real estate..... is it true??

[babyfinsta]

Is it true that the property in average will loose 10 to 30% in value in the next few year in canada? Appenrently the property are 30% overvalued... Im looking to invest in real-estate, i just don't know when and what!!! I've been reading a lot about it but everyone says the opposite! What do you guys think about it? especially toronto market i'm talking about.

buy a house/semi detached in an up and coming nieghbourhood in T.O if you can instead of condo. If you dont like maintenance issues than stick with condos. However, i probably would stick with a condo in the downtown core.
http://www.torontolife.com/informer/toronto-real-estate/2013/08/14/toronto-best-neighbourhoods/
no, condos will not go down in the next few years. reasons:

1.) interest rates are low and the market can still stand a increase in it anyways.

more importantly:

2.) immigration is still strong and no indication the govt will change it. over 100,000 people per year coming into GTA. ask where these people will live? unless this changes there still will be demand even as rental units.
3.) no purpose built rental buildings being built. Condos have been the de facto supplier of rental units. only recently have some builders started toying around with rental buildings now that rents have risen so much to justify the economics of building rental buildings. However, these purpose built rental buildings are more highend to justify the rents.
4.) Greenbelt Act will restrict urban sprawl thus increasing demand on existing lands. Hence reason why detached homes are rising in prices and lower price condos are in demand.

 

[SkyRider]

i am looking for an invest property, i won't necessary live in it, i just wanna buy it, rent it out, and maybe put some money on renovation if it need to,

Been there, done that, will never do it again.

Jeff Rubin correctly called the real estate meltdown in 1989. http://en.wikipedia.org/wiki/Jeff_Rubin

 

[Barca]

Every year for the last 10 plus years I hear the same thing. Wait for a correction and with waiting now you're priced out.

Waiting for 10 years means nothing, it's nothing more than a biased sample. I've lived through 2 housing corrections. They happen and they're painful. Do people think economic rules don't apply in Canada? Massive housing correction in the US but somehow Canada is immune?

Deniers in Canada sound eerily similar to gullible investors in the US before they lost their shirts

 

[Barca]

Seven. Netted over $700K. Any further questions.

Stalker!!!

And Warren Buffet made 50Billion investing in stocks. Doesn't mean they never go down.

 

[one.of.a.kind]

Waiting for 10 years means nothing, it's nothing more than a biased sample. I've lived through 2 housing corrections. They happen and they're painful. Do people think economic rules don't apply in Canada? Massive housing correction in the US but somehow Canada is immune?

Deniers in Canada sound eerily similar to gullible investors in the US before they lost their shirts

If one is in for the long term, say five to ten years, a correction will have no negative impact on you unless you decided to sell. Long term housing always goes up.

Yes, Canada is immune under that melt down scenario. Our bankers aren't liars and cheats like the Americans in those circumstances. Americans paid for American greed and unethical behaviour.

And Warren Buffet made 50Billion investing in stocks. Doesn't mean they never go down.

One can't compare stocks and real estate. Stocks can lose their entire value where real estate never will. I bought new in 1989. Closed in 1990 and sold in 1999. Made money.

 

[SkyRider]

What I have notice is that a lot of real estate companies and developers go bankrupt. The Reichmans went bankrupt. The developer of Place Ville Marie went bankrupt. Donald Trump went bankrupt. The real estate meltdowns in 1990 and 2008 took down a number of U.S. banks.

 

[SkyRider]

I'm starting to think that TERB has more than a few TREB members on it!

TREB members always say it is a good time to buy.

1) It is a good time to buy when prices are going up because prices are going up.

2) It is a good time to buy when prices are going down because prices are cheaper.

 

[Prelations2]

I like real estate bc I can drive by my investments , and touch the brick whenever I want, and see that they're still there covering their costs, drop off wine for my tenants at xmas etc. I don't need them to make me money now, just cover, and let the equity build up , while the mortgage gets paid down.

