*to Hanlon's razor: Never attribute to malice that which is adequately explained by stupidity.

Tuesday, 31 July 2012

Reposting: Unload your Toronto condo. Fast!

Just over a year ago I said the Canadian housing bubble was going to pop, but my mortgaged-up-the-ass friends told me it wouldn't. We have not bought in, and thank god. Even now we have several times the average net-worth for our age (shows how little Canadians save), and far more fluidity. Soon our idiot-friends will have a bigger mortgage than their house is worth.  Oh, and my profession is recession-proof; their's aren't.  Now the burst has begun, and summer of 2017 I see 50% off Vancouver's peak, and 30% off Toronto's.

How did I predict this? Easy:
- I have seen two fifteen year boom/bust cycles in Canadian housing already
- interest has never been cheaper, and when it becomes expensive these people can't carry their mortgages
- uhh... the American one went down just a few years ago and has not hit bottom yet, since banks are trying to hold inventory
- double/triple? dip recession
- recessions in the US, Europe, China..
- there is no more money left to squeeze from the middle-class
- get out when people say, 'but it's a reasonable price for Manhattan', in Toronto!
- get out when people say, 'but it's different here!'
- get out when people say, 'you're throwing your money away on rent!' (Like you can't throw it away on interest, property taxes, maintenance, renovations or condo-fees)
- get out when people say, 'buy now or you'll never get in!'

Especially the last one.  There are rent/mortgage calculators you can find online to see if you should buy-in or wait: WAIT!  Rents are reasonable in Toronto; real-estate still isn't.  You'll do far better to rent and invest for now, financially, and have far more flexibility (should you lose your sales job in a recession, for example).  Now we just wait to buy some moron's house...

Originally posted: Thursday, 3 February, 2011
Another business article from Toronto is telling you condo purchase is not a disaster.  First, consider the source: a business article.  Never mind that a crash has to come, even if you do not believe this economy will precipitate a crash: I have seen three housing bubbles in my forty years, so I shouldn't expect to see another three before I die?

Even in a stable economy, here are reasons from the article that you should never buy a condo:
In the GTA, the average asking price for newly built condos rose by 8 per cent to $530 in the fourth quarter of 2010, from $493 in the fourth quarter of 2009. [The price of a small house!]

In the former city of Toronto, new construction averaged $643 per square foot. In the downtown core, it was a lofty $723 per square foot.

Resale condominium pricing... with existing units selling for $374 per square foot on average in the GTA. In the city of Toronto it was $487, and in the downtown core it hit $518. [A loss of fifty to twenty-five percent for the seller!  However, that's per square foot, since the newer ones are smaller they will be even less attractive and the loss should be considerably more.]

The new construction market is typically supported by investors, while resale condos have a higher end-user component. [The very definition of a 'bubble'.]

Foreign investors looking to the relative safe haven of Canada have also piled into the condo market. Many of the investors are from Asia and the Middle East. [Get your money out now!  They will.]
On a related note, though this article tries to cheerlead the housing market, it sure sounds like the market is getting flooded by new housing.  But this article is more telling: too many people in Ontario are up to their eyeballs in debt.  I certainly did not predict the Toronto boom would last this long, but if 'value' has doubled in a decade, it should make the 'correction' that much more harsh.  Good thing I want to buy in in three years.

1 comment:

  1. Your last post features comments by the more better educated who were not wanting their middle class-ish offspring to be raised around those thought of as poor and, consequently, not so bright. I'm wondering if the 'have-nots' are in nearly as deep as the 'haves'. And I'm also wondering how this could possibly be blamed on education.

    Thanks for the post.