All you need to know about how Toronto real estate happened last Saturday. Fifteen thousand people packed a tacky seminar on how to get rich buying property. Yes, in Toronto – now one of the most inflated, bubbly, frothy, horny housing markets on the planet, where prices rose 27% in a year and, according to Tony Robbins, they can never go down.
Robbins, of course, is a motivational speaker who knows diddly about Toronto real estate. The same with some dude named Pitbull. He spoke, too. And the kid realtor who hosts “Love it or List It” in Vancouver. But Brad Lamb was there, the condo flogger who finds math so challenging. And did I mention there were 15,000 others? They all paid between $50 and $150 for a seat, so the organizers made millions – which went to Robbins, the doggy guy et al.
The event was a ‘real estate wealth expo’, not aimed at helping people buy a home to live in, but full of encouragement to borrow massively and – as soon as possible – grab real estate as an investment. No money down. Rent it out. Watch it soar. How hard can that be?
There comes a time in the life of every bubble, usually near death, when the fools pile in at the moment of peak euphoria. History is rife with examples. The pattern is as ancient and reliable as human nature. Now, in Toronto, this is that instant. When speakers make big bucks telling you to do something, rather than doing it themselves, it’s time to go home. That’s now. When everyone is clamouring to buy the same asset, as they did with Nortel stock seventeen years ago, sell.
But let’s not just trust history. Instead, hard evidence. Facts, numbers, stats. For some, we turn to John Pasalis, a fixture on the Canadian real estate scene, and head of an outfit called Realosophy Realty. The thing that differentiates JP from the normal realtor is perspective and (dare I say it?) integrity. Very truthy dude.
Anyway, he has just released a large, indepth and highly interesting paper called “Freeholds on Fire: how Investor Demand for House is driving up Prices in the GTA.” The conclusion is simple. It’s not Chinese industrialists. It’s not moist Millennials. It’s not even the Bank of Mom or rapacious lenders at the heart of the current delusion – but Tony Robbins-inspired losers gobbling up every listing that materializes.
And why are they losers? Because, as Pasalis found, 95% of them are cash-flow negative. In other words, almost all of these ‘investors’ are bleeding money monthly. If the price appreciation stops (and it will), they will truly qualify as the GTA’s greater fools.
Here is the report’s summery page:
Lack of government data and competing explanations for Toronto’s skyrocketing real estate prices have resulted in uncertainty about whether the market is becoming unstable. Using an innovative method of measuring investor demand which looks at the number of houses being bought and immediately rented out, Realosophy’s John Pasalis finds evidence of speculative activity across the Greater Toronto Area, specifically:
- These investors are responsible for 17-21% of all sales in Aurora, Newmarket and Richmond Hill and 36-39% of all sales in some of the GTA’s hottest neighbourhoods.
- Whitby, Ajax and Oshawa all saw the steepest increase in sales to investors of over 400% in just 4 years.
- An estimated 95% of all investment properties purchased in 2016 are losing money every month.
- This subset of investors in the GTA real estate market alone accounted for 10% of all sales; all investors could be responsible for as much as 25%-30% of all sales. This behaviour, emblematic of bubble markets according to leading economists, not only prices out regular buyers, but eventually risks a market correction affecting all property owners. Regular buyers and sellers are advised to be aware of what Greater Toronto Area neighbourhoods are showing the greatest signs of speculation when making real estate decisions. Governments are called to implement the right measures to address the problems suggested by the data. Most notably, lenders currently underwrite mortgages for residential investment properties as if they are owner occupied homes, resulting in a loophole that allows buyers to finance money losing investment properties largely with debt; these loopholes should be closed by tightening lending practices.
In the past, this blog has pointed out that 52% of all condo purchases are currently being made by speculators, not owners. Virtually every one of those units will end up hitting the rental market unable to provide a positive rate of return for the investor. Even with 2.5% mortgages available, after financing charges, property tax, condo fees, insurance and the lost investing power of the downpayment, it is impossible to make money as a condo landlord. The situation is even more dire with detached houses or rental semis – now costing seven figures. Negative cash flow, with everyone gambling that prices will continue to inflate. As the Realosophy boss concludes, this is the reason a boom became a bubble, and will end in a bust.
What can be done?
The Ontario government asked the feds to impose a higher capital gains tax on spec real estate. They didn’t. So now it’s up to the provincial guys to levy a speculation tax on non-principal residence holdings – if they have the courage. Meanwhile the CRA is routinely forcing speckers to include real estate gains in their taxable income, not allowing the 50% capital gains tax exemption, because they consider speculation to be a business. Finally, as JP suggests, bankers should stop lecturing people about how risky real estate now is, and do something about it.
In any case, it’s only a matter of time. Fifteen thousand sweaty investors sealed it.
161 comments ↓
There is a sector in C4 I have been watching since 2016 June. These buyers are super eating it. It is truly a comedy unfolding before my eyes. Bought for mega. Rebuilt or renovated. Listed. Open housed. Relisted. Six months later. Rental pool. Now, here we are 2017 March with the rental monthly numbers being reduced multiple times. h aha ha ha ha. So funny……………. you cannot create stupid. You can only watch it happen.
Noteworthy, the numbers of MLS listing registrations per property; each change brings a new MLS number… that alone says ALOT about real estate boards and real estate data in Ontario.
make us proud Jimmy, make us proud.
For: “The thing that differentials JP from the normal realtor is…”, it should be “…differentiates…”. Also: “Here is the report’s summery page:” should be “…summary…”.
You’re welcome!
Unbelievable how these people got scammed to pay for seats to this event. Surprised Morneau does not want to intervene with these types of tactics being done right oit in the open.
I believe the data, Garth, but living in Vancouver, there are times when I doubt the logic.
Maybe prices will go up forever. What’s 1 mil today will be 1.3 next year. I never thought it could happen but 700k became 800 which became 900 and now here we are.
Not owning in this is a similar feeling as when the stock market is down, you know that things will get better eventually, but there’s no way to keep from feeling like you’ve made the wrong choice.
Hanging in there.
J
It seems Garth and the Realtors both agree that rich Chinese dudes buying Canadian homes isn’t a problem…..
Yet this BMO economist says something quite revealing:
“I find it amazing how for years, real estate experts told us that the foreign investor element was trivial in the market,” BMO’s Porter told BNN via email on Wednesday morning. “And yet now such a tax could trigger a recession, on the national economy?”
Full article found here: https://www.bnn.ca/top-toronto-condo-developer-warns-tax-on-foreign-buyers-could-trigger-recession-1.703067
Interesting, eh?
Did they at least get to do the hot coal walk?
#4 Wren Lacy on 03.23.17 at 5:58 pm
Unbelievable how these people got scammed to pay for seats to this event. Surprised Morneau does not want to intervene with these types of tactics being done right oit in the open.
++++++++++++++++++++++++
In my post I said, “you cannot create stupid. You can only watch it happen.”
I say to you and your post, “Try telling stupid what to do.”
And, good luck with that.
FOMO has gripped the GTA . How many of these 15000 have been to a party lately and listened to an acquaintance or BIL who claim they are killing it in the RE market with their rental properties ? I think more before buying a jacket than these people do before buying a POS for seven figures . But I like being debt free with a huge liquid portfolio and 14% of my NW in RE. That’s just me.
Would love for you to actually check out rental prices in cities where the rental vacancy rate is hovering around 0.5%. Your math is way, way off, especially given the price appreciation yr/yr since this blog begun.
I can see major cities supporting a median single family dwelling price of 1.2m as long as there is a rental suite option to provide income to reduce the monthly mortgage. Anything beyond that is just not sustainable, and frankly, I don’t know too many people who can cough up 250k for the 20% DP on that. Once those guys are gone, demand dries up. Are we there yet?
That was Calgary couple years ago, now rental properties all over the city sitting empty
Real estate will continue to be the investment vehicle of choice for most Canadians. Why? Because 1) the gov’t heavily encourages it through more favorable tax treatment and 2) because to most people RE is something that’s more stable and better understood than financial assets.
The Greater Fools. http://cdn.newsapi.com.au/image/v1/3393d7962335fe5b0e01d37e596a8142?width=650
wouldn’t the same apply to other asset classes (like equities) that have been fueled by low interest rates? I admit that stocks may not be as inflated as the GTA or Vancouver housing market but isn’t it still a risky bet to invest if we expect to see some cooling later this year?
I don’t think so. — Garth
“Using an innovative method of measuring investor demand which looks at the number of houses being bought and immediately rented out”
——————————————————————-
I have been living in Markham since 1979 and have never seen so many detached houses up for rent.
I went to a meeting kind of like this back in 1986 in St. Catharines – about 40 people in a house with one guy at dining room table explaining how the “pyramid” got everyone cash as long as you brought in new people. My dad and I ere invited by a relative and as I was standing there 2 more people showed up and stood beside me – I took one look at them, sized them up and whispered to my dad “cops” – we both went to the bathroom and quietly left – next day it was in the paper LMAO
“…The Ontario government asked the feds to impose a higher capital gains tax on spec real estate. They didn’t….”
