Canada Housing/Debt: Trust me, I'm a landlord.

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

namaste friends: Sep 18, 2004; by Smythe

You need an account to read this:
http://www.ft.com/intl/cms/s/0/06e556b4-48d1-11e3-a3ef-00144feabdc0.html?siteedition=intl#axzz2kHMwqxdQ

quote:

Robert MacFarlane, a long-time crane operator, surveys his empire from the top of one of Toronto�s flashy new apartment buildings.

�I can see more than 50 tower cranes,� said Mr MacFarlane, whose bird's-eye photography from the country�s tallest crane have gained him online notoriety as interest in Toronto�s property sector escalates.

These cranes � which can offer clues to bubble-like conditions � emerged in response to lofty demand for condominiums from investors and homebuyers taking advantage of Canada�s ultra low interest rates.

�I�m even considering a condo investment myself,� Mr MacFarlane added.
But as home prices rally and construction projects proliferate � particularly in Toronto, Montreal and Vancouver � industry analysts say the country�s property sector is perched precariously at its peak.

David Madani, economist at Capital Economics, believes the nation is on the verge �of what will prove to be a prolonged correction�.

�Canada�s housing market exhibits many of the symptoms that preceded disruptive housing downturns in other developed economies, namely overbuilding, overvaluation and excessive household debt,� he adds.

Mr Madani�s comments chime with a chorus of policy makers, rating agencies and hedge fund managers who have warned of the risks posed by Canada�s overheated housing market.

Alongside Norway and New Zealand, Canada�s overvalued property sector is most vulnerable to a price correction, according to a recent OECD report. It is especially at risk if borrowing costs rise or income growth slows.

In its latest monetary policy report, the Bank of Canada, the nation�s central bank, noted: �The elevated level of household debt and stretched valuations in some segments of the housing market remain an important downside risk to the Canadian economy.�

The riskiest mortgages are guaranteed by taxpayers through the Canada Mortgage and Housing Corporation, somewhat insulating the financial sector from the sort of meltdown endured by Wall Street in 2007 and 2008. But a collapse in home sales and prices would be a serious blow to consumer spending and the construction industry that employs 7 per cent of Canada�s workforce.

Under the watch of Mark Carney, the former Bank of Canada governor who now holds the same job at the Bank of England, the country weathered the global financial crisis better than many industrialised peers. It was helped by a resilient housing sector, a strong banking system and tighter lending standards.

But the flipside of a low interest rate policy designed to buttress the economy has meant that household debt levels have hit record highs as homebuyers stretched themselves to jump into the housing market. That in turn propelled demand and prices.
The government tightened mortgage rules last year in an attempt to cool demand, but while momentum slowed a little, debt accumulation did not.

Household debt has risen to 163 per cent of disposable income, according to Statistics Canada, while separate data shows a quarter of Canadian households spend at least 30 per cent of their income on housing. This is close to the 1996 record when mortgage rates were substantially higher.

On a price-to-rent basis, which measures the profitability of owning a house, Canada�s house prices are more than 60 per cent higher than their long term average, the OECD says.
Although Canada has so-far defied a US-style property crash, recent surveys have raised alarm about parts of the market.

Year-to-date new home sales in the Greater Toronto Area � an area accounting for a fifth of Canada�s home building activity � are down by half from two years ago, according to the Building Industry and Land Development Association.

As existing construction projects in Toronto and elsewhere are completed, the pool of unsold properties will widen. Inventory levels are already above average in two-thirds of Canada�s housing markets, the Canadian Real Estate Association said.

Mr Madani forecasts a market correction in home prices over the next few years, predicting a 25 per cent drop.

But those that are bullish on the market point to resilient regional data. October sales of existing homes rose 38 per cent in Vancouver and 19 per cent in Toronto.

