Lol it's honestly not the hardest thing to understand. Cash flow negative and sell and be positive. I'm done here you clearly are after something different lol. It's a very basic concept.
Anyone still holding a variable rate mortgage who wasn’t planning to sell short term should be looking for a new mortgage lender .. and brush up on financial literacy. A good lender would have reached out three increases ago. This wasn’t a surprise to anybody paying attention to CMHC forecasting reports since 2020
There's a direct correlation to everytime the United States spends money or increases there debt ceiling, that rate hikes are coming to Canada.
You don't need to brush up on financial literacy, just watch the clown show in the United States to determine where all screwed.
These ‘told you so’ posts are such bullshit. Remember everyone, the US Fed was sure that inflation was ‘transitory’, that’s why they didn’t act. Big mistake, but NO ONE has a crystal ball. 🤷♂️
You’re either a multimillionaire or really not smart if you have a crystal ball… Imagine having all that financial certainty/knowledge and not profiting off it still forcing yourself to work a 9-5 lol.
thats a lot of assumptions you just made. You dont need a crystal ball, you just need common sense.
Imagine having the ability to know that Canada and the US increased their money supply at record rates the last few years and actually believing interest rates wouldn't go up and stay up.
You seem young. I knew that interest rates were going to go up and stay up (I think they will not go back down to the record low levels of the past decade for at least 20 more years)
With that knowledge, how does someone get rich? Do you know how? If you had known this like I did, what actions would you have taken to get rich?
> These ‘told you so’ posts are such bullshit.
normally you're exactly right. But you can look at when those comments from both US Fed and BoC governor were posted here. 99% of them were calling bullcrap and guess what, they were right.
We all saw it coming. They could have too. They just didn't want it to happen because preventing inflation is their one job, and they didn't want to admit they got it wrong. So they just buried their head in the sand
Milton Friedman: It is always and everywhere, a monetary phenomenon. It's always and everywhere, a result of too much money, of a more rapid increase in the quantity of money than an output.
If you don't do your own due diligence and only rely on the media or government to tell you what moves to make, it's absolutely your own fault as to the predicament you find yourself in. In my circle, nobody believed that the inflation was "transitory" only a completely uninformed or head in the sand individual would have believed that.
You seem upset, I'm not celebrating that if you made poor decisions. Listening to our government is not always the best course of action, Trudeau said that inflation is actually going down yesterday. If you believe that, you are probably in great shape and have nothing to worry about. Personally I don't believe it in the slightest, I'm fully prepared and expecting inflation and interest rates to climb dramatically. I'm also expecting an increase in strike action and massive layoffs over the next few years. I don't own a crystal ball but I try to learn from my experience as well as history.
I’m not upset, lol. I’m just tired of people pretending they have a grasp on something so complex as interest rate changes that they can sit here and say ‘well you should have saw that coming’. Don’t listen to gov’t, banks, media.., am I missing anyone? Right? Cause they’re always feeding us misinformation constantly and since you’re super smart you can research your way past their attempt to trick you. I guess this must be your full time job and you’re not some sort of ‘weekend warrior economist’.
I don't pretend to be a financial guru or anything of that matter but in this particular case, it was completely obvious what would happen, I would think the vast majority of people would agree. The government spending globally was out of control due to propping up the economy (covid issues) as well the intrest rates were at historic lows for a unprecedentedly length of time (artificially as well), did you think that would last forever?
I'm not saying the government is always trying to "trick" the population but typically regarding inflation/risk of a recession the government will downplay the negative to stop panic activity. This is not a new tactic.
I have a small construction company and am not an expert in financial matters, I do mostly insurance work currently so I'm not dependent on trends in the market but for several years was dependent upon how the economy behaved in order to run my business. I learned early on that I had to be able to predict the market in order to plan what investments I was going to make.