__________________________
Judging from yesterday’s federal budget, Morneau isn’t stupid. He already knows his Ontario Liberal counterparts are already toast in the upcoming provincial election.
Guaranteed he’ll leave it to Ontario Liberal Premier Kathleen Wynne to troll for last-minute millennial votes and prick the GTA bubble with a specker’s tax, wiping out millions in fake homeowner equity, as he watches innocently from the sidelines.
#129 EhHey
Yes, data mining has been happening for several years. EVERYBODY already knew THAT.
Read “the shadow Factory” published in 2008.
No. Obama didn’t bug “the Grifters” apartment building.
Oh, and Nunes is in deep do do
http://www.cbc.ca/news/world/devin-nunes-trump-credibility-house-intelligence-committee-1.4038335
And yes, this is the mainstream media reporting. Not some obscure publication which is mainly famous for ranking US universities (poorly)
I hope Tom Vu comes to Toronto .https://www.youtube.com/watch?v=iQNdi-fRExc
So now it’s up to the provincial guys to levy a speculation tax on non-principal residence holdings – if they have the courage.
I don’t think so. The Province isn’t responsible for the housing bubble the Federal Government is. Well partly responsible: CMHC, bank regulations, interest rates these are federal. I think the best thing the Province can do is to help the federal government with its Housing Statistics Framework:
http://mcaf.ee/b0tzhj
I think that Ontario’s Land Registry Offices and MPAC could provide a lot of value.
https://www.ontario.ca/page/overview-land-registry
https://www.mpac.ca
That’s all good to hear in the spence that I’m not in the ponzu scheme, but, it seems very likely that our socialist government with a policy of “No Consequences for Ones Actions” will do there best at finding the ways to make people (savers) pay through huge tax on any liquidable investment returns…thus ever eliminating any chance of growth, All for the social good of course!
“In any case, it’s only a matter of time. Fifteen thousand sweaty investors sealed it.”
One day you will be right….nothing goes straight up forever. However….we have been hearing this same sentiment for 6+ years now.
Plenty of time to make your money and get out, then. — Garth
I got paid 5k to walk away from making an offer on a home. To be honest that’s what I tried to do, see if someone is stupid enough to pay me to walk away. And it worked now I’m going to try it again next week. I already set my eyes on the property I’m going to target. I love FOMO if I can pull it off again next week I’m going to try and do it twice the following week!
That is after the bubble burst and wastes the economy and the spectres who will cry “help us, we didn’t know”!
•An estimated 95% of all investment properties purchased in 2016 are losing money every month.
———————————————————
I purchased a new build townhouse in ancaster in 2015, was ready this year. paid 367,000. will spent another 2 grand on an a/c. $3500 for levies @ closing.
Rented on day 1 from a nice retired couple who upgraded the fridge and did all the window coverings.
$1875x 12 = $22,500 total rental income
-7536 mortgage interest (25 years @ 2.6%)
-4000 property tax
-1100 insurance
-2000 maintenance (although these people probably won’t be looking at me to spend another dime here)
positive cash flow $7864
that ain’t even a bad yield divided into my down payment, levies land transfer tax and closing.
(73,400+3500+1000+4000=81900)
7864/81900= 9.6% return.
and next door (same model) sold for $500K
I’ve done this x4 in ancaster. my other two rentals in Hamilton bring in more rent and I’ve paid less.
The post was about Toronto, not Ancaster, wherever that is… — Garth
Everyone has become a real estate speculator, including agents themselves. I tried to buy a property but refused to get in a bidding war, the winner a real estate agent who bought it as an “investment.” Went to an open house and a bidding war broke out between two foreigners. To say we have problems with housing trading like penny stocks in the GTA would be an understatement. Government doesn’t want to solve a problem that brings them in a tonne of revenue. I don’t see an end in site. I’m not sure how people are even qualifying for homes anymore. Where is all this money coming from?
Newbie’s DIY sample Garthfolio. Lookin’ for feedback in all the wrong places. Pleeeeeeeze and thanks.
XIU – 16% Cdn equity
ZRE 5% Cdn REITs
21% Total Cdn Equity
VTI 13% US equity (USD)
VBR 6% US small-cap (USD)
19% Total US Equity
XEF 16% Itn’l Equity
VEE 3% Emerging markets
19% Total Itn’l Equity
ZFS 6% Gov’t bonds
CBO 8% Corp bonds
VSB 9% Short-return bonds
XPF 18% Preferreds
41% Total Fixed Income
Hi Penny Henny.
Don’t get me started!
I’m miffed that SM is going to be giving away his book up at the General Store. Foolishly bought a copy. Wonder if I can expense it?
“They all paid between $50 and $150 for a seat, so the organizers made millions – which went to Robbins, the doggy guy et al.”
———————————————————
$50 and $150 for a seat. Average of $100. 100 * 15 000 = 1,500,000 in revenue. If you deduct the costs of the event for the promoters; space rental, taxes, security staff, …. they didn’t make millions at all, at least, not directly.
That said, motivational seminars are a good place to meet up single women and get laid.
That’s what the smartest guys in the room did.
Got that, Limited Sage?
—
Anybody want to make some projections for the Canadian economy?
Stagnant economy, interest rate rise, mortgage defaults, bank losses, protracted recession.
CIBC economist Ben Tal commented the housing crisis is a shortage of rentals giving people who need a roof a choice to rent instead of going in debt.
This is an opportunity for the Ontario government to stick a rental control clause in this new investor class opening up a huge choice of housing made affordable by the government without costing the government or the investors a penny. NOthing wrong with good government when it costs little to the taxpayer but gives a huge meaningfull benefit to housing and no added cost.
What could be better than opening up thousands and thousands of available rental housing in Ontario at no cost to the government and the housing is already built and ready to occupy. Put in the “rental cap and control” now so in the next ten or fifteen years some of the problem is solved and the government did not have to spend taxpayer’s money and the benefit is across the whole province and we can see and experience good government as it should be.
Meanwhile the CRA is routinely forcing speckers to include real estate gains in their taxable income, not allowing the 50% capital gains tax exemption, because they consider speculation to be a business.
———————————-
This is the reason we don’t need a speculation tax on principal residences. We already had one and it just needs to be enforced.
As an old tax guy, I don’t like the idea of arbitrary rules about what is and isn’t a principal residence. The more rules you write, the more spaces you have to leave between the rules that smartasses (like I used to be) can drive between. Think – I smoked pot but I did not inhale.
One simple rule change I would make would be a reverse onus provision. Under tax law, the onus is on CRA to show that a taxpayer breached the law. Under reverse onus, the taxpayer must show that he didn’t. Few people ever sell a principal residence in less than, say, three years. If you did, CRA would automatically send you a letter asking you to explain. If your spouse died, you lost your job or got transferred etc., no problem. If there was no obvious reason for the sale and/or you never really occupied the property, expect a reassessment. Most amateur speculators would shy away from dealing with an assured CRA review. Now that reporting of house sales is required, the cost of implementing such a system would be minimal.
#29 Jimmy on 03.23.17 at 7:15 pm
Hi Penny Henny.
Don’t get me started!
I’m miffed that SM is going to be giving away his book up at the General Store. Foolishly bought a copy. Wonder if I can expense it?
……
I’m only bringing 3 copies. One is for Garth. The other 2 for the two blog dogs that I antisipate will show up.
@13
All those house are for rent because their owners actually live in China lol
The new landlords are moving in — winning! lol
So people are willing to pay $50 to $150 for this crap, but they are not willing to pay a financial advisor a few hundred for an initial meeting and portfolio review!?
Actually the meeting and review are free. — Garth
Alberta Blog Dogs. Keystone is getting approved tomorrow.
Just saw a red trump like hat.
It read “Make Justin Trudeau a Drama Teacher Again.”
Anyone know where I can get one.
A buddy of mine rents a 3-bedroom house in East Los Angeles. He says that his ‘landlord’ (a large, private investment corporation), owns 80% of the houses on the block, and purchased ALL of those houses in the aftermath of the crash in 2009, from homeowners who were overextended, one way or another.
From what I understand, the neighbourhood was undergoing gentrification (read hipsters and specuvestors) prior to the crash, and the new investors bought those properties for pennies on the dollar.
Now THAT’s how you make money in Real Estate:
1. watch as small, local neighbourhoods become nice places to live, with properties increasing in value.
2. let the small fish buy at the peak of the market, and take on all the risk to renew properties, and gentrify the ‘hood.
3. sit on your ‘Hollywood millions’ while the bubble bursts
4. Cash in hand, walk in while the masses panic, and buy properties / liabilities for a pittance. Act like ‘you’re doing these poor people a favour’.
5. rent out the homes in the neighbourhood while you wait for the next bubble to burst. Charge above-market rents, because hey, it’s a great neighbourhood. Keep it that way, by selecting your tenants.
6. Drive down operating costs by making volume deals with painters, landscapers, tradesmen, avoid costly retrofits like sprinklers and seismic upgrades that are mandatory for multi-family dwellings.
7. Organize an annual ‘neighbourhood street party’ for your tenants, to build community spirit. Don’t tell them it’s not spontaneous.