�It�s a mistake to think that what happened in US will happen in Canada,� said Gregory Klump, CREA�s chief economist said. �There was a lowering of credit quality in the US that has not happened in Canada. If anything, over the past four years tightened mortgage regulations have successfully prevented a housing bubble.�

Mr MacFarlane too has yet to be convinced of an imminent slowdown. �In the past when things have slowed down, there has been a distinct �feeling� from the boots on the ground perspective. I don�t really sense that right now.�

Even so, any strength now is not expected to last. The central bank says any continued upward momentum will exacerbate the problem, setting up the housing market for an even harder fall.

Nothing new in the article that hasn't already been discussed. I think it is notable that the FT is taking notice.

# ? Nov 10, 2013 22:08

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# ? May 12, 2024 07:08

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Cultural Imperial posted:

You need an account to read this:
http://www.ft.com/intl/cms/s/0/06e556b4-48d1-11e3-a3ef-00144feabdc0.html?siteedition=intl#axzz2kHMwqxdQ

Nothing new in the article that hasn't already been discussed. I think it is notable that the FT is taking notice.

Surely this sort of thing is troubling for the housing pumpers. They dismiss Canadian bears as being bitter or jealous or whatever... But that's now the FT, the Economist, and a big American news property recently also (Bloomberg?).

# ? Nov 10, 2013 22:23

etalian: Mar 20, 2006

I liked the classic quote about how Canada will not get a bubble pop from the inflated housing market since the economic and credit controls are so good:

quote:

�It�s a mistake to think that what happened in US will happen in Canada,� said Gregory Klump, CREA�s chief economist said. �There was a lowering of credit quality in the US that has not happened in Canada. If anything, over the past four years tightened mortgage regulations have successfully prevented a housing bubble.�

# ? Nov 10, 2013 22:55

namaste friends: Sep 18, 2004; by Smythe

etalian posted:

I liked the classic quote about how Canada will not get a bubble pop from the inflated housing market since the economic and credit controls are so good:

It's brilliant because tighter lending was no good for Canada because so many people needed easy access to credit and Uh something about jobs blah blah blah.

# ? Nov 10, 2013 23:18

namaste friends: Sep 18, 2004; by Smythe

Lexicon posted:

Surely this sort of thing is troubling for the housing pumpers. They dismiss Canadian bears as being bitter or jealous or whatever... But that's now the FT, the Economist, and a big American news property recently also (Bloomberg?).

Never mind Goldman Sachs saying that it's a problems either. This country I tells ya

# ? Nov 10, 2013 23:19

blah_blah: Apr 15, 2006

Lexicon posted:

Surely this sort of thing is troubling for the housing pumpers. They dismiss Canadian bears as being bitter or jealous or whatever... But that's now the FT, the Economist, and a big American news property recently also (Bloomberg?).

Not really, it's been somewhat well-known for awhile that lots of hedge funds have or have had fairly significant short positions in the Canadian housing market.

# ? Nov 10, 2013 23:26

LemonDrizzle: Mar 28, 2012; neoliberal shithead

blah_blah posted:

Not really, it's been somewhat well-known for awhile that lots of hedge funds have or have had fairly significant short positions in the Canadian housing market.

How do you short a housing market?

# ? Nov 10, 2013 23:31

etalian: Mar 20, 2006

LemonDrizzle posted:

How do you short a housing market?

There are piles of stocks/ETFs which targeted the real estate market.

# ? Nov 10, 2013 23:55

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

LemonDrizzle posted:

How do you short a housing market?

I think the theory is you short the retail/wholesale construction material vendors, the mortgage insurance companies and the mortgage companies. I believe most of the companies that directly build are private, but a number of their lenders or supplies are probably shortable.

Home Capital Group (HCG) is one financing company that gets mentioned that will be particularly vulnerable to a housing correction and should be shorted if you think a market correction is coming. It's stock has increased by ~45% since July though, so good luck with that. Something, something, something about market irrationality outlasting your solvency, something...

# ? Nov 11, 2013 01:19

etalian: Mar 20, 2006

ocrumsprug posted:

I think the theory is you short the retail/wholesale construction material vendors, the mortgage insurance companies and the mortgage companies. I believe most of the companies that directly build are private, but a number of their lenders or supplies are probably shortable.

