pressure on the rental market and may even drive up rents. 

My back of the napkin calculations indicate, to me, that real estate is 40-60% overvalued, and got there because low interest rates make it “affordable”. 

As for it hurting investors, that all depends on the prices they paid originally and how they’ve managed their money. Personally I bought places well below market value over the years, but I do know those who paid market price.

As to when, if interest rates keep rising, it’ll hit sooner rather than later as mortgages come up for renewal and borrowers realize how much damage compound interest can do.


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## Mukhang pera (Feb 26, 2016)

TomB16 said:


> I predict that people who have predicted R-E crashes every year for over a decade will also predict a crash this year. Further, one of these years they may be correct.
> 
> I have no interest or abilities in terms of short term predictions but I have near perfect vision in what is going to happen in the R-E market on the long term: It will go up.


Of the recent comments to this thread, this one is the most accurate.

As for the suggestion that low interest rates have caused hyperinflation of real estate prices, not really. I have cited before on this board one example of my own experience. Bought a shabby 1914 house in Vancouver in 1979 for $110,000, essentially land value. Saw it more rise to about $275,000 in a couple of years, then cut in half when the prime rate went to 22.75%. Sold for land value in 1989 - $525,000. A fivefold increase in 10 years. Ten years in which mortgage rates never went below 10%. Have we seen that kind of increase in any 10-year period of low interest?

Moreover, all the talk about "Canadian" real estate being overpriced is nonsense. Probably true in Vancouver and Toronto. Maybe a few other spots. Where I live, a 10-acre lot (minimum lot size here) sells for about $55,000. That was the price in the 1990s. Unchanged for 20 years. Idiots here calling that overvalued. 

And yes, while Toronto and Vancouver may be in for a correction, and likely will when mortgage rates get back to 10-11% in a few years, that too will be temporary. Twenty years down the road, today's prices in those cities will look cheap.


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## rl1983 (Jun 17, 2015)

Mukhang pera said:


> Of the recent comments to this thread, this one is the most accurate.
> 
> As for the suggestion that low interest rates have caused hyperinflation of real estate prices, not really. I have cited before on this board one example of my own experience. Bought a shabby 1914 house in Vancouver in 1979 for $110,000, essentially land value. Saw it more rise to about $275,000 in a couple of years, then cut in half when the prime rate went to 22.75%. Sold for land value in 1989 - $525,000. A fivefold increase in 10 years. Ten years in which mortgage rates never went below 10%. Have we seen that kind of increase in any 10-year period of low interest?
> 
> ...



So given say today's prices of an average house is 1 million dollars, could you see 20 years from now where that same house is worth 8 million? Like the example I posted earlier? If that's the case, the local wages have a long way to go to catch up.


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## Just a Guy (Mar 27, 2012)

I love how people pick and choose a few anomalies hen say that represents the whole.

First off, Vancouver and GTA are both anomalies, which I don't think anyone denies. Some of us "idiots" however, when doing out calculations, go to a place like stats canada and pick up something like the "average house price in Canada" which, somewhat surprising to some people, isn't $55k but rather nearly $500k. From that same site, one is able to find out something called "the average income of Canadians" which, again something of a shocker to some, isn't much more than $50-60k. 

Now, us idiots out there would conclude that, even with a dual income of $120k, an average house price of $500k is unaffordable once the interest rates get up to around 8% (which turns out, according to stats to be he historical average). Of course, here are people who think real estate will continue to rise, despite the fact that wages really haven't (who needs to actually be able to pay off debt these days) just because it has for the last 20+ years of falling interest rates.


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## Mukhang pera (Feb 26, 2016)

rl1983 said:


> So given say today's prices of an average house is 1 million dollars, could you see 20 years from now where that same house is worth 8 million? Like the example I posted earlier? If that's the case, the local wages have a long way to go to catch up.


Do you think wages have anything to do with Vancouver house prices?