8. When the time comes, sell the homes at market rates, or work with local government to re-develop the whole thing into a mall.
9. Profit.
John Maynard Keynes, the great grandfather of economystics, long ago pioneered the fine art of using fiscal stimulus (money creation) to encourage growth. And it’s been working ever since.
The idea is pretty simple. Not enough aggregate demand? Lend money into existence. Interest expenses too high? Lend more money into existence. Need even more money? Reduce fractional reserve holdings at the banks and lend even more money into existence. It is this sort of brilliance that earned him the title “Baron”.
From Charles Mackay’s great treatise Extraordinary Popular Delusions and the Madness of Crowds”, which is quite a long read, we learn that these sorts of bubbles and misinformation is a part of the human experience ever since property could be monetized. But it was Baron Keynes who saw the extraordinary advantage that could be gained by playing the system correctly.
It kind of works like a game of monopoly. Each player collects $200 dollars for passing go, but not much money ever actually leaves the system. So rents and property values skyrocket as the game goes on until landing on a fully developed property or two can bankrupt the unfortunate player who does so. Eventually all the wealth concentrates in the hands of one player who is considered the winner. It is much like our current economic system.
Of course the monopoly game, just like Keynesian economics, results in the bankruptcy of everyone in the long run. But as Keynes noted, “In the long run we are all dead.”
So my dear economystical pupils, it may seem like woo but you have to understand that if everyone else believes it you must too. Buy all the things. Stocks, bonds, real estate, gold, silver, whatever you can get your hands on. It’s all going up! Somehow you can even buy the debt of other people and it’ll go up too!
And never buy something like a house cash, use as much leverage as possible! Why have $500,000 of your own money in there on it’s way to $1,000,000 when you can put in $50,000 on it’s way to $1,000,000 (minus the loan). In the first example you double your money, which is pretty good, but in the second you multiply your money 10 times, which is a more reasonable economystical objective! Better yet, if you have $500,000, buy ten houses with $50,000 down payments and easily see your $500,000 become $5,000,000 in just a few short years! That, my friends, is the power of economystics. It’s better than playing the lottery! Although for small investors the lottery is still the preferred choice.
Wage growth and this so-called “full employment” thing is now so passe, with economystics having found the solution. Who wants to work anyway? Just buy all the things, sit back, and watch the magic.
Remember, economystics promises everyone a free lunch and no one working in the kitchen. If you can borrow the money and buy all the things wealth is yours.
A few of you will probably note that “buy all the things” sounds a little like it might be a “balanced portfolio”. Well, that’s marketing. It’s a little like how we sold CO2 as a pollutant. The difference would be that a “balance portfolio” attempts to smooth out the ups and downs (using correlations or should I say negative correlations, another economystical masterpiece in it’s own right) whereas “buy all the things” is just going for the gusto. But they both ride the same wave.
Remember folks, Trump didn’t get to be one of the world’s richest men by avoiding leverage or balancing his portfolio. He did it by borrowing yuuge and investing in New York property and building a few golf courses. He is an economystical master 1st class, and thus he can save the free world. Why golf courses instead of buying Subway franchises? Well, where is the money? Not in the pockets of the guy who eats at Subway. He is a genius.
@#26 Joe’s Rentals
I’ve done this x4 in ancaster. my other two rentals in Hamilton bring in more rent and I’ve paid less.”
*******************************************
And you divulge ALL your rental income to the taxman right Joe?
Nice find Garth, well written report that can be found here:
http://realosophyrealty.blob.core.windows.net/static/InvestorDemandHouses.pdf
Interesting that John Pasalis is recommending a foreign buyers tax much like Vancouver that you didn’t include in your closing recommendations, see excerpt below from page 31. Bring it on baby!
Foreign buyer tax and ownership
A single family home is the new gold. Just as investors historically turned to purchasing gold as a safe haven when there was uncertainty, foreign investors are
opting to park their cash in single family homes in the world’s most attractive cities –like Toronto.
While this behaviour is understandable, this injection of foreign capital inflates house prices higher than local factors like income and population growth would, at the expense of longer term residents who live, work, pay taxes and build the cities being bought into. Ironically, growing economic inequality may undermine the very social stability that all buyers, domestic and foreign, value in Toronto.
As a first step, Ontario should introduce a tax on foreign buyers similar to the one implemented in Vancouver by the British Columbia (BC) government, but with improvements.
This revelation invalidates the “prices are sticky on the way down” thesis – at least for this GTA RE market…
From the author Garth cites:
“This speculative mood and rationalizing of buying investment properties that in many cases people can’t really afford is so compelling that on more than one occasion I have overhead potential investors rationalize paying the expected shortfall in the carrying costs of an investment property through cash advances on their credit card. In each case, the investor’s
rationale was the same – who cares if they have to pay 25% interest on the $1,200 they need to borrow each month if they’re earning 25% on the $800,000 purchase price of their home?”
That’s awesome when prices are going up… But ummm, question:
What happens when prices stop rising, or go down?
SELL, SELL, SELL! X 15,000 RE Wealth Expo suckers I mean investors + 10’s of thousands more who are doing the exact same thing – All at once. Nothing but air below.
https://www.youtube.com/watch?v=A_sY2rjxq6M
My wife today told me that a couple that we know are moving back to Brazil because they can’t find a 2 bedroom apartment for less than 2000 in Toronto. My wife came here from Brazil when she was 19. She attended college and worked her ass off to make a better life for herself. So I asked her if she came here with what is going on with housing in the gta if she would’ve stayed. She told me HELL NO! So I started thinking at what point do people stop coming to the gta for a better life when wages have been pretty stagnant for years. And as a son of immigrants I know most immigrants come to a different country for a better life. Also at what point do kids growing up in a city start leaving a city because their only option is to either take massive debt or stay in their parents basement. As we left the restaurant today. I took a ride along queen west and I noticed that from York and queen to dufferin and queen which is a good 5km stretch, there are on average 2 store fronts empty on every block. I don’t know what is happening to this city. But if a cities economy is going to revolve around real estate it’s going to end up being a pretty sad city.
Garth, Tony Robbins does stock market investing as well.
https://www.youtube.com/watch?v=-QhHkRFtDUM
He does what he can shill. — Garth
Actually the meeting and review are free. — Garth
Ya but the services sure aren’t. However I still think it’s worth it. Doctors and small business people don’t have time to figure out markets, so a reasonable fee to have someone who does that full time makes as much sense as having a mechanic fix your car. If you can’t afford a mechanic, you try and fix it yourself and probably make it worse, or you just leave it broken. If you can make more money buy tending to your own business you get the car towed to the mechanic.
So Garth help me out here I forgot one thing. I know part of the fees are tax deductible but I can’t remember if it’s the RRSP part or the cash part or if I got it wrong all together. But I think it’s important when people decide what “accounts” are going with the adviser.
All fees on non-registered accounts are 100% deductible from taxable income. Fees for RRSPs come out of those accounts without being counted as income (the only such withdrawal permitted) so the government pays a big chunk of them for you. TFSA fees are not deductible. — Garth
#38 Smartalox on 03.23.17 at 8:02 pm
A buddy of mine rents a 3-bedroom house in East Los Angeles. He says that his ‘landlord’ (a large, private investment corporation), owns 80% of the houses on the block, and purchased ALL of those houses in the aftermath of the crash in 2009, from homeowners who were overextended, one way or another.
From what I understand, the neighbourhood was undergoing gentrification (read hipsters and specuvestors) prior to the crash, and the new investors bought those properties for pennies on the dollar.
Now THAT’s how you make money in Real Estate:
===
I did case study research on this re: South Korea. When the ROK had their IMF bailout in 1997, a lot of specuvestors got completely wiped out along with small & medium-sized companies. The smart sharks swept in and ‘saved’ the day by purchasing all of the great real estate. Fast forward a decade and the top conglomerates had cornered the market on all of the best real estate in the top-tier cities like Seoul, Incheon, Busan, etc.
A lot of these properties now have massive condo complexes, high-end department stores and subway stations. Millions into billions. Damn.
Of course its not moisters snapping these properties up. The banks may be lending loose but guys making 75k with a 100k from there parents are not buying 1.5MM YVR properties, or even 900k shacks in Mississausage. Was never a plausible scenario. The numbers don’t add up. Its either foreign investors or guys rolling over equity into new properties. Or likely a combo of both. And there are new numbers out in BC that show foreign money representing up to 25% of homes sales in some BC markets, that 5 percent number was and is bunk.
Curious crows eye
Mating mallards on the pond
Spring is surely here
And remember the “realtor” star of love it or list it vancouver is/was a actor who won the part on the show and then took his real estate liscence as part of the show !!
I really do believe the emergency interest rates a have screwed housing in the gta and Vancouver. These rates were brought in the aftermath of the Great Recession to stimulate the economy. What the government should do is have two sets of rates one for residential real estate and another for commercial investments, the types that actually create jobs because that’s what the low interest rates were meant for not to become a landlord.