Home Capital Group (HCG) is one financing company that gets mentioned as probably be particularly vulnerable to a housing correction and should be shorted if you think a market correction is coming. It's stock has increased by ~45% since July though, so good luck with that. Something, something, something about market irrationality outlasting your solvency, something...

The US bubble has lots of interesting examples for the ripple effect in which everything from REIT to direct home builder stocks tanked. Canadian financial stocks would also get burned in a big way in the aftermath of a housing bubble.

# ? Nov 11, 2013 01:21

namaste friends: Sep 18, 2004; by Smythe

etalian posted:

The US bubble has lots of interesting examples for the ripple effect in which everything from REIT to direct home builder stocks tanked. Canadian financial stocks would also get burned in a big way in the aftermath of a housing bubble.

Would they really?

I thought all the lovely non-existent subprime risk was insured by the CMHC. The banks have very little skin in this game.

# ? Nov 11, 2013 06:04

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

Cultural Imperial posted:

Would they really?

I thought all the lovely non-existent subprime risk was insured by the CMHC. The banks have very little skin in this game.

It isn't all with the CMHC as there are private insurers in the mortgage business too. The government just gave a large loan guarantee to one of them last year. :downsgun:

The problem with the banks would potentially arise in the case that loan defaults started to happen and the banks got asked for their documentation. All of the liar loans that got made could get their insurance invalidated. (Thoough I cannot imagine the government letting the banks suffer too much.)

ocrumsprug fucked around with this message at 19:16 on Nov 11, 2013

# ? Nov 11, 2013 08:23

namaste friends: Sep 18, 2004; by Smythe

This is so meta.

http://m.theglobeandmail.com/report...?service=mobile

# ? Nov 11, 2013 19:13

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

ocrumsprug posted:

Something, something, something about market irrationality outlasting your solvency, something...

Yeah. It's often easy to predict the future. It's hard to predict when the future will arrive. If you'd shorted RIM the day after the 2007 iPhone announcement, you would have been bleeding cash and incurring sleepless nights for quite some time, possibly bankrupting yourself in the process.

# ? Nov 11, 2013 23:37

Pixelboy: Sep 13, 2005; Now, I know what you're thinking...

Lexicon posted:

Yeah. It's often easy to predict the future. It's hard to predict when the future will arrive. If you'd shorted RIM the day after the 2007 iPhone announcement, you would have been bleeding cash and incurring sleepless nights for quite some time, possibly bankrupting yourself in the process.

I forget the quote... but something along the lines of "the market can remain irrational longer than you can remain solvent."

# ? Nov 12, 2013 00:31

etalian: Mar 20, 2006

Speaking of interesting parallels:
http://www.businessweek.com/articles/2013-11-11/south-koreas-debt-culture-fueled-by-spending-on-housing-education

# ? Nov 12, 2013 00:32

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Pixelboy posted:

I forget the quote... but something along the lines of "the market can remain irrational longer than you can remain solvent."

Yeah, occumsprug alluded to it and that's who I just quoted.

# ? Nov 12, 2013 02:00

namaste friends: Sep 18, 2004; by Smythe

http://www.cbc.ca/doczone/m/episodes/the-condo-game

# ? Nov 15, 2013 00:47

etalian: Mar 20, 2006

Cultural Imperial posted:

http://www.cbc.ca/doczone/m/episodes/the-condo-game

Looks like they already posted a summary of the points here:
http://www.cbc.ca/doczone/m/features/facts-from-the-condo-game

I like the fun fact about the quality of construction being much worse than a rental property since the whole pay on sale gives developers the incentive to trim construction quality since someone else can pay to fix the problems down the road through a condo fee jump.

# ? Nov 15, 2013 16:41

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

A frankly-bizarre cheerleading op-ed about condo construction in Toronto.

Conspicuously absent from the piece: the set of incentives from the Bank of Canada and CMHC, and the general housing hysteria, that caused this in the first place.