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## Mukhang pera (Feb 26, 2016)

Just a Guy said:


> I love how people pick and choose a few anomalies hen say that represents the whole.


That's the difficulty with what I see posted here so many times on cmf. So many say "Canadian real estate is overvalued" when, in truth, it's just a small fraction of all the real estate in this vast country. Why not say "Vancouver and Toronto are overvalued"?


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## rl1983 (Jun 17, 2015)

Mukhang pera said:


> Do you think wages have anything to do with Vancouver house prices?


Definitely not, Foreign investment and FOMO drove the prices sky high. But if you want to maintain a work force in a city, you can't have unobtainable RE.


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## Just a Guy (Mar 27, 2012)

Mukhang pera said:


> That's the difficulty with what I see posted here so many times on cmf. So many say "Canadian real estate is overvalued" when, in truth, it's just a small fraction of all the real estate in this vast country. Why not say "Vancouver and Toronto are overvalued"?


Just because Vancouver and the GTA are extremely overvalued doesn’t mean that the other cities across the nation (Kelowna, Edmonton, Calgary, Saskatoon, Regina, Winnipeg, etc.) aren’t locally overvalued as well, just not to the same extent.

It’s quite easy to get the numbers from CMHC, stats Canada, etc. If you’d like to do some actual research.


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## Mukhang pera (Feb 26, 2016)

Just a Guy said:


> It’s quite easy to get the numbers from CMHC, stats Canada, etc. If you’d like to do some actual research.


I cannot imagine anything more dreary than doing such research. Moreover, I suspect that CMHC, statsCan, and such august bodies do not venture to set out an opinion as to how much each location is over/under valued. 

My point is that I have grown a bit tired of hearing seemingly for years now about how Canadian real estate is in for a "correction" or a "bubble" will pop, or whatever. Yawn. Yes, some places will see some of that, some more than others and some not. Just when, who can say? But it will come, so eventually the crash predictors will have something to crow about. I really don't care a whit, personally. I have no short or long-term plans to buy or sell anything in North America in the foreseeable future. In all probability, I'll go to my grave owning what I now own and my heirs can deal with what I leave as they see fit. Happily, there's enough there that the few properties that will attract some tax consequences on my passing will not impose a burden. I am comfortable with my estate plan. Real estate prices will continue to cycle, as they have since time out of mind.

South of the border we are starting to hear the same old saw about real estate prices having risen to unsustainable levels since they hit the skids in about 2007. Perhaps so in some areas, but there are a helluva a lot of smaller places in the US that have not followed suit. On occasion, I watch "House Hunters" on HGTV. I find myself frequently astonished by how much house one can buy in some places for as little as $250,000 or even less. Nice houses on good lots in what appear to be nice neighbourhoods. Where I live, one would be hard pressed to go Home Depot and buy all the materials and fittings to build such a house for anything close to that (have you priced a sheet of plywood lately?), never mind the cost of the labour to build it and never mind the price of a lot. I find it inconceivable that those places are about to "correct" to any noticeable extent.

Programs like House Hunters are good for the entertainment value. Usually it's a couple being shown properties by a realtor. They'll drive up to a house that looks quite decent, priced at something even as low as $150,000. One of the pair will say something like "Looks okay, but I was looking for a craftsman-style home". Then they'll walk in, perhaps admire the hardwood floors, but, oh dear, the kitchen lacks granite, it's not fully open to the main living areas, the bathroom looks "dated", no "double vanity" (an absolute sin), etc. What do these people want and expect for next to nothing? Good for a laugh. Yet we are told, that US house prices are over the moon. Sure. 

Just yesterday I came across an article written in January 2018 about the housing market in the U.S. area where I own a rental. It said prices in that area have risen 91% in the last 69 months (how they came to focus on exactly 69 months I do not know) and maybe something is about to give. Well, maybe it will. I have watched it tank before and stayed the course, as I shall continue to do. One observation I have made is that rents do not follow house prices. If the price of a house goes down 40%, one does not have to reduce the tenants' rent by 40%. Indeed, in the years when that property value was in decline, I still collected an annual rent increase. Actually no, I increased only every 2 years, but still an increase.