“It’s not even the Bank of Mom or rapacious lenders at the heart of the current delusion – but Tony Robbins-inspired losers gobbling up every listing that materializes”
No doubt these are the people buying in the fringes of the GTA but they’re not the ones who started this nor are they the ones bidding $2-$3mil on Toronto houses. I’m sure the federal investigation and collection of data will eventually show that it was investors funnelling cash into privately held Canadian corporations that were the primary investors and speculators. Just as it was shown to be in London and what’s happening across the US.
Also if Vancouver was any gauge then this is not the finale.
#26 Joe’s Rentals
Your math is wrong and you are barely positive cash flow:
Mortgage payment $1,332*12=$15,984/year
Property tax $4,000
Insurance $1,100
I’ll leave out the maintenance to be nice
I’ll be extra nice and assume you don’t pay any taxes
I’ll be super duper nice and assume a 0% vacancy rate
Your cash flow = $22,500 – $21,084 = $1,416/year
If you spend more than $118 per month on maintenance you are negative cash flow for the year.
This also means your cash-on-cash return is $1,416/$81,900 = 1.73%.
You’ve (accidentally) made a giant bet that the market continues to go up, because I can think of better ways to earn 1.73% on my cash.
#41 The Great Gazoo – Good catch, the foreign buyer is definitely fanning the fire. It’s clear Morneau was too timid. Also clear that Polosz and the BOC are out of their depth in dealing with this, rates should have been normalized long before now.
I would advise anyone relying on Pasalis’ report to be very careful with how he comes to his numbers. Media is quoting everything as though his numbers are bullet proof and they are not. Because the data on the housing market is sparse, Pasalis simply makes up numbers and uses them to support his thesis. Looking at mls for rentals after houses have sold is hardly scientific – especially given that there are so many other places to list places for rent. Assuming 35% down on average prices and comparing to average rents – really stretching truths to suit ones needs in my opinion. I can’t argue the fact that we’re in a bubble, but I can spot shoddy sleuthing that’s obviously pandering to the theme of the day.
Please share your data and methodology with us. — Garth
Tony Robins is a form of entertainment. “motivational speaker” is something characteristic to anglo-saxon societies. Most other cultures do not have this …or doesn’t have it to this extent.
In my opinion motivational speakers are complete failures at anything else.
Can’t we do something to reward these altruistic “speculators” who buy expensive housing and then rent it out for a loss to those of us too poor to buy in Vancouver?
Perhaps we could donate a timbit ?
That’s my point Garth. We don’t have data and as a result, we cannot tell exactly what’s going on. Sure, people can speculate that foreign buyers are influencing markets – but until there’s hard evidence it’s simply speculation. Likewise with domestic investor/speculators, I see that the balance of offering to wanted ads on kijiji is skewed towards wanted ads – I couldn’t use this as proof of there being a shortage of rentals available because it could reflect who’s accessing the service, who has the ability and motivation to post ads, etc. In my opinion the Pasalis report isn’t worth the read because he’s stretching far and wide for his proof. Like I mentioned before, I can’t argue against the bubble – the metrics are there – leverage ratios etc. But as far as proving that investment properties are underwater, Pasalis does a horrible job making his case.
What a bunch of pimps at the Real Estate Expo.
Tony, Pit and former Mountie Mr. T must be really hard up for cash hosting that s%^ Show…
Almost as bad as My FUBU, pimping Entrepreneurship in Canada a little while back….
At least these people are EXPERTS!
If you have seen the CRAP lately from so called “Social Media Experts” who claim to be experts after 4 months of experience on the web in a” variety of platforms” that need to help you “build relationships”, “fine tune your brand”, Get you “more likes” , increase your “followers” , etc you would think the Moonies and Hari Krisnas were sane. HACK THIS.
Hello Sir,
Please advise if, for 18% of portfolio to be in USD, can someone buy any USD ETF from NYSE in TFSA account or there are restrictions set by CRA to have only certain ones. I was told there can be penalties from CRA. I read there is 15% tax withold but nothing about penalties
One day you will be right….nothing goes straight up forever. However….we have been hearing this same sentiment for 6+ years now.
Plenty of time to make your money and get out, then. — Garth
—
Also over half decade missing the opportunity of making way more than 6% per year.
Do both, obviously. — Garth
M103 past in the House of Commons.
It’s a nothing thing. Where was T2 when the votes were cast.
Most of us are sons and daughters of imagrartion, refuges in my case. You would be hard pressed to find a rasists in canada. It’s sort of what makes us Canadian.
But this bone head motion will divided the country
It was stupid and unnecessary. 99% of Muslims are good people. What the same shit we all do.
White picket fence to brag abour to our personal rivals in the made world of real estate.
This bill will bite T2 in the ass every time 1% of the Muslim community screams ala akbar and dose something stupid.
Who the hell is advising T2?
was in a meeting with a portfolio manager a few days ago. this guy meets with CEO’s of USA banks
he says bank of canada rate will creep up to 2.5 eventually. this is 2% increase. Gartho is right more normalization will be happening
so #26 joe renter will lose almost all his profits when his mortgage renews in ancaster. take into acct extra maintenance in 5 years time. it is not going to be extremely profitable. maybe breakeven or a tiny profit. most likely losses even with a rise in rent.
Also portfolio manager said cmhc is highly leveraged and in the case if shit really hits the fan. ie. there are alot of defaults in the future, if cmhc really audits the files when big banks want to make a claim on defaults and if they find fraud. that cmhc will most likely send the mortgage back to the bank saying that the fraud on the file will cause the mortgage to not qualify for mortgage insurance. then the bank will eat the loss
dont be too smug about canadian banks and credit unions. i know that some branches arent totally above board. the mortgage brokers are licensed and we have to be clean when we submit an application. but what some branches pull off makes our eyes water sometimes
the only sure things are death and taxes. and that this blog will remain pathetic
#7 Doug t on 03.23.17 at 6:11 pm
Did they at least get to do the hot coal walk?
$$$$$$$$$$$
Nope, Drywall with nails and broken dreams, I mean glass……
I Think the Ontario Government will impose some sort of taxes on RE, likely a ill conceived “Chinese Dude” tax
bad plan period. how about considering the following:
1) remove the age cap on rent controls,making them universal regardless of build date of the property.
2) A 1% per month of Appraised Value property tax surcharge Added to the property tax levy, to give the speculators whom are apparently holding upwards of 100k homes vacant in the gta, a reason to put them to market. also provide data on vacant properties to the
CRA
3) a 20% provincial sales tax on sales of real estate,by any entity other than a tax paying Canadian citizen . this type of tax is common in many us states.
These actions would 1) free up much needed rental accommodation, 2) increase market supply of homes for sale 3) provide a much needed increase in tax revenue for the province
And lastly likely put a serious brake check on the real estate ponzi game playing out in southern Ontario
#26 numbers add up
#50 “Analyst guy” needs to check his facts
Mortgage pmt consists of interest & principle been that way for ever!
I also own a rental
Paid 300k 6 yrs ago, value today 475k
Int, tax & maint. = 13,250
Rental = 20,400
Net= 7150
ROI = 9.5%
Not trying to get rich on it and not worried about
the value. Just a piece of the investment puzzle.
And what’s with people thinking that investors don’t declare income or profits to CRA??
You Know The End Is Near When the TOM VU types show up: history repeats
Victoria is getting just as stupid for what it is. Bully bids of $200K over ask is common for crapola houses on low inventory. There’s going to be a lot of tears and divorce when this all comes undone.
Landlords are using the same tatic as realtors in Victoria.Whats happening is the landlord will put a condo for rent on Monday and take all bids for the monthly rent on the following Monday.Bidding wars for rentals.
What is needed but our local goverment won’t act for the poor middle class of Victoria.A liscence for $10,000 a year for AIRBB for all who rent their house,basement suite or condo.Everybody is using their house or condo as a hotel.Get it done you pathetic local goverment you hate the poor.
No matter if you are a house owner or not, the rampant speculation will cause big harm to us, and to our next generation. Speculation does not create value, it transfers wealth from the common folks to speculators. It is a way domestic and foreign speculators rob Canadians. It is a shame that this is allowed, or even encouraged by the Canadian government.
Can any one start to organize a rally or petition to protest the criminal negligence Trudeau and Wayne committed? I will do whatever that I can do to support such an operation. I cannot speak English well, otherwise, I will stand up for this. It is no use that we complain here.
It is good to have warnings from industry insiders. It shows that not every trademarked house seller preaches inanities.
So the end may be nigh. Not just because of the evidence of euphoria all around, but because Garth has finally delegated writing duties and is taking a well-deserved day off.
Will this finale have an encore?
Great article on Chuck Berry that said he left an estate of over 17 Million….not bad for a guy who insisted on being paid IN FULL, IN CASH before he went on or else he didn’t play and left.
Though he was considered “difficult and a pain in the ass” by many (likely those who tried to screw him, like they did so many uneducated, trusting black artists), I am glad to see he had the last laugh….
#53 M
I speak to help and motivate others often free, based on a lot of business experience working with some very well respected companies.
What do you offer the world?
Don’t paint everyone with the same brush you paint Tony and his crew of bottom feeders. Thanks.