The Toronto Star posted:

http://www.thestar.com/opinion/commentary/2013/11/14/torontos_amazing_condo_boom.html

The worst of times are usually obvious, as in the case of Toronto under Rob Ford. The best of times can take longer to reveal themselves � as in the case of Toronto under Rob Ford, which is most likely to be remembered by future historians not for its political buffoonery but for the amazing building boom that has launched our city into the new century leagues ahead of its closest competitors.
To get a sense of just how far ahead, consider some of the usual suspects: Chicago, Boston, Manhattan, Atlanta, Los Angeles, San Francisco and Miami, which collectively gained 34,330 new residential housing units between 2009 and 2012, according to data collected by the U.S. Census Bureau.

Over the same period, according to city statistics, Toronto alone gained 56,444 new units � 20,000 more than the U.S seven put together. You have to add Seattle, Minneapolis and Philadelphia to the U.S. side of the balance before it tips. In broad terms, Toronto is building 10 times as much new housing as any comparable U.S. city.

This is more than remarkable, it is outstanding � both with respect to other cities and our own history. Many U.S. cities remain caught in the trap that enclosed Toronto a generation ago, with new residential construction at a standstill, rents soaring and growing pressure on government to provide the housing that private capital once did. But what was once an urgent issue and major government expense for us � affordable housing � is today little more than the stage for a minor sideshow in the ongoing Rob Ford farce.

The reason affordable housing is rarely mentioned in Toronto today is that we are creating so much of it. Condos selling at $500 a square foot may not be affordable in themselves, but they have a tangible effect on the housing market as a whole � an economic blessing contemporary Toronto proves in spades. It is no coincidence that the average monthly rent on an apartment in Toronto � $1,612, according to rentjungle.com � is lower than it is in all but one of the increasingly housing-starved U.S. cities cited above.

The trend lines are equally revealing. Rents in the most attractive U.S. cities are spiking as the economy recovers and building stays stalled. Rents in Toronto remain comparatively flat and look likely to fall as our miraculously bountiful supply of new housing skates ahead of demand and long-prophesied �peak condo� looms.

This is not to suggest that there is no longer any need for government to subsidize housing for the poor, but the condo boom has clearly relieved pressure for greater spending while helping to target aid more closely on the truly needy. And the broader economic benefits of so much new housing in the urban core are impossible to overstate. Jobs follow people, leading more people to follow jobs, which in turn leads more jobs to follow the more people in a virtuous circle of growth and prosperity.

There�s always room for more in the open city � more people, more jobs, more growth.

Gentrification is a dirty word south of the border because it inevitably means that long-established low-income residents in an up-and-coming neighbourhood must make way for high-income newcomers. But constant construction makes room for everybody in Toronto. Newcomers pour in, but nobody is forced out. Here, gentrification is a goal shared by all.
U.S. cities that fail to add housing despite strong demand risk becoming �luxury goods,� according to Harvard economist and leading urban theorist Ed Glaeser. Using heavy regulation to choke development, he says, they have chosen to grow not in buildings and population, but in price.

�A healthy city is one that has a healthy mix of demographic groups,� Glaeser told the New York Times in one of his many calls for what amounts to Toronto-style up-zoning. �Shutting out your 25-to-40 year-olds? That feels like a bad strategy for urban innovation.�

Almost inadvertently, freewheeling Toronto has tackled and solved the most difficult problem of emergent 21st century urbanism.

We have heard forever that it won�t last, which is undoubtedly true, but the cranes are still swinging and the main reason new starts have declined recently is that no fewer than 45,000 units � an astounding amount � are currently under construction.

And so what if the market �corrects� itself? That will just make housing in Toronto even more affordable, and the virtuous circle will continue to spin.

# ? Nov 15, 2013 16:52

Pixelboy: Sep 13, 2005; Now, I know what you're thinking...

etalian posted:

I like the fun fact about the quality of construction being much worse than a rental property since the whole pay on sale gives developers the incentive to trim construction quality since someone else can pay to fix the problems down the road through a condo fee jump.