TomB16 said:


> IMO, it makes no sense to hold R-E investments without leverage so any property needs to be remortgaged every 6~10 years to expand the holdings, as it makes sense. To hold a property for 30 years with the last 5 years being paid off, seems silly to me. Once the LTV goes much below 0.50, it's time to extract money and buy more houses.



On this score TomB16 and I part company. But I suspect I am a lone seawolf in this regard.

For me, it makes perfect sense to hold a clear title investment. In fact, even JAG seems almost to be suggesting same, saying that those with mortgaged lands are about to “realize how much damage compound interest can do.” I have not gone back through all of JAG’s thousands of posts, but I seem to recall a time when he sung the praises of the technique of leveraging rental real estate to buy more, more, more. Perhaps his current view is tempered by the realization that yes, interest rates are poised to take off and that with catch some off guard. I think his 8% prediction is conservative. I expect 10-11% first mortgages will be back in a few years and that’s fine. Some of us lived with such for decades and did quite well. 

Getting back to the endless leveraging idea, there must be a few folks out there, like me, who reach a stage where enough is enough. Probably, if I owned a real estate empire like JAG’s, I would liquidate the whole kit and caboodle and buy one apartment building in Vancouver, for say $30 million cash. No Vancouver building in a good part of town is likely to return JAG’s touchstone rate of 1% per month. Me, I would not care about that. I am absolutely certain that, after expenses, with no mortgage to service, added to my other income, it would provide me with more income than I need or want. Sure, I could go and mortgage it to the hilt (or sell it) and buy 300 houses for $100,000 each, returning 1% per month, but that would turn me off. I would far rather have one high-end investment, not a whole lot to look after, in a place where the underlying land value will at least keep pace with inflation in the long term. That would suit my comfort level. But many here would see me as a fool for being satisfied with such a dog of an investment.


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## milhouse (Nov 16, 2016)

rl1983 said:


> Definitely not, Foreign investment and FOMO drove the prices sky high. But if you want to maintain a work force in a city, you can't have unobtainable RE.


There is so much shady stuff going on in the Vancouver housing market with respect to foreign money that is finally getting some attention. Great article in the G&M this past week outlining the circle between the drug industry, money laundering, gambling debts, shadow lending, capital controls in China, underground banking in China, and the Vancouver housing market.


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## AltaRed (Jun 8, 2009)

Good post Mukhang. I think it depend where one is at in the continuum of being an RE investor. Clearly starting out and building inventory, it is about leverage with the attendant risks if mortgage rates get out of hand. But it makes no sense to continue on that treadmill as one has reached some manageable limit. Either continue some leverage and invest in capital markets or wind down the leverage entirely by a certain age. It is only if someone is trying to build a RE empire aka REITs, Trump et al that one would want to continue high leverage. When is enough enough....


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## Just a Guy (Mar 27, 2012)

The leverage isn't the issue. I still leverage my properties 100% at the time of purchase. The thing that matters is the purchase price. If you buy at a huge discount to market, it's doesn't matter what the leverage rate is, especially if the cash flow covers it and makes a profit. 

Now, I don't tend to releverage my existing properties, but then I don't need to the properties I buy cash flow from the beginning even with 100% leverage. 

The nice thing about multiple properties is the multiple income streams. Lose a tenant, no big deal the cash keeps flowing in. 

As for research, it's funny to hear that from a guy who reads all the court proceedings he can out of BC. I personally thought that kind of torture was banned in the Geneva conventions. 

Funny, no one thought USA real estate was overpriced in 2008...until the cheap mortgages disappeared. Then it recovered as the middle class snapped up investments at low interest rates, bringing prices back up to where they were in 2008...I'm sure they are much more affordable this time when interest rates rise...why wouldn't they be? After all earning power has been on the decline.