Gotta love this blog; I do, what a wealth of info for all of us that have the guts to say something or learn; today, for me, not so much, one of those days that I appreciate all of you with no judgment on my part, wealth of info and I hope all of you appreciate that you can do this. No, I am not a paid shrill if you were wondering, I see us as one small family trying to make the most regarding our differences and foolish decisions of a certain few, man, we are lucky to have this, thanks Garth and all meatheads, (including all the great posts from all genders, no bias, just a point). Life is short, enjoy it! :)
meanwhile the following is the state of the RE market in toronto.
http://torontolife.com/real-estate/think-going-go-even-sky-high-wealth-expo-attendees-talk-torontos-housing-market/
#62 wack
I suspect the vast majority of JR landlords are “forgetting” to report rental income from basement rooms/etc. new initiatives and cross referencing between various provincial agencies hold many a nasty tax surprise in store moving forward
There is a sizeable shadow banking industry in the alternative mortgage market. This is referenced in the following CIBC report by our old buddy Benny. Keep in mind that report was from a couple of years ago and things have changed quite a bit from then. For years this industry has been profitable for participants on both sides. Investors have been lending to speculators through private corporations (MICs). The investors receive a decent return with above market rates and high set up fees. In turn speculators have had access to otherwise unavailable funds to purchase real estate in a rising market. Since the arrangements are between private corporations the industry has been largely unregulated. However Federal Regulators are aware of what’s going on and that’s why the Fed’s have stepped up the monitoring. When this thing blows up this is where it will start. Liquidity in the secondary market will dry up very quickly. You won’t see it being reported on the loan books of the banks. The signs will appear in the shadow lending market. This will be Canada’s version of the sub-prime crisis, which will happen at some undetermined point in the future.
http://research.cibcwm.com/economic_public/download/if_2015-0218.pdf
Lesson from today’s blog:
When dogs (pitbull) start pushing real estate, it’s like to pack up and get out of dodge.
A couple of interesting links about the event (I particularly enjoyed the photo and the deep thoughts of the 18 year old “investor” – fortunately for him, he has life in front of him to learn and recover from his mistakes, while others like the semi-retireds ladies do not have anymore):
http://torontolife.com/real-estate/think-going-go-even-sky-high-wealth-expo-attendees-talk-torontos-housing-market/
https://onbeyondinvesting.com/blogs/blog/i-attended-the-top-of-the-canadian-housing-market-so-you-didnt-have-to
Hope you enjoy as much as I did.
Drink. It brings out honesty.
Dangerous shit. Safe space is living a lie.
Dr Smoking Man
PhD Herdonomics
I participated in the event. My impression is similar to this: http://www.zerohedge.com/news/2017-03-20/i-attended-top-canadian-housing-market-so-you-dont-have.
However, I would admit that neither Tony Robins, nor Pitbull say anything specific about real estate (at least during mass presentations).
Crank it bitches
Life is just a fantasy. Shit I grew up to.
https://youtu.be/VhddPnxDWvI
#62 Wack
Sorry, but ROI and cash flow or cash-on-cash yield are not the same thing. My point that a low cash flow property investment relies on a rising market to make money is true. That’s now two “real estate investors” who don’t understand financial math.
The Wynne-Sousa team don’t have the courage to do anything except when it comes to saving their jobs (for example, cancellation of the Mississauga Nat Gas Power Plant at huse taxpayer cost to save Sousa’s job, and lately the extension of the hydro costs over a longer amortization period at our childrens’ expense!)
DELETED
#55 common sense on 03.23.17 at 9:16 pm
If you have seen the CRAP lately from so called “Social Media Experts” who claim to be experts after 4 months of experience on the web in a” variety of platforms” that need to help you “build relationships”, “fine tune your brand”, Get you “more likes” , increase your “followers” , etc you would think the Moonies and Hari Krisnas were sane. HACK THIS.
——————————————————
I heard a certain country, located south of Canada, might need the advice of such said “Social Media Expert.”
#39 crowdedelevatorfartz on 03.23.17 at 8:10 pm
@#26 Joe’s Rentals
I’ve done this x4 in ancaster. my other two rentals in Hamilton bring in more rent and I’ve paid less.”
*******************************************
And you divulge ALL your rental income to the taxman right Joe?
yep, and no longer work full time. I could refinance to have higher mortgage interest to deduct but it would be scary to pay back these properties at current prices.
Mark 31 years old today till he fell off mountain a few years ago.
Loved that kid ..we all did.
Can I legally sleep in a bus shelter? park shelter? or underpass?
#49 Analyst Guy on 03.23.17 at 8:50 pm
#26 Joe’s Rentals
Your math is wrong and you are barely positive cash flow:
Mortgage payment $1,332*12=$15,984/year
Property tax $4,000
Insurance $1,100
I’ll leave out the maintenance to be nice
I’ll be extra nice and assume you don’t pay any taxes
I’ll be super duper nice and assume a 0% vacancy rate
Your cash flow = $22,500 – $21,084 = $1,416/year
If you spend more than $118 per month on maintenance you are negative cash flow for the year.
This also means your cash-on-cash return is $1,416/$81,900 = 1.73%.
You’ve (accidentally) made a giant bet that the market continues to go up, because I can think of better ways to earn 1.73% on my cash.
————————–
more than half of that mortgage payment you listed above is principal pay down during the first year at these rates.
I’ve wanted to do this my whole life. my old man held on to two rentals in Toronto for 25 years. my first office job in my early twenties, the landlord owned half of the block of 7000sqft buildings on a Mississauga street. another old Italian guy owned the other half of the street.
i’m in for atleast another 15 years.
#75 Smoking Man on 03.23.17 at 10:57 pm
Mark 31 years old today till he fell off mountain a few years ago.
Loved that kid ..we all did.
i played Nintendo with him in 1994
DELETED
Deranged alcohol abuse.
Looking at fence. Trying to find menning.
This is exactly what happened the last boom and bust in the late 1980’s. Folk would attend these RE ponzi events in TO hotels. Events were run by Americans who knew nothing about Cdn RE policies or markets but got thousands out by promising to teach how to buy RE with nothing down.
The next morning our RE office phone would ring off the hook with fools ordering 5 houses to go with nothing down as they were promised in the seminar they just spent $500 on. These potential buyers were willing to spend a day on their order and then expected the agent to make it work, just as they had been promised in the seminar.
The reappearance of these shills a generation later truly is a ‘shoeshine boy’ moment. Get out of this market now. Once it turns you won’t be able to sell a house for love or money. Ben there. Human greed never works in the long term.
#32 Andrew Woburn – reverse onus … i like that idea. Brilliant for this purpose.
Re: Re: #14 Nik on 03.23.17 at 6:33 pm
See chart: You can plainly see from the chart that the DOW Jones average is in a long term bear market dating back to the dot-com crash. The long term trend line cuts through around the 4,500 level.
https://www.virtueofselfishinvesting.com/img/content/reports/4675/history_of_market_corrections2-hires.png?link=mktw
Next year it will be a decade since Garth published Greater Fool: The Troubled Future of Real Estate. In the past ten years real estate has soared to unprecedented levels. With our economy stuck in neutral, we’ll probably be looking at zero interest rate increases this year again. With an aging population and a young generation that sees real estate as a can’t lose proposition, we’ll likely never see a bust. Worst case scenario is a stagnant market for 20 years while inflation slowly, imperceptably eats away gains in real terms. Once the boomers start voting for their retirement funds we’ll end up like Japan 1992-20??
#23
Told this site a couple of days ago. Father and son got paid 15k each to do they same
The bellwether Calgary economic statistic is now etched (vis Calgary Herald). The Rangeland Derby Canvas Auction results are in. This is the annual event at which oil business typhoons sponsor chuckwagon drivers for the annual boobfest, aka Stupede. Up 5.3% over last year (which was a disaster). Yahoo. A rebound. No sign of PETA at the auction.
The answer to the crazy housing prices lies no further away than an evening door to door stroll in an area with 3+ million dollar NEW houses in the Vancouver area.
If a person has an accent, there is no way they were born in Canada, I don’t care what they look like.
That to me would be an immigrant or foreigner.
The only argument after that is what percentage would it take to effect the prices?
Do the walk, do the knock.
Looking at mls for rentals after houses have sold is hardly scientific – especially given that there are so many other places to list places for rent.
Given that there are so many other places to list for rent, wouldn’t that mean that the number of rentals is actually *under-reported* and thus is a bigger issue?
#42 Carm
Empty store fronts all over the GTA as businesses go bust one by one. 10 years ago we had less people living here and very few empty stores. The ponzi economy ia killing the real economy all thanks to the useless product nothing FIRE industry
“All fees on non-registered accounts are 100% deductible from taxable income. Fees for RRSPs come out of those accounts without being counted as income (the only such withdrawal permitted) so the government pays a big chunk of them for you. TFSA fees are not deductible. — Garth”
Thanks Garth, I am sure you have said that before and I am sure so has my adviser but it is an important part of the equation. But there are many things you’ve had to repeat for us, thanks for your patience.
#93 Tony
Thank you for the link to the DOW Jones graph from 1896 to 2016.