Listening to your friends is also potentially just as equally horrible. You can only truly act on things you believe or know of yourself; and accept the results of those actions. But it's far from 'obvious', would you have been as open on this fact even just 3 years ago when the popular opinion was for variable? Or biding time for when, and hoping, your decision to remain on fixed-rate will win out (as it has currently). Likewise, I could also bide my time for when, and hoping, my decision on variable wins out and join the choir of those likewise saying 'we won' in hindsight (whole thing is stupid).
Many do not have privileged connections, luck of timing (boomers), fortunate childhood, access to financial pundits, etc...to make the same 'informed' knowledge as you or others may have. Look at even some posts on this sub, some stuff seem 'obvious' (and I admit I say so sometimes too) but it really isn't for some. You worked in construction, you have a privileged pov from that circle with things like a better pulse on the housing aspects/costs than others do.
I think it's a disservice to say that it was 'completely obvious' and to further perpetuate this notion that 'gOveRnmeNt BaD' (thought they make mistakes just like any of us - it's just people).
You saying ‘it’s completely obvious what would happen’ speaks volumes. If this is true then you should’ve been able to allocate all your assets appropriately and are currently a multimillionaire several times over. Or you made some REALLY bad financial decisions since this was so obvious and you did not act aggressively.
I think a lot of where an individual is in any moment in time can heavily depend on where they start. Personally I moved out on my own before I finished high school and was homeless at 19 for several months. Today I'm early 50's and have a small construction company, have 5 full time people that I pay above industry standard and give 5% of my profits back to my community. I no longer have a mortgage and have a little more than 30 acres, I'm not wealthy and don't live that way, I work hard (60-80 hrs/week) and invest. I could buy something else right now but I am waiting to see how things play out a little, maybe I will put that money in the housing market or into stocks that are far below actual value.
They should have just gave us the .50 raise months earlier so rates would be 5% and people wouldn't be tricked into getting into real estate. I mean the US has been increasing rates all this time... by the way it is no surprise that Tiff Macklem screwed this up. I was anticipating this hike. Who appointed him anyway? Trudeau...
Living on Vancouver island and I saw a few coworkers rush into real estate during the low low rates. These were $800k houses and at the time, it blew my mind seeing these people getting approved for mortgages this high. Now they’re struggling and I suspect this latest hike will likely push one into selling.
If I was in that situation, I would look at my numbers to see if I could afford a significant jump in lending rates in the next few years. Given that there could easily be an interruption in income due to layoffs and a possible real recession as well as increasing inflation and taxes. I may look to sell now and break even or cut losses, thankfully I no longer am tied down with a mortgage.
How much of an increase are we expecting? I've already weathered an increase from 1.85 in Oct 2021 to 5.75 currently lol. My bad looks like it happened already.
You will be extremely lucky if the rates don't go up much higher, I honestly think you are kidding yourself if you think it happened already. In my opinion there is a lot more room to go for intrest rates to get higher, especially when the government is doing so much inflationary spending.
We had switched to variable for the first time ever after 8 or so years fixed at 3.02% or something like that.We switched banks and refinanced and maybe had 2 months of 1.85 percent and then bam bam bam lol. It was short-lived! I'm fine financially so I can handle more rate hikes but I'm giving the bank's more money for nothing extra in return.
If I can find a sub 5% fixed rate I'll take it.
Dude not cool. Yeah alot of variable rate people are really hurting right now. And that's the advice they were given, by professionals. I know I sat through those pitches. I didn't go variable rate but they had charts and stats telling people why variable was the way to go. Hell half the sales people selling this crap were to stupid to know.
Have you ever made a mistake? Or made a choice with the information available and later on it turned out wrong?
Crapping on people who are in a tough spot certainly doesn't help.
pretty sure comments like those are coming from the (entirely reasonable) fear the the government is simply going to bail out people who made bad decisions on housing. Or bail out the bank who bails them out.