I'm sure Canada will be similarly protected, after all what's another $50/month for each 100k borrowed as the interest rate rises 1%. To the average homeowner, who supposedly can't handle a $2000 emergency by all reports, that's only about $200/month, every month, for each 1% interest rate rise (we've only seen a 1% rise in the last year with more increases predicted) come renewal time...I'm sure those idiots, like me, are just thinking the sky is falling for no reason.


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## TomB16 (Jun 8, 2014)

Mukhang pera said:


> On this score TomB16 and I part company.


We may not share the same perspective but I appreciate your point of view.




Mukhang pera said:


> Getting back to the endless leveraging idea, there must be a few folks out there, like me, who reach a stage where enough is enough.


This is where you and I rejoin company. We have enough.

Our LTV is down significantly due to forced appreciation. Also, we haven't bought any new property for a while. We are now in the process of getting out of R-E. It will take some years.

I don't want to leave a bunch of property for my wife to manage/renovate/sell. We have well sufficient worth to live very nicely on 4~5% annually. We don't have any children to pick up the work or to pass along the assets so some charity is going to end up with an extra can of soup in their donation box.


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## BigMonkey (May 31, 2016)

As an individual that would like to start a family one day. I try not to get bogged down by dollars value of the real estate. All I know is I want a house of a certain size/quality and if I can comfortably afford it.

From a continuity of the city perspective, high real estate price is not ideal. If you told me if I went out and got a 500 sq ft apartment for $450k and it would go up to $550k next year. Thats great from a dollar perspective. But it doesn't change the fact that raising a family in a 500 sq ft apartment is not ideal, and everything else has raised up proportionally. The only way I could actually benefit from this is to exit out of the city and look for another place to live.

I know several people who have left or are looking to leave Toronto and Vancouver earning decent amount (100k+), citing their exit is due to houses they can afford look like "crap holes". They said they didn't work hard, put in all those long hours, or go to school for 10+ years just to live like a person on social assistance. For fun, see how many you can guess right: http://www.crackshackormansion.com/


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## Just a Guy (Mar 27, 2012)

One way to help mitigate the problem is to not buy. If there are no buyers, demand goes down along with prices. Of course we live in a society obsessed with ownership. I don't know how many times I hear, I want to own so I get my money and don't give it to a landlord. In reality, with their high mortgages, they are really just renting from the banks, pretending they have ownership. 

Many of the properties I buy get picked up from people who discovered this the hard way. 

Same thing lead to the price buildup in the USA in 2008, "everybody deserves a home policy", even if you can't afford it. No one should have to rent...


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## TomB19 (Sep 24, 2015)

I don't share your point of view, jag.

A homeowner's cost is mortgage interest plus tax plus maintenance. I that is higher than rent, then rent is cheaper. Even if the ownership cost is a bit higher than rent, rent will increase over time faster than ownership cost.

Each payment reduces the mortgage principle, increasing the owners net worth. Appreciation adds to the owners equity, as well. These things are invisible.

In the case of a rental house, the cash flow is the tip of the iceberg. Most of the gains are equity gains caused by debt retirement and market gains which are not cash in pocket. I can see how a lot of people would not be happy with the "virtual" nature of r-e gains. The vast majority of the gains aren't realized until the property is sold.


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## rl1983 (Jun 17, 2015)

TomB19 said:


> I don't share your point of view, jag.
> 
> A homeowner's cost is mortgage interest plus tax plus maintenance. I that is higher than rent, then rent is cheaper. Even if the ownership cost is a bit higher than rent, rent will increase over time faster than ownership cost.
> 
> ...


Another aspect of having a mortgage/owning a place is the control you have. As long as you keep up with the payments, you are where you are. No worries about landlords renovicting you, increasing rents to ridiculous amounts, and so on and so forth. I'm still paying $800/month for my condo where I'm sure others renting in this building are paying $1500/month.