I did my numbers based on the worst case scenarios, and I come out relatively unscathed month to month. It helps to have a small rainy day fund just in case (tenants leave, tenants break something, apocalypse ha)

I'd say, take a look , do your numbers , then do them again.
If you can handle the worst case scenario, then you're fine. If not , then wait, and build up a larger down payment which will lessen your overall exposure.

And to be honest I missed out on a couple of opportunities over the past couple of years where I would have made good/ok money in 2015, but the numbers didn't work for me back then, and I didn't want to take on partners. I kick myself, but sometimes you have to grow at your own pace.

 

[SkyRider]

I like real estate bc I can drive by my investments , and touch the brick whenever I want,

You can do the same thing with bank stocks, just drop into your local branch.

Question: Did you ever get a telephone call from a tenant at 3:00 AM saying a pipe broke?

 

[detonader]

I've worked in the real estate market now for almost 10 years marketing new home developments. Talk of a market 'crash' or 'correction' has been circulating for years in the GTA market. While external factors such as falling oil prices can have an impact on the market at a national level (see the drops already in Fort McMurray, Edmonton, Calgary), the fact is that cities with high immigration rates such as Toronto, Vancouver and Montreal are insulated somewhat from those factors.

The US housing crisis came about due to an unregulated banking system that overextended on sub-prime mortgages to people who should never have had those mortgages in the first place. Canada's banking system, which has much tighter regulations is designed to prevent those sort of situations from arising. Here is a link to an article from the CMHC outlining some of the key differences between the Canadian and US housing systems that are in place to avoid collapses like in the US.

http://www.cmhc-schl.gc.ca/en/corp/nero/jufa/jufa_018.cfm

If you are looking to get into the real estate market as an investor, the condo boom that has transpired in the GTA over the past 5 years has been driven primarily by investors. However over the past year there has been a significant drop in the level of investor purchases of new units. This has led to builders and developers adjusting their unit mix to target more end users with their designs; larger units, more 2 bed units etc. That being said, because the condo market has been driven essentially by investors for so long, there are more units available downtown for rent already.

If you are looking for a long term investment, you may want to look at some of the commuter cities just outside the city. Innisfil for instance has incredibly 'cheap' homes by GTA standards, however industry experts are predicting Innisfil as one of the next places to boom, similar to Woodbridge 10 years ago. The expanding 407 will also drive up property values east of the GTA.

If you are looking for a quicker ROI, look to buying single detached in the city. Your property value will rise much quicker. I purchased a WWII style bungalow in Scarborough in 2008 for $320,000. This past summer an identical house next door without any improvements or upgrades sold for $610,000.

Now is a good time to get into the market as the banks have dropped their mortgage rates in response to the Bank of Canada, which surprised everyone with a rate drop when everyone was anticipating the opposite. If you are looking to buy property with the express intent of using it as your primary residence, then there is never really a 'bad' time. Corrections will come and go, and certain areas will feel it more than others. However this can often be ridden out if you plan on staying in that location for an extended time. Plus the intangible benefits of owning and living in the home will offset some of the financial set backs to some extent.

 

[theycallmebruce]

Low interest rates are keeping the housing market strong and house prices high. When interest rates start to rise, you can expect for every 1% increase in interest rates, house prices will fall by 10%.
A 2% interest rate rise will create a 20% correction in house prices, and so...

Do what you wish but buyer beware.

 

[Barca]

The question isn't whether you made money over 10 years - you can do that with a simple savings account -- the question is how did you do versus other investment options? How much more money would you have made if you had waited until 1991 to purchase that real estate? I'm starting to think that TERB has more than a few TREB members on it!

Bingo.

I tell friends who ask me for advice is to buy based on need (we all need to live in something) and not based on a speculative interest.

After taxes, expenses and lost opportunity costs, to me real estate is a wash. The only advantage is bank willingness to lend creating a leveraged investment. But dollar for dollar, real estate is an average investment at best, one with a lot of headaches.

People who throw figures about how much money they've made in real estate rarely account for what was spent after the purchase. It's always "I bought at $200k and sold at $300k so I made $100k!". Um, no.