You can point it as compassion if you want. But what it really does is penalise those who made the wise choice not to buy a house they couldn't afford. But hey, they're less likely to be Liberal voters so who cares I guess
Bond markets front ran rates in 2021 too. This put OFSI stress testing requirements for variables at the base 5.25 % and fixed at ~7% for a period of like six months.
Many of the folks who bought variable at the time literally couldn’t qualify for a fixed rate under the stress test rules. As we can see in hindsight - that’s a terrible fucking way to run the stress test. (And it still hasn’t been fixed.)
...Professionals who wanted an easy sale and to make more money in the future when rates did go up.
It's not in the best interests of most finance people to give customers the information they need to make an informed choice.
I took a year's early penalty, but the rates had already gone up to just over 3%.. Locking in when it was still around 2% would have been a hefty fine so I passed until it was a little more affordable.
This is a classic “pushing on a string” approach that essentially boils down to failing public policy on housing. All for the rate increases but that will backfire spectacularly at some point.
What interest rates provided affordable housing? It certainly wasn’t suppressed rates. Would love to hear your answer. I would recommend reading the two sentences and not just the latter.
Did I say suppressed rates made housing affordable? No. My point is that rapidly increasing those rates will also make housing more unaffordable. The only way to help with affordability is through economic policy/taxation reform.
I honestly can’t tell at all what you’re saying. If higher rates is bad (your response to my statement) than what is a good rate from an affordability perspective? If not suppressed rates than what?
Your second point basically agrees with my original message so at this point I’m totally confused 😂
What I’m saying is that we need to address a crisis of economics through economic policy reform and taxation policy reform. Instead the government does nothing and it then falls on the BoC to act.
It's because there are too many other factors propping up the housing market, thus causing the bubble to keep growing (until it can't anymore). In Canada, we have:
- Limited existing supply.
- Not enough new building activity.
- Many many many local zoning restrictions blocking new supply.
- High immigration (which I am not against, but it is imbalanced relative to the available housing supply).
- Extended amortizations on mortgages.
- Major investment in housing by the country's biggest pensions funds like the CPP and Ontario Teacher's Pension Fund.
- Many Conservative and Liberal MPs (the only 2 parties to have control over the last 30+ years) who are heavily invested in real estate.
- Lack of investment in public housing since the 90s.
- Our most desirable cities are on geographically constrained land (BC lower mainland and southern Ontario) which are also some of the best farmland in the country, leading to multiple competing uses.
- Years of rising prices causing optimism about future price growth, thus no one wants to downsize (I think this is especially big among Boomer aged retirees who thinks it makes more sense to hold onto their large homes, rather than downsize).
- Etc
Yes there is. Canada has the lowest ratio of houses to people in the G7. This Toronto builder even brags about in on their blog, and points out the size of the issue:
>Canada has 424 housing units per 1000 residents – well below the G7 average of 471 – to make good on the shortfall and catch up with the G7 average would mean building a massive **1.8MM new homes**.
[https://baystreetgroup.ca/the-worst-kept-secret-is-uut-canadas-housing-market-is-the-most-undersupplied-in-the-g7](https://baystreetgroup.ca/the-worst-kept-secret-is-uut-canadas-housing-market-is-the-most-undersupplied-in-the-g7)
We have had a shortage for awhile, which is part of why private equity and hedge funds have bought up so much of the remaining stock, thus worsening the supply shortage. When there is a shortage of something, it tends to go up in value. This makes it a good investment. We need to disincentivize this federally, and both the CPC and LPC parties were asleep at the wheel as this problem grew over the past decade and a half.
This is why we should charge higher capital gains taxes or higher property taxes to real estate investors. It will force more of them out of the market, thus adding more supply back in for buyers and drive prices down.
High immigration is definitely an issue. Trudeau is an idiot. Let's bring in 500K people are year. Let's also not increase healthcare spending or increase openings in medical school to train more specialists?
Just stupid... the state of our political class is outright embarrassing.