Look at all those towers of glass in Vancouver -- and whisper to yourself:

"This was built by the lowest bidder."

# ? Nov 15, 2013 19:43

etalian: Mar 20, 2006

Pixelboy posted:

Look at all those towers of glass in Vancouver -- and whisper to yourself:

"This was built by the lowest bidder."

Plus all the condo gimmick features like a pool on the roof or massive glass windows, imagine what will happen 15-20 years if things such as the pool on the roof aren't properly maintained.

It's pretty much a smash and grab speculative business, putting down piles of condos without sense of city planning and also not worrying about long term durability since someone else can pay for the repairs.

etalian fucked around with this message at 21:19 on Nov 15, 2013

# ? Nov 15, 2013 21:15

Pixelboy: Sep 13, 2005; Now, I know what you're thinking...

etalian posted:

Plus all the condo gimmick features like a pool on the roof or massive glass windows, imagine what will happen 15-20 years if things such as the pool on the roof aren't properly maintained.

And you know that stratas are totally cool with a spending some extra cash on preventa--- nevermind.

# ? Nov 16, 2013 04:41

namaste friends: Sep 18, 2004; by Smythe

http://www.cbc.ca/news/business/average-house-price-in-canada-rises-8-to-391-820-1.2427778

quote:

The average selling price of a Canadian home was $391,820 in October, up 8.5 per cent compared to last year.

But a closer look at the numbers shows a split between hot markets in the West, and cooler ones in Eastern Canada.

The Canadian Real Estate Association (CREA) said the number of homes sold in October was 8.3 per cent higher in 2013 than it was in the same month a year earlier.

But the growth is almost entirely coming from Western Canada. In terms of total sales volume, the hottest markets this year are Calgary, Edmonton, and Vancouver, BMO economist Doug Porter said in a research note after the numbers were released on Friday morning.

"All three have reported double-digit volume increases, the only cities in that category," Porter said. "On the flip side, the only three cities with double-digit declines in volumes this year are Quebec City, Saguenay and Halifax (again, all east of Ontario)."

On a provincial basis, B.C. led the country with a 26 per cent increase in sales. There are more strong numbers as one moves east across the country, before starting to decline east of Ontario.

While strong on an annual basis, compared to the previous month, home sales dipped by 3.2 per cent. CREA chief economist Gregory Klump says the month-over-month dip in sales was evidence that sales in the late summer and early fall were boosted by homebuyers with pre-approved mortgages jumping in the market before rates headed higher.

Now that interest rates appear to be holding, Klump says, sales in the near term may be held in check by homebuyers who are in less of a hurry to buy.

Porter seems to agree.

"Looking past some of the wild swings [and the wilder headlines] seen in the past year, the broader trends in the Canadian housing market are surprisingly calm," Porter says. "With total sales basically flat versus a year ago so far in 2013 and almost every city sporting a modest, single digit price gain, we can only ask: Where�s the fire?"

The run-up in prices may not be sustainable, but there's evidence that sales volumes are indeed very balanced. So far this year, a total of 402,299 homes have traded hands across the country. That's just 0.2 per cent below levels recorded in the first 10 months of 2012. After rising every year until 2008, annual home sales have been pretty steady since then.

The $391,820 average rose 8.5 per cent from last year. But CREA notes that if the large, active markets of Toronto, Vancouver and Calgary are removed from the equation, the average price increased by 4.9 per cent.

NO BUBBLE HERE JUST SUSTAINABLE ECONOMIC GROWTH

# ? Nov 16, 2013 16:52

namaste friends: Sep 18, 2004; by Smythe

Not housing related but an indication of what kind of money is flowing around Vancouver:

http://vancouver.en.craigslist.ca/van/cto/4185946557.html

quote:

I'm selling my Murcielago SV. 1 of 350, less than 10 in Canada.

In colour Grigio Telesto.
Only 2700km.
Purchase from Lamborghini of Vancouver.
I'm returning to China next year after graduation so I have to sell it.