 

[trouble321]

The Reichmans went bankrupt.

Partially accurate. Then rebuilt the family fortune in real estate.

If you're an accredited investor - construction financing with a reputable developer can be very rewarding.

 

[Barca]

The US housing crisis came about due to an unregulated banking system that overextended on sub-prime mortgages to people who should never have had those mortgages in the first place. Canada's banking system, which has much tighter regulations is designed to prevent those sort of situations from arising. Here is a link to an article from the CMHC outlining some of the key differences between the Canadian and US housing systems that are in place to avoid collapses like in the US.

http://www.cmhc-schl.gc.ca/en/corp/nero/jufa/jufa_018.cfm

This is one of many explanations of the credit crisis I have seen on this board that fails to capture all elements of the crash and its usually due to some built-in bias.

It always fascinates me that some of the most basic elements of economic theory gets tossed out the window while convenient principles get quoted selectively. That's a logical fallacy.

Canadians are massively overleveraged. Real wages have stagnated and in some places actually declined. And the "immigrant" story is a myth. Few immigrants can afford the level of prices Canadian homes have reached. Simple math tells us many Canadians are living a lifestyle they can't afford. At its core, cheap debt has hooked Canadians like a drug and when it comes time to dry out, Canada is going to suffer serious withdrawal. Using the point that it hasn't happened in the last 10 or 15 years only INCREASES the probabilities of it happening, not reducing it. What sane and informed person would say that about a city on a major fault line like San Francisco or Vancouver? Oh, there hasn't been an earthquake in a decade so the chances are less that it will happen?

All we have done in Canada with these artificially low interest rates is not only delay the inevitable, we've ensured that when it does happen, the effects will be more severe. Make no mistake, we are in a bubble. Just because it hasn't burst yet does not change the fundamental economic reality that it eventually will. Sometimes I feel like Pierce Brosnan in Dante's Peak. So who are you? The guys who choose not to listen because it is an inconvenient truth, or the ones willing to look at the situation objectively and take into account all the facts and take measures to stave off disaster?

I have no horse in this race. But it seems to me that those who are most adamant there is no bubble usually have a major stake in real estate interests?

 

[Barca]

Partially accurate. Then rebuilt the family fortune in real estate.

If you're an accredited investor - construction financing with a reputable developer can be very rewarding.

Reward is always a function of risk. Why do people forget this? Much like with any potential investment, if there is opportunity for great gain, there is potential for large losses. This is unavoidable.

 

[SkyRider]

Partially accurate. Then rebuilt the family fortune in real estate.

The Reichmans actually thought about diversifying. They looked at Abitibi (trees) and Gulf (oil). They also made the deal of the century when they bought 8 NYC office buildings because people thought NYC was going bankrupt.

 

[one.of.a.kind]

This is one of many explanations of the credit crisis I have seen on this board that fails to capture all elements of the crash and its usually due to some built-in bias.

It always fascinates me that some of the most basic elements of economic theory gets tossed out the window while convenient principles get quoted selectively. That's a logical fallacy.

Canadians are massively overleveraged. Few immigrants can afford the level of prices Canadian homes have reached. Simple math tells us many Canadians are living a lifestyle they can't afford.

Make no mistake, we are in a bubble. The guys who choose not to listen because it is an inconvenient truth, or the ones willing to look at the situation objectively and take into account all the facts and take measures to stave off disaster?

But it seems to me that those who are most adamant there is no bubble usually have a major stake in real estate interests?

Over leveraged. Yes, big time. Do we stop moving forward though. No. My glass is half full. It seems yours is half empty. It's also a common thought that everyone should own a home. It's a nice goal but not realistic.

I've been hearing the bubble burst theory for years. I'd say there will be another correction but it will only have a severe impact on properties and people who have high percentage to worth mortgages. There is nothing in the world that can correct that really.

Any home owner has real estate interests.

Bingo.