It clearly shows the brutal periods where it took stock market investors decades to recover the losses.
So I guess investing in RE at the peak is no different. If stock market investor collects dividends while waiting for recovery so does the RE investor by collecting rent.
And the RE investor has something tangible whereas stock market investor can see the investment disappear in a day (well…in a very short time frame).
And it brings me to another point too; i.e. when promoters of stock market call a 5 or 10 year time frame ‘long term’ they are misleading the client.
In stock market one should take the meaning of ‘long term’ to mean really long term; i.e. invest not for yourself but for your kids retirement. Better still invest for your grandchildren.
Seriously that is how it ought to be looked at; not a 5, 10 or 15 year time horizon.
Dear Gary Zack I love someone who can spell . In the world I grew up in…..and I am far from perfect….one would look at a resume and if that person could not spell or could not understand the written rules of English…..They were considered as not up to snuff ! God bless us all !
Victoria real-estate update, haven’t heard from you for quite some time. How about enlightening us with your amazing data on the Victoria market?
Canada is simply Real Estate. Plain and simple.
You can’t talk to any Canadian longer than 1 hour without the topic of Real Estate coming up.
Either they want to brag about their equity or they own multiple “investment”houses and or apartments.
Nothing else matters. That is why even with prices detached from fundamentals this insanity can go on longer.
Vancouver, lower mainland and Toronto make no sense but government is too scared to touch it.
Had a conversation with someone who cashed out of YVR and actually said, “it’s different this time”!!
Reasoning, world wide Canada is a great place to park your money. Too much foreign investment and so on..nothing will change.
Prices will just keep going up….My point was that fundamentals don’t make sense but didn’t feel like discussing it. I give up. Fine, it is different this time and prices will rise forever.
Hard to argue with a million dollar tax free gain.
Just accept the fact that your average under 30 year old will not have a house around those areas unless you mortgage your soul, are gifted money or whatever…because based on average salaries, housing is 8-10x average incomes.
Housing is all that matters in Canada. Not going to change anytime soon unless policies are enacted to slow speculation and limited foreign money.
That’s too crazy, super high house prices are awesome. And the higher rents go, the better for the economy. I have to relearn or start studying how economics in Canada work because my views are obviously extremely outdated.
The new economy: DEBT is awesome as long as it if for a house, condo or apartment or land.
Max it out and don’t worry about it. Take on a much debt as possible. Canadians only owe 22 Trillion in Debt so plenty of room to go. Worse case, government will find a way to bail you out IF for some crazy reason that Housing actually doesn’t go up forever… highly unlikely though.
Because it really really is different this time (sigh).
#81 Al
You are right. Just as the fed libs are too terrified to tackle this monster the prov libs have proved they will likely be even worse. They will do all they can to sidestep issue.
However both governments will step in after this thing corrects, with deep sweeping emergency legislated taxes to extract the majority of any gains made on liquidible investments as they will be scraping the floor for money to help the reckless for the greater Scocial good!
It seems the new mentality of leaders today wether government or otherwise is to leave the tough issues alone and hope they go away. does anyone else notice this?
#13 Prairieboy43 on 03.23.17 at 6:33 pm
The Greater Fools.
http://cdn.newsapi.com.au/image/v1/3393d7962335fe5b0e01d37e596a8142?width=650
——————————————————————–
I thought that photo reminded me of something similar:
http://c8.alamy.com/comp/EX6KAW/nazi-rally-with-hitler-youth-members-in-foreground-1936-EX6KAW.jpg
https://3.bp.blogspot.com/-5Q0CXesbGPA/WCFrYCINbiI/AAAAAAAALxc/y_W2eDvT3hQzc6YVEyc_cy1JoBFdOdfaQCLcB/s1600/august_landmesser_1.jpg
Deflate house prices?
Just raise the interest rate. Significantly.
Game over.
You can’t have your cake and eat it to.
The government is dancing around the subject. The solution is obvious.
What a farce.
@ yorkville renter
“Looking at mls for rentals after houses have sold is hardly scientific – especially given that there are so many other places to list places for rent.
Given that there are so many other places to list for rent, wouldn’t that mean that the number of rentals is actually *under-reported* and thus is a bigger issue?”
Yes and no. If what I was saying was true and prove-able it might be, however my point is that Pasalis is simply making up stats to suit his purpose. I would question whether he (or his helpers) went through mls on the lookout for sales that later turned into rentals. Seems a stretch and an odd way to go about collecting partial data on a market that is notoriously difficult at the moment for collecting information from. Pasalis acknoledeges this challenge as well, but the article might as well be the farmer’s almanac. “We think this is the case, because look, here are select partial facts that we think may or may not reflect what’s happening in the marketplace.”
I can’t claim to be an expert, or even a statistician – but even I can read through what Pasalis report is doing – and it’s simply pandering to what the theme of the day is for media – that’s we’re in a bubble and it’s about to pop.
Another take, which even make sense although it would be rather late in closing the barn door –
http://www.cbc.ca/news/opinion/nonconforming-mortgage-market-1.4038515
Tony Robbins had posters of his seminar posted everywhere in Toronto. He looks like a greaseball, sleezy realtor that’s a fast talker.
Tickets were advertised for 49$ on the posters(supposedly slashed from “$149”).
Anybody who fell for that ploy deserves to loose when the bubble bursts!
#38 Economystical on 03.23.17 at 8:08 pm
Dude (or dudette), your posts are top notch! Keep up the good work. Very tongue-in-cheek. Love reading them.
Don’t confuse the value of a stock with its price.
@#43 Obviously not 1st
“Tony Robbins does stock market investing as well. ”
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
Tony Robbins, formerly known as Lurch is the 2017 version of a 1800’s Snake Oil salesman.
Peddling his song to the ignorant rubes willing to shuck out $50 to $150 each to hear him blather on in generalities about nonspecific ways to “get rich” and “be successful”…..
“The Power of Positive Thinking” or some other version…….ugh……reminds me of Tom Vu.
They should all be in jail.
Low hanging fruit- can’t blame Tony and his posse for cleaning up on greed, fear and hoards of groupie wannabees.
The cash they walked with was the result of a classic no-brainer, slam-dunk cocktail-napkin idea. The cash was just sitting on the table. Screaming at them. From space.
Tragic to see Canada going from pirouetting “best of the best, economic sage status” during Mr. Flaherty’s tenure to complete drooling idiot in such short time.
I can’t wait to see what tptb have in store to fix this train wreck. They don’t seem to get the impact this will have on Canada’s economy at large. Economically, socially, medically, structurally. They think that “monitoring things closely” whilst wasting time in parliament pressing for Fridays off will fix things. Sorry mate, the weight of public opinion would like to boot your collective butts back to real work.
I can hear it now during the 6 pm newscast:
“Help rebuild Canada’s future, buy New Spangled, Canada Middle Class Bonds.”
@#64 Chilly Wack
“And what’s with people thinking that investors don’t declare income or profits to CRA??”
******************************************
Gee I dunno.
My past experience with landlords?
Had one guy who owned a 4 plex. ALL the renters had to pay in cash every month. He would personally come around and collect. The place turned out to be a disaster and he didnt give a $hit…so I moved
I took great pleasure in dropping a dime on him to the CRA after I moved out….I wonder how much they dinged him for.
@#70 Chuck Berry fan with little Common Sense.
“I am glad to see he had the last laugh….”
*******************************************
He sure did.
But he could have been a lot richer…
What with the cost of all those legal bills in “beating the rap” on the Child Abuse charges …..he was later convicted of Voyuerism due to the hidden camera he placed in the womens washroom of one of his restaurants.
200 women filed a class action lawsuit after he was convicted.
If banks had to take all the risk for loans/mortgages, things would tighten up real fast.
@#29 JosephR
$50 and $150 for a seat. Average of $100. 100 * 15 000 = 1,500,000 in revenue. If you deduct the costs of the event for the promoters; space rental, taxes, security staff, …. they didn’t make millions at all, at least, not directly.
—————
Based on those I’ve known involved with large stadiums/ concert orgs (and events like this are treated like concerts), ticket sales are tagged as ‘gate’ which yes gets split many ways incl a percentage to performer/ speaker(s). Performer/speaker etc also receive an appearance fee pre determined by contract (incl form of currency, special requirements like food etc). Documentaries have TR in the millions and PB not far behind esp in venues with higher Latin demographics.
TR has said all sales of the his latest book are going to his foundation to provide food/ meals to those in need Seems he’s been doing this type of thing for many years. No doubt though his appearance fees and seminars are lucrative for him. Demand must be there because he’s been around for a dog’s age.
Fed’s Williams: Balance Sheet Shrinkage Could Begin Late this Year
Hugely expensive real estate brings in huge revenues for government taxing bodies. Land transfer tax grabs based on selling price. And MPAC assessment hikes. What government wants to reduce its tax haul to pay the expanding government debt load? Lip service. Instead, Debters will implode the mess by default. Just like in 1999 and 2008. And in 1989-1991 in Japan. There real estate values have never recovered and a rapidly aging demographs sealed the trend 25 years later. Tic toc Canada.
