Investing in realestate

Red695

Red695

Well-known member
Site Supporter
Forum Sponsor
I was at ground breaking ceremony for a big condo build and I got to talk to some developers and investors about what the future of real estate looks like in the GTA. Lots of good arguments for why the market will remain stable but I am not sure I am convinced what with all of the trouble down in the states. I have some people telling me now is not the time to be sinking money in to builds that will take 4yrs to finish as there potentially be no market at that time due to economic turmoil. Anyone have any insight on this or opinions on this?
 
One of the big question marks is the interest rate situation. Sure they are low for the next couple of years and that is why prices are high. We think we can afford the big price tag because the interest is low. And people are in debt to the max. The Governor of the Bank of Canada keeps warning us to pay down our debts.
Now if the rates go up (and it wouldn't have to be by much) then some people are going to want to unload their big houses and the prices will come down like they did in the U.S.
Demographics. All the Baby Boomers are becoming Empty Nesters and are going to want to sell their big houses and get into smaller ones or condos.
Immigration. Will the government be able to find enough suckers to come to Canada to buy all our crap?
 
Developers arguing that the market will remain stable and advising to buy years in advance?? Who'da thunk.

Just one wafer thin mint...hmmmm?
 
Basketcase said:
One of the big question marks is the interest rate situation. Sure they are low for the next couple of years and that is why prices are high. We think we can afford the big price tag because the interest is low. And people are in debt to the max. The Governor of the Bank of Canada keeps warning us to pay down our debts.
Now if the rates go up (and it wouldn't have to be by much) then some people are going to want to unload their big houses and the prices will come down like they did in the U.S.
Demographics. All the Baby Boomers are becoming Empty Nesters and are going to want to sell their big houses and get into smaller ones or condos.
Immigration. Will the government be able to find enough suckers to come to Canada to buy all our crap?
Click to expand...

As it stands right now, 250 thousand people are allowed to immigrate into Canada per year and 30% choose Toronto and the number keeps growing.
 
Red695 said:
I was at ground breaking ceremony for a big condo build and I got to talk to some developers and investors about what the future of real estate looks like in the GTA. Lots of good arguments for why the market will remain stable but I am not sure I am convinced what with all of the trouble down in the states. I have some people telling me now is not the time to be sinking money in to builds that will take 4yrs to finish as there potentially be no market at that time due to economic turmoil. Anyone have any insight on this or opinions on this?
Click to expand...
I don't know who told you not to invest in a build that will take 4 years to finish, but let me tell you he must be one smart mother****er, or he can see what's plainly obvious.
 
7up said:
Developers arguing that the market will remain stable and advising to buy years in advance?? Who'da thunk.

Just one wafer thin mint...hmmmm?
Click to expand...


And therein lies the problem. I want to hear arguments from people who don't have their hand in that pot......I never knew his name was Mr. Creosote!!
 
Red695 said:
As it stands right now, 250 thousand people are allowed to immigrate into Canada per year and 30% choose Toronto and the number keeps growing.
Click to expand...

So that gives you 75,000 people moving to the GTA. What percentage are buying vs renting properties vs moving in with family already here? Where in the GTA are they moving?

Throwing out numbers like 250,000 people are allowed to immigrate to canada a year is useless. Did all 250,000 come? Show some data or don't bother throwing random numbers out there.
 
The people making money right now from those additional people coming into the GTA - are the developers! They're the ones who buy the land and then put up that building and then sell it in overpriced little chunks. The ones who buy those overpriced little chunks are rolling the dice.

Historically, real estate has been a good investment, most of the time. But the market can only withstand SO much. Housing in the GTA is on the limit of affordability for most normal people and I think it's unreasonable to expect that it will go to a significantly greater percentage of people's income (where is the money going to come from?). On top of that, interest rates are more likely to go up than down in the long term and they sure have a lot more room to go up, than they do to go down. If the interest rates go up, it drives affordability in the wrong direction and that tends to drive prices down. On the other hand, if the economy continues to stumble, which postpones the increase in interest rates, that results in average income not increasing, which means there is not room for the cost of housing to go up.

My view at this point is that it's wise to buy a place to live in, but not to rely on it as an income source.
 
I think the answer lies somewhere in the middle. Is real estate in the GTA a great investment right now that will yeld awesome returns in the next few years? Probably not. The days of prices going up 10% a year are over. Things are cooling off and yes, anyone expecting to get rich off real estate alone would be a fool. Are things really bad, and it's a terrible place to put your money and you will be broke in a few years? hell no! Interest rates are NOT going to be jacked up 3+% in the next 2-3 years. It would kill the economy! 1-2%? Maybe, so budget accordingly if you're purchasing right now but if you're expecting rates to double than you're nuts (not in the short term).

And what is a good investment right now anyways? Low interest rates means it's not worth sitting on your money cause intereest is crap. The european stock markets are in the toilet, the US is the same..........sure, the return on real estate investements are looking grim right now, but the returns for most alternatives aren't looking so hot either. 3, 2, 1, until someone mentions buying gold. :D
 
When you say invest, what are you refering to? An "Income" property? Moving from renting to owning?