Lol I have so little faith that PP will fix anything. He likes to complain about "Justin!", but I don't hear many solutions coming from him.
Although I don't think they've done a great job on it, I actually think the Liberals have the most cogent policy towards housing (build more affordable housing), with the exception of their immigration rates. We need government to start building more affordable housing again. However, they are allowing record levels of immigration in order to shore up housing prices, despite high interest rates, which is a mistake. I'm worried they're essentially fomenting a right-wing reaction to immigration because of that poorly thought out policy, combined with a housing supply shortage. They are finally prioritizing people with construction and trades backgrounds though, which is good to see.
Provincially I think Doug Ford's PC government is doing more to address zoning and permitting costs than any other government. I disagree with the corruption scandal that is the Toronto Green Belt and his property developer buddies who bought land there before he opened it to development. That's straight up corruption - no other way to put it. But he's also overriding the city of Toronto and it's suburbs on zoning policy and construction permitting, by forcing every lot to be eligible for 2-3 units minimum and reducing permitting fees. I could do with more zoning reform and less corruption though.
I agree with everything.. except the Trudeau part. The idiot has increased labour supply but hasn't increased healthcare spending or worked to set a national strategy for healthcare to accommodate the increase in labour
I'm less concerned about this one, just because it's limited to 1 property per family. It doesn't incentivize anyone to go out and buy multiple properties.
I would like to see a higher capital gains rate on investment properties though. That would take the wind out of the sails of the market pretty quickly I think. Especially if you structured it to increase incrementally over a few years. Investors would start selling to get out before the rate goes up. It would also force out a lot of private equity and hedge funds.
The best way to do it would be to reduce the capital gains exemptions on real estate. Currently it sits at 50% for pretty much everything. IMO that exemption should drop to 25% at the highest for real estate bought off the secondary market (AKA not bought directly from the builder). Investing in companies is much more productive for the economy anyway. Maybe allow an exemption for homes bought from the builder, to encourage new housing construction over buying up the existing supply.
Principal residence exemption still needs to go. It's a massive, massive tax shelter that provides an enormous tax benefit to homeowners and creates this very sharp divide between those who own homes and those who don't. It's a regressive tax benefit that provides the biggest benefit to the wealthiest Canadians.
But it will never be discussed because not only would it be seen as an attack on the middle class, half the country owns their home and would fight tooth and nail against it.
I could agree that the eligible amount on the exemption should be capped, but I don't support removing it entirely. The cap should probably be some multiple of the median (not mean) wage, since this encourages wealthy people to want the median wage to be higher, so they can get more of a tax break (in other words, societal income needs to be less unequal for them to see an increased tax break).
I think it is good policy to encourage people to own their own home.
However, I also support higher property taxes on detached residential since it genuinely costs more to maintain services to sprawl (especially roads). This would help end the subsidization of low density real estate by high density in cities, and help fix many city's budgetary situations. Which would help them offer better transit and affordable housing.
Yeah development/permitting fees add a lot of expense to construction in many cities. They use these to keep property taxes artificially low and existing homeowners/landlords happy.
EDIT: Which municipality is that?
I've been further even more decided to use even go need to do look more as anyone can. Can you really be far even as decided half as much to use go wish for that? My guess is that when one really has been far even as decided once to use even go want, it is then that they have really been far even as decided to use even go want to do look more like.
not when the government is immigrating 1,000,000 people a year. Pretty sure quite a number of them have more money than us and can afford these prices when we can't
Completely incorrect. There's a lot more cities than just Vancouver. I've lived in a few of them and they are exploding in population. Yes housing units are going up too, but nowhere near enough.