Serious buyers only.

Asking $388,888 firm. Will also accept trade + cash to take the car back to China. Must sell before Lunar New Year.

# ? Nov 17, 2013 17:17

Throatwarbler: Nov 17, 2008; by vyelkin

Cultural Imperial posted:

Not housing related but an indication of what kind of money is flowing around Vancouver:

http://vancouver.en.craigslist.ca/van/cto/4185946557.html

An indication of the kinds of idiots who live in Vancouver maybe.

http://www.cars.com/go/search/detai...onal&listType=1

...but sure why don't I go ahead and pay a shitload more money to some random craigslist nutjob who can't be bothered to list what transmission the car has or take photos better than a 640x480 circa 2003 cellphone pics. :effort:

# ? Nov 17, 2013 18:35

Baronjutter: Dec 31, 2007; "Tiny Trains"

All moved into my new downtown apartment, probably the best financial decision we've made (vs buying a condo) and a lot of this was thanks to this thread. We're paying about $1300 when you include utilities and everything a month on a great 2br place. People don't understand that the base mortgage is NOT what you'll be paying each month for a condo. We could have gotten something about the same size and location for about $1300 a month mortgage but that would not include transaction costs, condo fees, and all the other amazing little situations that come with pride of ownership, which, being pretty conservative, would be around another $300-400 a month.

My only question though now is how do I lay this out to family and stuff who say we're throwing our money away and "paying someone else's mortgage!!!" ? What is the math one uses to prove rent vs buy in these situations? I'm sure if we lived here for 20 years straight maybe buying would have been better. I know Victoria has one of the worst rent/buy ratios, almost as bad as Vancouver. But can someone explain this again ?

Baronjutter fucked around with this message at 20:32 on Nov 17, 2013

# ? Nov 17, 2013 20:29

man thats gross: Sep 4, 2004

Baronjutter posted:

All moved into my new downtown apartment, probably the best financial decision we've made (vs buying a condo) and a lot of this was thanks to this thread. We're paying about $1300 when you include utilities and everything a month on a great 2br place. People don't understand that the base mortgage is NOT what you'll be paying each month for a condo. We could have gotten something about the same size and location for about $1300 a month mortgage but that would not include transaction costs, condo fees, and all the other amazing little situations that come with pride of ownership, which, being pretty conservative, would be around another $300-400 a month.

My only question though now is how do I lay this out to family and stuff who say we're throwing our money away and "paying someone else's mortgage!!!" ? What is the math one uses to prove rent vs buy in these situations? I'm sure if we lived here for 20 years straight maybe buying would have been better. I know Victoria has one of the worst rent/buy ratios, almost as bad as Vancouver. But can someone explain this again ?

Basically just plunk your figures in here (don't forget the advanced settings for condo fees, etc.) and then look for a good benchmark people would understand such as "if I bought it would take me xx years just to break even vs. renting an equivalent unit".

# ? Nov 17, 2013 20:40

Precambrian Video Games: Aug 19, 2002

Lexicon posted:

A frankly-bizarre cheerleading op-ed about condo construction in Toronto.

Conspicuously absent from the piece: the set of incentives from the Bank of Canada and CMHC, and the general housing hysteria, that caused this in the first place.

at the quality of research in this op-ed. Average rents are lower in Toronto than in major US cities (single source: rentjungle.com, no actual figure given)! Well yeah, except it doesn't look like he made any attempt to normalize on any factors like the long transit times and poor services in some of the unattractive corners of the city, or the tiny vacancy rates in desirable neighbourhoods. Also no mention of the fact that rents are only stable because we have rent controls, and how there's very little new rental housing being built. Also no mention of the shoddy, substandard quality of many new condos or how sometimes windows fall off and kill people. Oh well, surely someone will be around in 15-20 years to pay for the repairs when these shitboxes start crumbling. Oh, and speaking of which, a lot of the (better-quality, but less sexy or glass-clad) apartments built in the 50's and 60's are due for some pretty serious repairs and revitalization. Who's going to pay for that, exactly?