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## tdiddy (Jan 7, 2015)

rl1983 said:


> Another aspect of having a mortgage/owning a place is the control you have. As long as you keep up with the payments, you are where you are. No worries about landlords renovicting you, increasing rents to ridiculous amounts, and so on and so forth. I'm still paying $800/month for my condo where I'm sure others renting in this building are paying $1500/month.


Right, on the flip side some people sleep better at night knowing they have the flexibility to move quickly if they need to. 

Will be interesting to see how things pan out here in BCs market with recent tax changes, plus strengthening rent laws. 

I'm not predicting a crash myself here, too much pent up demand, but doubt that we will be seeing gains of the same degree that have been there recently.


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## AltaRed (Jun 8, 2009)

Housing is like sex, religion or politics. Personal bias is everything and there will never be agreement. Home ownership to me comes with a lot of baggage and cost and lack of liquidity that I would prefer to do without. That said, spouse and I own our current PR so that pretty sums it up.

Added: I agree the BC changes, if and when they occur, will have some effect on housing demand at the margin, but mostly it will be a non-event for most.


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## lonewolf :) (Sep 13, 2016)

The fed will pursue high interest rates to help normalize interest rates to help pension funds that are rapidly collapsing.

The problem with real estate is its value depends on lending. Back in the 30s the government extended mortgage to 30 yrs to get the price of real estate up. Previously mortgages were for 5 years. Because of the 30 year mortgage prices have risen to reflect the accumulative amount of earning available. If there was no lending real estate prices would collapse to 10 cents on the dollar till cash buyers became interested.


The compounding effect of higher interest rates will cause municipalities that are burdened with debt to raise property taxes. ( who wants to own when you can rent ?)

Technology will change the way homes are built making homes cheaper to build, able to withstand tornadoes, cheaper to heat & cool who is going to want the older technology homes ?


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## TomB19 (Sep 24, 2015)

When property tax goes up, so does rent.

I've never met a landlord willing to subsidize a tenant.


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## lonewolf :) (Sep 13, 2016)

TomB19 said:


> When property tax goes up, so does rent.
> 
> I've never met a landlord willing to subsidize a tenant.


The market decides rent prices not taxes. BC empty house tax kicks in next year $1000 a month on 600,000 home. Taxes are going up on BC real estate better to lower rent & not pay 2% empty house tax then raise the rent to cover the cost of the increased taxes or just sell. Can not get blood out of a stone if renter can only afford so much rent they can only afford so much rent. 

The political correct thing for the politicians to do when economy turns down is let the renter stay in the home rent free. After all make the rich pay if you have a home to rent out your rich.

The trend is tax the rich. In Ontario make the rich business owners pay higher min wage & is looking to increase HST so the business owners can collect more tax to fund the politicians fat pensions.


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## TomB16 (Jun 8, 2014)

Mukhang pera said:


> Getting back to the endless leveraging idea, there must be a few folks out there, like me, who reach a stage where enough is enough. Probably, if I owned a real estate empire like JAG’s, I would liquidate the whole kit and caboodle and buy one apartment building in Vancouver, for say $30 million cash.


Mukhang, I'm curious why you would sink $30M into an apartment that might yield 16% when you could put your money into a small basket of businesses and comfortably make 10% completely hands off? Do you enjoy the rental business or perhaps you believe in it that strongly?


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## Just a Guy (Mar 27, 2012)

TomB19 said:


> When property tax goes up, so does rent.
> 
> I've never met a landlord willing to subsidize a tenant.


(Duplicate post from another thread, but is also applies here...)

I like the way everyone assumes you can just raise rents to cover expenses whenever you want. Sorry people, this is a supply and demand business, the rates you can charge are based on what the market will bear, nothing else. If you overpay for your rental and your expenses are too high, you'll wind up losing your shirt and going out of business, just like any business. Just because you own something doesn't guarantee you a profit. Just because you made a profit yeaterday, doesn't mean you'll make a profit tomorrow if the government, or other outside influences, change the rules. 