ALL-TIME RECORD HIGH Household Debt in Canada! U.S. Student Loan Debt Ready to BURST!
http://investmentwatchblog.com/all-time-record-high-household-debt-in-canada-u-s-student-loan-debt-ready-to-burst/
@#38, you’re a better mystic than an economist. Keynes was right about some things, wrong about others. He was right to insist that “debauching the currency” was a sure road to ruin. He was right to insist that budgets be balanced over the cycle (meaning right now we should be running surpluses, not deficits). He was right to point out the “liquidity trap”, where easy money stops working (meaning we should stop relying on destructively low lending rates). In other words, the opposite of everything you’ve been preaching here.
Keynes was wrong about many things too, but he was a smart guy, and not inflexible. Had he lived long enough, he’d have seen where he was wrong and adapted his theories accordingly. And if he were alive today, he would certainly disown the entire lot of econo-babblers who refer to themselves as “Keynesians”.
I see this happening lately.
Buy 1 home, Husband’s primary residence, buy 2nd home, wife’s primary residence, buy 3rd home, kid 1s primary residence, buy 4th home, kid 2s primary residence, buy 5 home brothers primary residence, etc. etc.
Capital gains taxes won’t prevent people from speccing this way. Original investor goes out and buys 4M worth of properties with a 200K investment. If houses go up by 10%, that is a 200% ROI with no tax implications because all the properties are primary residences.
Bleeding money? who cares when you make 400K a year tax free.
Bid the price way up? who cares, it will just make the property/neighborhood worth more.
What happens if the market crashes? For speccers if they already cashed out, run. If they haven’t, then drop the keys off at the bank and move. That’s the tax payers problem.
Any capital gains taxes will have no impact on this unless they start taxing prime residences.
I should run one of these conferences. Get rich through real estate collusion. Join my facebook page lol
https://www.facebook.com/Real-Estate-Collusion-Investing-1943478422551910/
#7 Doug t on 03.23.17 at 6:11 pm
“Did they at least get to do the hot coal walk?”
LOL. They didn’t need to.
No! But they drank the Kool-Aid.
#77 Cristian on 03.23.17 at 10:17 pm
A couple of interesting links about the event (I particularly enjoyed the photo and the deep thoughts of the 18 year old “investor” – fortunately for him, he has life in front of him to learn and recover from his mistakes, while others like the semi-retireds ladies do not have anymore):
http://torontolife.com/real-estate/think-going-go-even-sky-high-wealth-expo-attendees-talk-torontos-housing-market/
https://onbeyondinvesting.com/blogs/blog/i-attended-the-top-of-the-canadian-housing-market-so-you-didnt-have-to
Hope you enjoy as much as I did.
===
Holy Jeebus. That second link is pure gold. Thanks for sharing…definitely at that shoeshine boy moment.
===
#97 Rentin on 03.24.17 at 12:05 am
The answer to the crazy housing prices lies no further away than an evening door to door stroll in an area with 3+ million dollar NEW houses in the Vancouver area.
If a person has an accent, there is no way they were born in Canada, I don’t care what they look like.
That to me would be an immigrant or foreigner.
The only argument after that is what percentage would it take to effect the prices?
Do the walk, do the knock.
===
Stereotype much? I guess that goes for Newfies, Cape Bretoners, and Quebeckers no doubt.
Please clarify what you mean by ‘accent’…what does the ‘accent’ sound like?
In my “hood”, 3 bed 2 bath semi for rent at $3,000 a month. This is at the lower end with others on quieter streets rent for about $3,500. These sell between $900,000 and $1,300,000 currently and go within a few days.
And why are they losers? Because, 95% of them are cash-flow negative. In other words, almost all of these ‘investors’ are bleeding money monthly. If the price appreciation stops (and it will), they will truly qualify as the GTA’s greater fools.
the perfect storm:
mortgagebrokeron: he says bank of canada rate will creep up to 2.5 eventually. this is 2% increase.
Ontario Housing Minister Chris Ballard: Expensive rents are next on the provincial government’s list of pocketbook issues it is planning to attack, because everything we want in life should be affordable.
http://mcaf.ee/8z4e09
okay if significant percentage of Toronto’s middle class have mortgages on properties that are cash-flow negative
and mortgage rates are going up
and the housing minister is going to cap rent increases
what you have is a significant percentage of the middle class are going to lose their middle class status!
Click the link below for an excellent discussion of the shadow banking sector, and of the rise of mortgage finance companies in Canada:
http://www.bankofcanada.ca/wp-content/uploads/2016/12/fsr-december2016.pdf
@Gary Zack (and anyone else who cares about these things)
For: “The thing that differentiates JP from the normal realtor is perspective and (dare I say it?) integrity”
It should be: “The things that differentiate JP from the normal realtor are perspective and (dare I say it?) integrity”
#127, Julia
If you are correct, someone putting 20% down would still be very much underwater collecting $36,000 in rent on a $1,000,000 house if landlord covers necessary utilities. At $1,300,000 he might as well just give the house to the tenant. I think those houses rent for way more than $3,000 a month, wherever they are.
#119 AK
Never mention the word “Shrinkage” on this blog.
Thank you,
FREEDOM FIRST
Nice chart, Garth. Now you can fire Ryan and Doug… :)
“Long term economic models are like astrology with good manners.”
-Scott Adams, March 2017.
#120 John –Hugely expensive real estate brings in huge revenues for government taxing bodies. Land transfer tax grabs based on selling price. And MPAC assessment hikes. What government wants to reduce its tax haul to pay the expanding government debt load? Lip service. Instead, Debters will implode the mess by default. Just like in 1999 and 2008. And in 1989-1991 in Japan. There real estate values have never recovered and a rapidly aging demographs sealed the trend 25 years later. Tic toc Canada.
____________________
Unfortunately, there is a lot of truth in those statements. Everybody is watching each other to see who is going to pull the plug, and take the blame. We’ve just seen JT and Morneau politely recusing themselves (saying they had already done enough), leaving it all to Sousa. Will he do it? The banks are agitating for some sort of regulations but they are still lending…Where is the end?
#129,
thank you for your reply and the link to the December 2016 “Financial System Review”. Reassuring it is not.
The mortgage finance problems have been watched as they develop, but no one has seen fit, or dared, to take any action. The money rolling into the finance and real estate industries, as well as government(s) by way of taxes, has been too good to limit, much less interrupt. We’ll have to wait for problems in mortgage servicing and the eventual failures to get action.
I remember a line from a book Morton Shulman wrote in the late 1970’s. He described the inflation everyone in North America was only too familiar with, asked “which government has the courage to deal with it?”, gave up and offered advice about dealing with inflation individually.
We have a problem in the real estate and mortgage sectors, and we have governments watching it develop with the interest and immobility of a rabbit staring at a python. It can’t end well.
https://ca.finance.yahoo.com/news/canada-governments-ambitious-export-goals-facing-big-challenges-160521783–business.html
OTTAWA (Reuters) – The Canadian government wants to boost exports by 30 percent over the next eight years, but experts and analysts say the goal is highly ambitious given a series of major challenges facing exporters.
These include low levels of capital investment by Canadian firms, a sluggish export sector and uncertainty over what economic policies U.S. President Donald Trump will introduce.
——————————————
Capital investments? With this ongoing credit bubble and crappy currency, remind me here: Why would there be any capital investments at all?
Hello?
#12 RentYVR on 03.23.17 at 6:30 pm
I think you’re spot on about most people being more comfortable with real estate. My brother bought what can only be described as an old cottage in Etobicoke. The owner was halfway through renovating the basement when they had a flood event and it was left half done. Brothers home inspector friend said everything was good but of course he later found mold. Sold the house a year or two later and clearly did not want to discuss the details with me so I left it alone.
John’s method notably underestimates speculators that aren’t becoming landlords.
#118 Free Bird on 03.24.17 at 8:47 am
@#29 JosephR
$50 and $150 for a seat. Average of $100. 100 * 15 000 = 1,500,000 in revenue. If you deduct the costs of the event for the promoters; space rental, taxes, security staff, …. they didn’t make millions at all, at least, not directly.
—————
Based on those I’ve known involved with large stadiums/ concert orgs (and events like this are treated like concerts), ticket sales are tagged as ‘gate’ which yes gets split many ways incl a percentage to performer/ speaker(s). Performer/speaker etc also receive an appearance fee pre determined by contract (incl form of currency, special requirements like food etc). Documentaries have TR in the millions and PB not far behind esp in venues with higher Latin demographics.
TR has said all sales of the his latest book are going to his foundation to provide food/ meals to those in need Seems he’s been doing this type of thing for many years. No doubt though his appearance fees and seminars are lucrative for him. Demand must be there because he’s been around for a dog’s age.
—————————————————————
I’m sure Tony and Pitbull are booked to do many venues, not just the Toronto one; they make low 6 figures per venue and then it adds up. They wouldn’t make millions in one night.
Tony has been around doing infomercials since the late 80’s: his ad would be followed by that “tiny little ads” guy.
Telling people to conquer their fears by walking on coals and “prep talk” isn’t bad by itself; it can come handy in many areas of life, career, love, … except, as we know, personal finances.