# ? Nov 17, 2013 21:11

etalian: Mar 20, 2006

eXXon posted:

at the quality of research in this op-ed. Average rents are lower in Toronto than in major US cities (single source: rentjungle.com, no actual figure given)! Well yeah, except it doesn't look like he made any attempt to normalize on any factors like the long transit times and poor services in some of the unattractive corners of the city, or the tiny vacancy rates in desirable neighbourhoods. Also no mention of the fact that rents are only stable because we have rent controls, and how there's very little new rental housing being built. Also no mention of the shoddy, substandard quality of many new condos or how sometimes windows fall off and kill people. Oh well, surely someone will be around in 15-20 years to pay for the repairs when these shitboxes start crumbling. Oh, and speaking of which, a lot of the (better-quality, but less sexy or glass-clad) apartments built in the 50's and 60's are due for some pretty serious repairs and revitalization. Who's going to pay for that, exactly?

Yeah I remember reading some story about toronto condos being forced to do window repairs due to bad water leaks or even windows crashing into the streets due to shoddy workmanship.

Let me list the ways why the condo boom is a bad thing, even though there's plenty of blame to go around on the regulation side
-Low quality construction and workmanship due to the whole pay on completion and walk away business model
-On the flip in the rental model there's a bigger incentive for the company to do a higher quality construction and add in other improvements since keeping repair costs low is really important
-The whole shiny toy nature of the condo machine encourages impractical architecture which makes long term cost and financial stability much more challenging
-Adds in US style subsidized private sector credit risk into the economy due to things such as the CMHC
-Bad city planning leads to isolated neighborhoods which aren't adequately connected to good local amenities, too many single bedroom units or not enough connection mass transit
-The whole condo boom model focuses on appreciation not affordability as the overall end goal for the owner
-Massive growth of housing creates additional credit risk through things such as HELOC

Pretty much a more sane policy would be to subsidize new rental development to at least get buildings would last much longer before getting torn town and also be more practical by not having things like rooftop pools.

etalian fucked around with this message at 21:40 on Nov 17, 2013

# ? Nov 17, 2013 21:35

namaste friends: Sep 18, 2004; by Smythe

Baronjutter posted:

My only question though now is how do I lay this out to family and stuff who say we're throwing our money away and "paying someone else's mortgage!!!" ? What is the math one uses to prove rent vs buy in these situations? I'm sure if we lived here for 20 years straight maybe buying would have been better. I know Victoria has one of the worst rent/buy ratios, almost as bad as Vancouver. But can someone explain this again ?

Congrats on the rental. Re: explaining the benefits of renting; connect your laptop to a large screen tv, load up google spreadsheet and start adding up the costs of renting vs. owning.

Cite NOBEL PRIZE WINNING ECONOMIST Robert Shiller and his thesis that housing prices revert to the mean that is inflation.

# ? Nov 17, 2013 21:46

etalian: Mar 20, 2006

Cultural Imperial posted:

Congrats on the rental. Re: explaining the benefits of renting; connect your laptop to a large screen tv, load up google spreadsheet and start adding up the costs of renting vs. owning.

Cite NOBEL PRIZE WINNING ECONOMIST Robert Shiller and his thesis that housing prices revert to the mean that is inflation.

Also the whole amortization table is another good one about "throwing" money away, the first few years of mortgage payments are mainly interest handed over to the bank.

Many sites also offer handy tools you can tweak to include information such as property tax and insurance costs:
http://www.nytimes.com/interactive/business/buy-rent-calculator.html

etalian fucked around with this message at 23:04 on Nov 17, 2013

# ? Nov 17, 2013 23:01

apatheticman: May 13, 2003; Wedge Regret

etalian posted:

Also the whole amortization table is another good one about "throwing" money away, the first few years of mortgage payments are mainly interest handed over to the bank.