This is why it's very important to buy at the right price and why I spend so much time looking for properties. I have to be able to make money in both good and bad times. I need to know my numbers better than others. For example, if the condo fees are too low, I can't say "bonus" because, eventually, they have to come up to their proper level, if not higher to make up the shortfall, or face special assessments. Just because people don't charge the right amount, doesn't mean the money isn't needed. 

I need to factor in for rising interest rates, which many don't believe have an impact, rising taxes, and rising costs...if I can't see long term profits in bad conditions, I don't buy. I may be very conservative, but I can't afford to lose money.


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## Pluto (Sep 12, 2013)

The future of real estate:

Its pretty obvious that the main driver of recent RE prices, particularily in TO and Van, was falling interest rates. For example, RE prices seemed fairly flat from 2010 to 2014. Then the bottom fell out of oil which precipitated the Bank of C to drop rates as they were worried about a recession. From that point to 2017 RE popped 50% or more in the hot cities. Falling rates fueled demand. 

Now we have the rising rate environment. As long as its rising, RE will struggle. And that's just the beginning as the recession that is bound to come will be an additional weight on RE prices. High unemployment is a sure RE Market killer, at least in the short term. But there in lies an opportunity for those lucky enough to have a decent income, and with a downpayment saved, for surely a recession will be met with falling rates, at the same time as house prices are soft. The oppertune time will be short, one to two years. 

To wait or not? Its a personal decision. If you buy near a peak, make sure you can afford it.


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## AltaRed (Jun 8, 2009)

And both those recently buying in GTA and GVR should look at historical prices from about 1985 to 2000. It can take a long time to get one's money back.


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## OptsyEagle (Nov 29, 2009)

Yeah, I always loved it when politicians would talk about lowering interest rates to make housing more affordable. Interest rates do not make housing more affordable, higher supply or lower demand makes housing more affordable. If interest rates decline in a high demand, lower supply environment it just puts more money in the hands of the sellers. If interest rates decline in a higher supply, lower demand environment it just puts more money in the hands of the buyers.

In essence, interest rates have no effect on the prices of housing...only supply and demand does. Interest rates just magnify the effect being caused by supply and demand.


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## AltaRed (Jun 8, 2009)

+1 It is surprising how dumb politicians can be. Interest rate manipulation AND easing mortgage terms is not the way to affordability. Ample supply is.


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## twa2w (Mar 5, 2016)

I am not sure what your 800.00 consists of. Is this just your condo fees and taxes? If so how much capital do you have sunk into the condo that could be earning a return
The person paying 1500 rent is not paying condo fees, property taxes, or any repairs to condo and will not be on the hook for any special assessments.

I recently looked at condos for potential future downsizing
Condo purchase price was about 250,0000.
Condo fees were about 600 month plus 150 in taxes.( condo fee included utilities)
I could rent the same condo for 1250 a month( or less). So the Landlord would be making 500 a month after paying taxes and fees. Also less some potential vacancy and repair. Not much of a return on a 250k investment.
Oh and the condo owners had just had a 20,000 special assessment.

Of course this situation could change depending on demand for condos versus demand for rentals( assuming no rent controls).

But I agree, the control is nice and the ability to do as you please with your own place. As others have noted, rental also has benefits. 
You have to do what is right for yourself and your stage in life


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## Mukhang pera (Feb 26, 2016)

TomB16 said:


> Mukhang, I'm curious why you would sink $30M into an apartment that might yield 16% when you could put your money into a small basket of businesses and comfortably make 10% completely hands off? Do you enjoy the rental business or perhaps you believe in it that strongly?


A combination of enjoy & feel strongly. Part of it is I like bricks and mortar more than paper. I can drive by and see it. I know it will be there tomorrow. In a good Vancouver location I know the land value will at least keep apace with inflation, as will the rents. 