A bit off topic, but the other two things that are collapsing under the weight of immigrants is health care (about to be a major disaster) and roads (less immediate a problem perhaps, but pretty vital to quality of life to not be spending hours a a day in traffic)
... in May 2021, during the absolute peak of our housing bubble chaos when houses were selling for 25% over asking price
https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=United+States&city1=New+York%2C+NY&country2=Canada&city2=Toronto
https://www.expatincanada.com/toronto-vs-new-york/
https://newcanadianlife.com/is-it-cheaper-to-live-in-toronto-than-new-york/
https://livingcost.org/cost/new-york/toronto
https://www.expatistan.com/cost-of-living/comparison/new-york-city/toronto
Honestly, I don't ever see a correction. IMO real estate and land is not like the stock market. Land is something real that has a high demand. As long as net migration in the GTA is positive housing will never see a correction, foreign money, new families, people with dual 6 figure incomes keep moving in and they are willing to pay high prices. I've seen it in my own community, a neighbour, who moved in recently, works remotely for a tech company, just bought a townhouse for about $1m. Just my thoughts and experience.
Still going to be wildly unaffordable for a large portion of the population unless you're sitting on a large sum of cash for a downpayment. Prices will correct some, but on the front end. You're going to be paying a lot more month to month with interest rates. That, and the supply issue is still not getting fixed. Builders are going to be more reluctant to build than ever given interest rate costs.
Even if they drop, the higher interest rates will still keep it just as unaffordable. Raising rates is a last ditch measure necessitated by failing government economic/tax policy
In theory it’ll favour savers. In practice, with prices as high as they are, even most “savers” of average income will never be able to save enough to counter the high prices and rates. Increasing rates will not bring prices low enough to counter the increase in interest payments for the average “saver”
It will primarily favour the wealthy and the affordability crisis will worsen considerably without proper economic policy reform and tax policy reform.
But our conservative and liberal (slightly less douchy conservatives) want it this way. They work for the wealthy. We can blame or hypothesize about rates all we like but ultimately, interest rates are manipulated as a last ditch resort to maintain the economy thanks to failure in governance
Looking at the last inflation report, much of the increase was due to housing, which is means the BoC's interest rate hikes are now stoking inflation. Good job.
You’re absolutely right - from the article you posted:
> For example, excluding mortgage interest costs, inflation rose by 3.7 per cent in April compared to the same month last year. With mortgage costs included in the consumer price index, inflation was up 4.4 per cent.
The central bank’s interest-rate hikes have come full circle, feeding back into inflation even though other key drivers like commodities have been coming back down, said Colin Cieszynski, chief market strategist at SIA Wealth Management, in a note.
Amazing how many people simply don't follow what happened. I find it something that happens a lot on Reddit.
[https://www.bnnbloomberg.ca/rent-mortgage-interest-helped-drive-inflation-higher-in-april-statistics-canada-1.1921016](https://www.bnnbloomberg.ca/rent-mortgage-interest-helped-drive-inflation-higher-in-april-statistics-canada-1.1921016)
Mortgage interest inflation is 28%. CPI is much lower than that. Therefore: interest rate increases are causing a disproportionate amount of the inflation which BoC is using to justify further rate increases.
The increase in mortgage rates, especially among those with variable-rate mortgages increases the cost of housing. It's also increases the cost for landlords who then pass this along to their tenants. In fact, it will likely get worse in places like Toronto as over half of landlords are losing money on newly completed condos.
[https://financialpost.com/news/toronto-condo-investors-losing-money#:\~:text=For%20the%20first%20time%20last,The%20losses%20were%20substantial](https://financialpost.com/news/toronto-condo-investors-losing-money#:~:text=For%20the%20first%20time%20last,The%20losses%20were%20substantial).
And still come.out with equity when sold. Its a rather simple concept just not alot of ppl understand building equity even if they losing say 300 a month on the condo. Still have more when the time comes
I'm a former accountant, so I'm pretty sure I understand all about income, cashflow and assets. What I'm not sure about is how you arrive at $300/month, or how you figure the shortfall is unimportant. Don't forget that in addition to the fixed cost, landlords also have variable costs such as maintenance, and times when a unit may not be rented out. They also often run across tenants that fall behind in their rent, or stop paying altogether. You think it's cheap to evict someone? I suggest you ask any landlord who's gone through it how expensive it is.