Many sites also offer handy tools you can tweak to include information such as property tax and insurance costs:
http://www.nytimes.com/interactive/business/buy-rent-calculator.html

Keep in mind the NY times site may be including some US only tax breaks.

# ? Nov 17, 2013 23:54

Shifty Pony: Dec 28, 2004; Up ta somethin'

Baronjutter posted:

My only question though now is how do I lay this out to family and stuff who say we're throwing our money away and "paying someone else's mortgage!!!" ? What is the math one uses to prove rent vs buy in these situations? I'm sure if we lived here for 20 years straight maybe buying would have been better. I know Victoria has one of the worst rent/buy ratios, almost as bad as Vancouver. But can someone explain this again ?

You really can't win honestly, just say you looked very hard at the numbers and renting fits in with your lifestyle and future plans. Keep it vague to prevent them from having anything specific to try and weasel in with. Even if you were to completely annihilate any of the money arguments a true believer in the power of the housing market (or someone desperately clinging to the hope that they didn't mess up by buying themselves) will just fall back to how you don't get the intangible warm fuzzy feeling of owning your own place.

# ? Nov 18, 2013 00:39

etalian: Mar 20, 2006

Whiteycar posted:

Keep in mind the NY times site may be including some US only tax breaks.

It doesn't include any tax breaks:

# ? Nov 18, 2013 00:54

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

Fitch Rating report that Canadian housing is 21% overvalued

cbc posted:

Sky high prices in the Canadian real estate market won't be climbing for much longer, says a report by global rating agency Fitch Ratings.

The agency forecast Tuesday that home prices across the country are in for a "soft landing" and will either flatten out or slightly decrease over the next five years. It estimates that current prices are overvalued by up to 26 per cent in some regions (21 per cent nationally) and could fall by no more than 10 per cent over the next five years.

Fitch Ratings said the Canadian economy will be exposed when this happens, as many homebuyers have financially stretched themselves to borrow for their home purchase and will be in for a shock once interest rates start to climb.

It noted a downturn in the housing sector will also impact jobs, as companies have scrambled to build new homes and push construction to record levels in recent years.

With the recent CREA release that Canadian home values are on average 390K, the wealth evaporation is going to be staggering. And in the specific areas that are skewed significantly above the average, it is going to be horrible to live through.

# ? Nov 19, 2013 23:18

etalian: Mar 20, 2006

ocrumsprug posted:

Fitch Rating report that Canadian housing is 21% overvalued

With the recent CREA release that Canadian home values are on average 390K, the wealth evaporation is going to be staggering. And in the specific areas that are skewed significantly above the average, it is going to be horrible to live through.

Even more since Canadian household debt number also passed the worst levels of the US bubble.

# ? Nov 19, 2013 23:23

namaste friends: Sep 18, 2004; by Smythe

gently caress all the shitheads in my building buying new bmws

# ? Nov 20, 2013 01:27

OhYeah: Jan 20, 2007; 1. Currently the most prevalent form of decision-making in the western world

2. While you are correct in saying that the society owns

3. You have not for a second demonstrated here why

4. I love the way that you equate "state" with "bureaucracy". Is that how you really feel about the state

etalian posted:

Even more since Canadian household debt number also passed the worst levels of the US bubble.

This is going to be so bad when it bursts. I'm a bit worried because my sister is living in Toronto and she will probably feel the poo poo tornado once it comes blazing.

It sounds pretty much exactly the same that happened in Estonia during 2000-2008. More and more money pumped into one sector, prices went out of control while everyone kept telling themselves that things are OK and there is no immiment crash. I mean there is no way that the situation in Canada will not end in a big horrific crash, right? And nevermind 20% reduction in the value of real estate, once the bubble burst in Estonia, the crappy low-quality, built during the boom years real estate dropped by a staggering 50-60% in some places.

# ? Nov 20, 2013 01:51

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# ? May 12, 2024 07:08

namaste friends: Sep 18, 2004; by Smythe

So knowing all this, why aren't you telling your sister to save her cash?

# ? Nov 20, 2013 02:09

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

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