As I said, a $30 million building would take care of my needs and wants quite nicely. I that sense I am perhaps out of step with many here. Most people, I think, even those who do not tarry in places such as the cmf forum, have an insatiable appetite for money. There is never enough, never mind too much. For me, if I have have sufficient to allow me to maintain the living standard I have set for myself and my family, and to provide future security, then I am content. I have arrived. Can down tools. For me there is a point where enough is enough.

It appears that a lot of us, when we get, say, the nice 3,000-square-foot house in Kerrisdale and we drive a Cadillac Escalade, we are content for awhile, but soon seek to get more money to enable a move to a Shaughnessy mansion and the purchase of a Bentley. Once there, we want more money, perhaps for a yacht, a flat in London and condo in New York and a Lear jet. Even for those who are not so acquisitive of material things, it seems to be human instinct to want to amass more and more wealth, even if just to watch it pile up. Seems to make folks seem warm and fuzzy. Some also get a high out of the bragging rights. They feel superior. I happen not to be so driven. Perhaps I am a sloth. An inferior being. One who will never rise to the pinnacle of wealth accumulation. If I arrive at the pearly gates, I'll likely be gently but firmly redirected to the paper mâché gates, more in keeping with my station when in life.

It is unlikely that those of us who are well and truly content with less than being in the league of Warren Buffet et al. are believed by most. We claim to be content because we have no choice. We are bitter and angry with ourselves for not having achieved the heights. Sour grapes. That's okay by me. Only I have to be satisfied. No one else.


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## Just a Guy (Mar 27, 2012)

twa2w said:


> I am not sure what your 800.00 consists of. Is this just your condo fees and taxes? If so how much capital do you have sunk into the condo that could be earning a return
> The person paying 1500 rent is not paying condo fees, property taxes, or any repairs to condo and will not be on the hook for any special assessments.
> 
> I recently looked at condos for potential future downsizing
> ...


You left out a mortgage payment on the $250,000, that will eat up almost $950/month (assuming a 20% down payment), so your "profits" are already nearly a $450 loss each month, forgetting vacancy or repairs, or special assessments.


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## lonewolf :) (Sep 13, 2016)

Mukhang pera said:


> A combination of enjoy & feel strongly. Part of it is I like bricks and mortar more than paper. I can drive by and see it. I know it will be there tomorrow. In a good Vancouver location I know the land value will at least keep apace with inflation, as will the rents.
> 
> As I said, a $30 million building would take care of my needs and wants quite nicely. I that sense I am perhaps out of step with many here. Most people, I think, even those who do not tarry in places such as the cmf forum, have an insatiable appetite for money. There is never enough, never mind too much. For me, if I have have sufficient to allow me to maintain the living standard I have set for myself and my family, and to provide future security, then I am content. I have arrived. Can down tools. For me there is a point where enough is enough.
> 
> ...


 Since self esteem is a comparative judgement one must use a standard to gauge ones esteem. If you use an irrational standard such as how much money, how many fancy cars, how many pretty women you date compared to someone else your confidence will yo- yo as to a certain extent it is out of your control as someone will always have more or less.

Since mans biological distinguishable trait is reason. Reason is the only rational standard that can be used to gauge ones esteem as you can choose to be committed to reason or not be committed to reason. 

Esteem is a basic omnipresent need that is inherent in everyone it entails that one is capable, worthy of living & committed to that which is good & true. It is the most important value judgement you can make as it effects all your other value judgement.


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## Just a Guy (Mar 27, 2012)

I wonder why people always associate accumulation with greed. 

I enjoy buying properties, I’m good at it. It’s intellectually stimulating. I also provide affordable housing for people, having been broke I understand how important that can be. 

If I sat around playing chess all day, or monopoly, people would just think of me as being retired and doing something stimulating but, if I play monopoly with real houses, I’m just accumulating for no reason, having amassed more than I can spend. It’s not like I don’t spend most of my time with family as it is.