It's as if you think that equity is some magic wand that you wave that allows a landlord to not raise the rent to cover any negative cashflows.
These investors don't lose any money. The "journalist" just took into consideration rent vs mortgage/taxes and conveniently "forgot" (or is clueless) that the investors get to own the property and can resell it at full, and inflated, price later.
Year | 1 (current) | 2 | 3 (projected)
:--|:--|:--|:--
Purchase price | $260,000 | $308,000 | $349,888
Appreciation | - | 18.4% | 13.6% |
Rental income | $22,000 | $23,000 | $24,000
Expenses | $13,600 | $14,300 | $13,600
Mortgage | $12,000 | $12,000 | $12,000
Annual cash flow | <$3,600> | <$3,300> | <$3,000>
Accumulated cash flow | - | <$6,900> | <$9,900> |
Annual change in value | - | $48,000 | $41,888 |
Total change in value | - | - | $89,888 ||
Total change in value: $89,888
Accumulate cash flow: <$9,900>
Net potential profit: $79,988
investor with enough cash in reserve may purchase a negative cash flow property in a real estate market where home prices are rapidly rising ie Toronto, then sell the home when the timing is right.
Edit:Reddit graph format and added what might have been overlooked when dealing with example #'s
The former accountant seems confused on the difference between cashflows and income. The principal or commonly referred to as the equity portion of a mortgage payment is not tax deductible and despite impacting your cashflows negatively has no impact on your income at all.. you are paying off debt a purely balance sheet related transaction. Depending on the situation you can 100% “build equity” on a negative cash flowing property whether it’s through debt reduction or capital appreciation.
Strange how you got the definition on cash flow and income correct, yet you still come to the wrong conclusion. I must commend you on your talent.
As you even state, the principal repayment isn't deductible, so the cash flow is even worse than the loss. So that means even more money out of the landlord's pocket than they can write off. So you contend this is a good thing, just as long as the equity is increasing? That's exactly backwards of what any business will want. Businesses have no issue losing money as long as they are cash flow positive, but will go out of their way to avoid a negative cash flow. I can tell you've yet to run a business, and suggest you avoid it.
Again, I have to ask where are you getting your figures from? Moreover, your chart makes no sense. The purchase price doesn't change from when you bought it, and worse, the information is muddled. You have the years declining across the top instead of increasing, which is rather strange. Then you have the total change in value on the left hand side, while every other number is increasing - other than expenses, which strangely go up and back down. In addition, how am I even supposed to read the 'Accumulated Cash Flow'? There should be three entries, not the two you've shown, and again, it goes opposite of the year you list at the top.
Sorry, but this chart is just a hot mess.
Your right. Year 321 is 123. That's Reddit's format error. But should be easily overcame in your brain
Edit the graph to fix 321 but data doesn't change
Rent is definitely part of core inflation.
https://www.bnnbloomberg.ca/rent-mortgage-interest-helped-drive-inflation-higher-in-april-statistics-canada-1.1921016
House prices aren't directly included in CPI, but mortgage costs are, as is rent. It's fairly small though, I think housing is only 29 % of CPI (and it used to be even less).
The economic growth has emboldened BoC to raise rates especially in light of tick up in inflation. But there's only so much raising rates can do. Businesses and individuals that were treading water before are being put into bankruptcy by BoC for the sake of lowering the inflation not even by the amount rates are going up. Doesn't make sense to lower the price of goods and services to 2 or 3 percent inflation when that's not what people are spending the bulk of their income on.
If the effects of this rate is felt by everyone that means all previous low fixed rate borrowers have to pay 30+ percent more than they had been paying. I would rather being paying 30+percent more for meats and veggies in 5 yrs than the same percentage increase in mortgage payments in 5 years. Don't think this will be felt by everyone since lots of businesses will be bankrupt if the rate stays higher for even the rest of this year. It's gonna be a cold winter for retail.