I've been keeping my eye to the housing market for the last two years as at first i was purchasing a home and then looking for a place for my mother and now looking at possibly moving to a bigger place.

I believe the housing "bubble" has reached its platou and has become to the point that even with all the hype and BS saying like "The real estate NEVER goes down" people simply cannot leverage themselves anymore and even with great interest rates cant afford housing.

I recently discussed rates with my mortgage broker as my mortage will be up for renewal next year and shes telling me there is no way she will be able to get my the rate i got the first time. Which is okay as i expected this, but it shows a trend of going away from ultra low interest rates.

People dont realize how much their mortgage rate goes up with even a few % rise in interest rate.

even a rise from 3% to 10% (BTW, interest rates were around 14% in the early 90s) so dont say how it will never go that high), the mortgage rate shoots up from $1500 to around $3500 on a $380K mortgage.

With all the turmoil in Europe and US borrowing 28cents out of every dollar they spend, that cant stay like that forever.

The entire world is running out of money to borrow to each other.
 
I work as a mortgage broker. i speak with realtors on a daily basis. and from them, they are very cautious about purchasing property as an investment.
if you are to buy so as to live in the property. grow a family etc that is fine.
but as only an investment. people are being cautious
what gets my red flags going is meeting with a young person making $50k per year but has bought two new construction properties, with deposits and all, fully expecting to finance both homes. oh and each purchase is approx $500k each.
this is when i start getting concerned.
 
silvrsurfr said:
what gets my red flags going is meeting with a young person making $50k per year but has bought two new construction properties, with deposits and all, fully expecting to finance both homes. oh and each purchase is approx $500k each.
this is when i start getting concerned.
Click to expand...

Idiots gonna idiot......not much you can do about that
 
Red695 said:
Do tell!
Click to expand...

Never pre-buy anything, unless it's custom made for you. If the developers won't sink their own money into it while under construction then why should you? Whether real estate is a wise investment or not is a tough call right now, but if you're going to buy something then definitely only buy something that exists!
 
^ I bought the house that I'm in now, before it was finished - but it was only a few months from completion, not years. First time I saw it, it looked like a finished house on the outside, but the inside was just stud walls, the basement concrete pad wasn't poured, no furnace, no insulation, no wiring. It actually worked out OK because I got them to change a small detail in the entranceway that I didn't like, and I got them to put the furnace and water heater in a different place that later allowed me to put a door from the garage to the inside in a place that I wanted it without having to move any of that stuff.
 
fastar1 said:
Never pre-buy anything, unless it's custom made for you. If the developers won't sink their own money into it while under construction then why should you? Whether real estate is a wise investment or not is a tough call right now, but if you're going to buy something then definitely only buy something that exists!
Click to expand...

I agree with your statement about never pre-buy anything. However I would argue that it's seldom for construction projects to happen without a bit of pre-buying or borrowing etc. The reason is that Builders are able to develop way way way more properties at the same time. I don't think it's as much about risk as it is leveraging their resources.
 
Actually it is about risk. They want to use your money to finance the development. They transfer the burden of capital over to you with no risk or interest payment burdens on themselves. The condo building falls down during construction or the developer defaults and you as an investor is stuck with the bill. You now own a small percentge of that land. Its no ifferent than stock market. Having a semi finished house is different. 4 years down the line its totally different. A friend did this and said never again. The stress was bad. And her financial situation changed that after depositing 50k 3 yearrs later she was having a hard time getting a reasonable mortgage.
 
Red, funny you should ask this - currently front page on The Star: http://www.thestar.com/business/art...ate-s-sudden-surge-in-gta-homes-for-sale?bn=1

I believe that 2 more important notes to take from the article (word for word) are as follows:

1. “...If new listings continue to grow at the pace they did in May for the remainder of 2012, the annual rate of price growth should begin to moderate on a sustained basis,” says Jason Mercer, senior manager of market analysis for TREB." [read: prices should be coming down in the long run, thereby affecting your overall monetary gain once you flip properties a few years down the road]

2. Some housing experts have blamed Toronto’s land transfer tax for putting off some Toronto residents from listing their homes and picking up that added up-front cost of moving. Others have raised concerns that baby boomers may be simply staying in their homes longer than anyone had anticipated, and not downsizing nearly as soon as many had expected. [read: that shiney new condo you pick up today may not sell so easily a few years down the road given the above "trend"]


If it's a condo you're looking at, I'd just be wary of how that market is going (a casual search on the 'Net pulls stuff like this: http://www.torontolife.com/daily/in...ket/2012/05/18/luxury-condo-sales-comparison/ where condo sellers are getting nervous as properties sit unbought, which may or may not tie in with the second point I listed above).

Of course, I'm but a neophyte at this - I figured that those amongst us who are more experienced at this can take what I've posted and make more experience predictions from it.
 
My view is that location is key. If you buy in an area with a high demand (either for living or for an investment property), then the value will always be high, and you will have no problem re-selling or renting it out.
I'm skeptical with so many "million dollar" developments that are happening north and west of the city. Demand is high now, which is why they sell for so much, but are you really going to be able to sell a house for more than a million dollars north of Brampton??
Forum Sponsor
 
You must log in or register to reply here.
Back
Top Bottom