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## lonewolf :) (Sep 13, 2016)

I can tell by the way someone talks about money if they will be rich or poor in the future.

There are only 2 types of money problems figuring out how to get it or figuring out what to do with it.

From experience I would rather be trying to figure out what to do with it.


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## AltaRed (Jun 8, 2009)

Just a Guy said:


> I enjoy buying properties, I’m good at it. It’s intellectually stimulating. I also provide affordable housing for people, having been broke I understand how important that can be.
> 
> If I sat around playing chess all day, or monopoly, people would just think of me as being retired and doing something stimulating but, if I play monopoly with real houses, I’m just accumulating for no reason, having amassed more than I can spend. It’s not like I don’t spend most of my time with family as it is.


So when will you stop accumulating? When you no longer have the mental capacity to do so? Or somewhat earlier when it no longer interests you? What then is the plan for all the money you cannot take with you? IOW, what is your Estate plan? Just curious......


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## lonewolf :) (Sep 13, 2016)

Nothing wrong with doing what you like doing.

People fail to understand if someone makes a lot of money by supplying a service they are adding value to peoples lives by providing the service.

The more positive the service the more money that is made


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## Just a Guy (Mar 27, 2012)

I'll quit when I want to. There hasn't been a need for me to do things for a while, but it's not my focus. I've developed systems and networks to handle the day to day operations, so I can do as much or as little as I want. It's all passive income for the most part. I can also "work" from all over the globe, so I don't see any point in stopping now. If I don't want to work again, I don't have to. Do a lot of volunteer work, I also help other people start their own companies, but mainly I spend time with my family volunteering and watching them do sports. 

Now, if I was chained to a desk, slaving for a paycheque, I'd question my sanity but, since I started building all this when I was unable to work physically, I designed it to work without me physically involved. 

As for the future, I've got kids who may decide to take over, or do something completely different with the assets. They've been raised with full exposure to the various companies, but no pressure to take over. I've given them the skills and knowledge to do whatever they want. Of course they don't expect to inherit anything, they weren't raised to feel entitled. 

Does it really matter that I don't spend it all? I don't see any reason to do it, and I don't see a downfall in my kids getting it, they were raised properly. I'm pretty sure they'd build on what I've already started.


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## Esco (Aug 8, 2016)

grayemma said:


> The simple fact is that house prices are rising much faster than incomes. Houses will become unaffordable to many Canadians. US interest rates are on a slow path upwards and Canadian rates will eventually follow. Toronto is in a bubble but the real question is whether we will see an orderly slow decline in prices or more like a crash


Downtown Toronto is also running out of space to build new condos. In the future I can see a bridge being built to the island and it becoming a new condo haven. Residents will fight it tooth and nail of course, but the real estate there is too valuable to pass up


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## Pluto (Sep 12, 2013)

In TO, in the 80's RE prices ticked up many years in a row, '84 to 89. By 89 home owners became euphoric and projected how rich they would be 5 years hence. A couple I know, DINK's, owned their own place and decided 89 was the time to buy another place and rent it out. One error was they bought new, which at that time and place meant a 25% premium over the same well maintained place used. the instant they bought and rented, 25% was gone. Then came about a 20% correction. Their tenants vanished in the night. New tenants willing to pay enough to cover thier costs could not be found. They decided to sell, and that's when reality struck: They had to sell 45% lower than they paid. 

it's true that the price they paid seems cheap by todays prices. Even so, their manic euphoria, combined with their ultimate depression contributed to several errors that cost them big. I still say only buy after a huge run up in price if you can afford it. I guess the problem is that euphoric people always think they can afford it.


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## AltaRed (Jun 8, 2009)

Shills like post 52 are exactly the reason NOT to bite. No RE firm in GVR or GTA will disclose what happened in the late '80s, and how many years it took to recover from those overheated times. Buyer beware...... More interest rate increases are coming as well.


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## kcowan (Jul 1, 2010)

In the GTA, it took 7 years to reach the low from 90 to 97.


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