I tell me friends who ask me for advice is to buy based on need (we all need to live in something) and not based on a speculative interest.

After taxes, expenses and lost opportunity costs, to me real estate is a wash. The only advantage is bank willingness to lend creating a leveraged investment. But dollar for dollar, real estate is an average investment at best, one with a lot of headaches.

People who throw figures about how much money they've made in real estate rarely account for what was spent after the purchase. It's always "I bought at $200k and sold at $300k so I made $100k!". Um, no.

Sorry my friend I can't agree with that statement. Rent and you have nothing. Buy and you will end up with something. If you're lucky you'll get the benefit of a windfall. An example was the introduction of the harmonized GST/Sales taxes. All property jumped a few points with no incurred cost. The carbon tax is coming. It's going to happen again.

All of this is some what like a leased car. You have nothing. Buy you have some things. And yes, before it's said, there are exceptions to the rule so to speak.

 

[parisbeautiful222]

I've worked in the real estate market now for almost 10 years marketing new home developments. Talk of a market 'crash' or 'correction' has been circulating for years in the GTA market. While external factors such as falling oil prices can have an impact on the market at a national level (see the drops already in Fort McMurray, Edmonton, Calgary), the fact is that cities with high immigration rates such as Toronto, Vancouver and Montreal are insulated somewhat from those factors.

The US housing crisis came about due to an unregulated banking system that overextended on sub-prime mortgages to people who should never have had those mortgages in the first place. Canada's banking system, which has much tighter regulations is designed to prevent those sort of situations from arising. Here is a link to an article from the CMHC outlining some of the key differences between the Canadian and US housing systems that are in place to avoid collapses like in the US.

http://www.cmhc-schl.gc.ca/en/corp/nero/jufa/jufa_018.cfm

If you are looking to get into the real estate market as an investor, the condo boom that has transpired in the GTA over the past 5 years has been driven primarily by investors. However over the past year there has been a significant drop in the level of investor purchases of new units. This has led to builders and developers adjusting their unit mix to target more end users with their designs; larger units, more 2 bed units etc. That being said, because the condo market has been driven essentially by investors for so long, there are more units available downtown for rent already.

If you are looking for a long term investment, you may want to look at some of the commuter cities just outside the city. Innisfil for instance has incredibly 'cheap' homes by GTA standards, however industry experts are predicting Innisfil as one of the next places to boom, similar to Woodbridge 10 years ago. The expanding 407 will also drive up property values east of the GTA.

If you are looking for a quicker ROI, look to buying single detached in the city. Your property value will rise much quicker. I purchased a WWII style bungalow in Scarborough in 2008 for $320,000. This past summer an identical house next door without any improvements or upgrades sold for $610,000.

Now is a good time to get into the market as the banks have dropped their mortgage rates in response to the Bank of Canada, which surprised everyone with a rate drop when everyone was anticipating the opposite. If you are looking to buy property with the express intent of using it as your primary residence, then there is never really a 'bad' time. Corrections will come and go, and certain areas will feel it more than others. However this can often be ridden out if you plan on staying in that location for an extended time. Plus the intangible benefits of owning and living in the home will offset some of the financial set backs to some extent.

I think that comment answered the most to my questions. I still have a lot of doubt in what i should do but thank you for your answer everyone!

 

[GPIDEAL]

For those old enough to remember, GTA house prices to-day reminds of 1989. Also, I'm concern when I hear some people saying they are buying houses and/or condos for "investment" purposes.

A smart man once told me that your principal residence is not really an investment.

However, real estate in general, has always been a good investment, but I can vouch for a 50% decline in land in the recession of the 90s (wrote it down for tax purposes to benefit from the Jake Friesen case against the CCRA or MNR back the, until the government changed the law on write-downs of single real estate investments).

 

[SkyRider]

However, real estate in general, has always been a good investment,

In the long run and don't overleverage. Anyway, old old trader told me once that there is "never a bad time to own the Royal Bank". I listened and the Royal hasn't let me down although there have been ups and downs along the way.