Money can’t buy emotional security, pride or self-worth.
That’s why you get a dog.
#27 Martha
“XPF are primarily perpetual preferred shares. In a rising rate environment ZPR (rate reset) or HPR are probably a better bet”
Correction 45% preferred in the PFF-US component. But that’s till a reasonable component. Again in a rising rate environment as Garth has said before the rate-resets are better.
#87 Joe’s Rentals
#49 Analyst Guy on 03.23.17 at 8:50 pm
#26 Joe’s Rentals
Your math is wrong and you are barely positive cash flow:
Mortgage payment $1,332*12=$15,984/year
Property tax $4,000
Insurance $1,100
I’ll leave out the maintenance to be nice
I’ll be extra nice and assume you don’t pay any taxes
I’ll be super duper nice and assume a 0% vacancy rate
Your cash flow = $22,500 – $21,084 = $1,416/year
If you spend more than $118 per month on maintenance you are negative cash flow for the year.
This also means your cash-on-cash return is $1,416/$81,900 = 1.73%.
You’ve (accidentally) made a giant bet that the market continues to go up, because I can think of better ways to earn 1.73% on my cash.
————————–
more than half of that mortgage payment you listed above is principal pay down during the first year at these rates.
I’ve wanted to do this my whole life. my old man held on to two rentals in Toronto for 25 years. my first office job in my early twenties, the landlord owned half of the block of 7000sqft buildings on a Mississauga street. another old Italian guy owned the other half of the street.
i’m in for atleast another 15 years.
——————
average interest costs over the 25 years is more like 4200. Of course, that assumes interest rates stay at 2.6 floating for the foreseeable future. that gives you an annual return of almost 14%, assuming your house stays the same value.
“lenders currently underwrite mortgages for residential investment properties as if they are owner occupied homes”
Good point. Investors, landlords, should not get CMHC coverage. Shouldn’t that be for home owners. Isn’t that the intention of CMHC. Perhaps I misunderstand the purpose of CMHC.
Sure would be alot less ‘investors’ if they had to put 20% down to buy.
And when the market turns…who is first to sell…the market is flooded with listings from the ‘investors’ and more than likely the 4.9% foreign owners who have no vested interest in our city.
You don’t really believe we’re in a liquidity trap, do you? (It’s a pretty rare circumstance, don’t you think?)
For a discussion of the reasons why interest rates have been kept so low (in relation to oil-importing economies), read Stephen Poloz’s foreward to the Bank of Canada’s 2016 Annual Report released yesterday (see below).
http://www.bankofcanada.ca/wp-content/uploads/2017/03/annualreport2016.pdf
LOL
der Trumpenfuhrer just signed keystone XL
get ready for $30 oil as the market gets fracked and flooded to oblivion.
131 Lee on 03.24.17 at 11:33 am
#127, Julia
If you are correct, someone putting 20% down would still be very much underwater collecting $36,000 in rent on a $1,000,000 house if landlord covers necessary utilities. At $1,300,000 he might as well just give the house to the tenant. I think those houses rent for way more than $3,000 a month, wherever they are.
—————————————————————–
Renting a house now and they had it listed for 27x the annual rent.
BREAKING: Health care bill pulled at Trump’s request
President Trump has asked Speaker Paul Ryan to pull the health care bill, a source says.
Since Trump can not pass his crappy bill and make a deal, what does he do? He moved the goal line way down the field. Nice move Donald, your still a chicken shit liar.
#144 A Reply to #122 Alistiar on 03.24.17 at 2:19 pm
You don’t really believe we’re in a liquidity trap, do you? (It’s a pretty rare circumstance, don’t you think?)
For a discussion of the reasons why interest rates have been kept so low (in relation to oil-importing economies), read Stephen Poloz’s foreward to the Bank of Canada’s 2016 Annual Report released yesterday (see below).
http://www.bankofcanada.ca/wp-content/uploads/2017/03/annualreport2016.pdf
———————–
BOC.
Dynamic, Engaged, Trusted.
With that idiot on page 6?
Really?
The Bank of Canada is the nation’s central bank. Its
mandate, as defined in the Bank of Canada Act, is “to
promote the economic and financial welfare of Canada.”
The Bank’s vision is to be a leading central bank—
dynamic, engaged and trusted—committed to a better
Canada.
Planning Framework
The Bank has a robust planning framework in place to
implement and operationalize its mandate and vision.
Every three years, the Bank establishes a mediumterm
plan (MTP) to set out its strategic direction and
objectives.
Central Banking for a New Era: The Bank of Canada’s
2016–18 Medium-Term Plan enables the Bank to continue
its traditions of excellence while enhancing its
readiness for the future.
The MTP helps the Bank respond to the realities of its
policy and operating context, anchors annual planning
and budgeting activities and serves as the foundation
for departmental and staff performance agreements.
The four core areas of responsibility are as follows:
CORE
RESPONSIBILITIES
MONETARY POLICY:
The objective of monetary policy is to
preserve the value of money by keeping
inflation low, stable and predictable.
———————————-
Inflation target: 2 %
policy rate: 0.5 %
BOC perceived interest rate: -1.5 % (negative)
real interest rate: -4.5 % (negative)
real interest rate as felt by a person in GTA: – 7.5 % (negative)
Note: “The objective of monetary policy is to
preserve the value of money by keeping
inflation low, stable and predictable.”
Here i got sudden urge to go to the washroom.
———————————
The Bank of Canada’s Role
The primary objective of Canada’s monetary policy is to
enhance the well-being of Canadians by contributing to
sustained economic growth, increased levels of employment
and an improved standard of living.
—————————–
Here I had to go to to the washroom again. It was not pretty.
I am holding equities that have a capital loss yet pay a decent dividend for now – the capital gains inclusion rate increase is not yet dead with T2. I have a couple of high yield companies that I am reducing because of their risk. They will create capital gains so I need losses to offset – this getting tricky. It looks like the dividend tax credit protocols are bulletproof although amendments are not – now for real estate.
Making a personal residence subject to capital gains also means capital losses are allowed. The problem is when the owner of a property wants to declare. Also home ownership would become a “business”. Transfer of ownership to family is an easy end around and many cultures believe family is more important than governance – blood is thicker than water. I think taxing principal residence capital gains creates more problems than it solves. I say just let municipal government tax the bejesus of ownership through property taxes if the fearless leaders have the backbone. Maybe an annual federal property tax is in order. I can tell you every time I pay taxes I think of privileged public servants (I have heard of some in the US who pull down over a million/year of pension income). Canada follows the US trend.
WUL pointed out something I will be watching. While Rachel keeps spending (save a public servant) our neighbour (SK) has decided on an austerity government. I will be following to see how the opposite programs pan out. Life in the prairies – always interesting because of tough winters.
#99 The real economy is dying
What do you expect? Given the % of income needed to afford housing very few people have anything left over. We’ve got a housing boom but the pay cheques are going to start getting smaller since people are cash strapped.
Look at Ottawa with a higher average household income than Toronto and much cheaper housing. If I was stuck in this spiral I’d move there and actually have extra spending money after paying for housing.
“investors are responsible for 36-39% of all sales in some of the GTA’s hottest neighbourhoods”
Do you find that proof of “excessive speculation”? You have to dig deeper into what’s happening… Fewer listings, but most of them are for houses that need to be re-built. Few end-users dare to take on such projects, so they go to investors. You really need to follow such stats for a longer period of time, 2-3 years, to draw the correct conclusion.
Don’t shoot the messenger! Did you read the foreword to the report?
#149 Euro Observer
Haha- yes I am a euro observer too and I simply don’t get it…. you hit the nail on the head… Canadians have really gone bonkers- they don’t even see how f***ed up things have become- debt awesome- buy real estate, all gov policies just screw over average Canadians but hey I have 20k in equity!!!!
Ok,everything is 15x more expensive but I have 20k in equity and only 450k debt- mom gave me 100k and bank about 400k but I have a place to live- Awesome
@#147 James
“Nice move Donald, your still a chicken shit liar.”
####################################
Hilarious!
Awesome
@ #151 I’m stupid on 03.24.17 at 5:17 pm
The issue is also going to be compounded since everyone just bought a house, then there’s the amount diverted from the economy for the next 25 years.
#131 Lee
That’s the going rate. The one at $3,000 a month is on a busy street but others are not more than $3,500.
I know the owner of the one currently for rent. They upsized a few years back and keep it to profit from the “continued increases in value”. They should sell. I don’t get it.
The other ones that I know went up for rent, and there are very few, are in similar situations or have moved for their careers for a few years and plan to come back. I know 1 person that cashed out last year and is renting a condo and their buyer got it strictly as an investment.
Uh oh
http://vancouversun.com/news/local-news/house-buyer-beware-landmark-b-c-court-ruling-will-shake-real-estate-industry
What I dont get is why RE Agents or purchasers would be liable for whether a vendor is a permanent resident. (A notary perhaps)
As the article states it is a cause of the BC Govt not having the correct disclosure information on their documentation. I’m not the RE industry greatest fan but this seems to be targeting the wrong people.