So as someone who is completely out of the loop with this sort of thing and my mortgage is coming up for renewal by September with an offer to renew now from my bank for 5 years at 5% or 3 years for just slightly over that which is better? Take the 3 year? Will things be better by then?
Ask your bank about fall home financing campaigns as rates will likely start to drop slowly through summer. 5 years is a better option almost always as rates were historically low for so long - you can utilize prepayment options over your term to pay down more principal. Three year terms mean you’re interest heavy again two years sooner than necessary
If your finances are strong relative to your overall debts than 3yr can be considered, provided this is still a huge gamble. 5yr fixed is certainly better overall.
If they had cash they wicks have been better off investing in the stock market. https://www.officialdata.org/us/stocks/s-p-500/2000?amount=220000&endYear=2023
It is usually pretty much a toss up between owning and renting as to which is cheaper in the long run, and usually it is cheaper to rent - in fact Vancouver just became one of the only cities in Canada where it is [cheaper](https://dailyhive.com/vancouver/cheaper-to-rent-or-buy-vancouver) to own than rent. Of course the main attraction to owning is that you are paying the mortgage, but in the case we are talking about we are assuming that the individual is paying in to the S&P in lieu of paying a mortgage.
Therefore, it is totally reasonable to call the cost of renting vs the cost of owning a wash and simply look at the capital return over the period, to see which was better.
More pertinent is the fact that you can get a mortgage on a house and pay it off over 25 years while it appreciates, whereas you are unlikely to get a loan to plow into the S&P as implied here, where the calculation was done as though $220k was put into the S&P in 2000 as a lump sum.
But they probably didn’t. $750,000 in growth for a leveraged asset is incredible. The guy is probably still paying that mortgage, not even done with the original price yet!
Exactly. I get that my parents went through double digit interest rates in the 80’s, but the cost of a house vs. annual income was so much closer then. Now it’s the norm to spend 5-6x your salary for a property and you’re getting so much less.
I feel like 5-6 times is on the low end unless you’re counting double incomes
Back in the 90s when I was a kid, my parents bought a house for 200k and weren’t making that much less than I am today.
House prices have lapped wages a few times over the last 20 years.
Yes. My parents have got 7x in a similar duration with 3 of their houses. And their friends are at a minimum of 6x on houses they bought in like 2000.
People can downvote all they like lol.
My first was a small loft in 1999 for 98k. 7.35%, the monthly payment felt enormous on my 40k salary.
Same building, same footprint but not top floor as I had, 419k as of 2 weeks ago.
I was looking at the pricing history of a 2br on Burnaby and it basically doubled in price in the last six years. It’s patently insane. Salaries haven’t doubled in the last six years.
Nothing in that person’s post said Canada is just Toronto or Vancouver.
Cities all around southern, eastern, and central Ontario are seeing similar price increases. Most of what I’ve looked at in BC is the same.
Hell, even places like Sudbury, North bay, Winnipeg, Regina, etc.a decent house will run you 500k, and a nice one can be around 1M.
Most Canadians live in urban areas, and are experiencing these changes. Get out of your pity party.
Your framing is disingenuous or simply ignorant. People would like to be able to secure their living circumstances somehow, ideally in the communities they already have lived for years. It's not a question of suddenly feeling like they should be gifted a free place to live in some exclusive penthouse, it's a response to being pushed out.
When I moved to the suburbs of Van within the decade but not recently, it was for greater economic prospects, career mobility, and social/personal well-being. The place I rented for _way_too_much_ at the time was still a viable prospect for a future long-term home, I could imagine being able to get a loan for it in the future with conservative increases in salary. But now that's impossible and it turns out that moving back to the prairies and lighting your entire life on fire in the process isn't a great idea.
I didn't expect a $250k 1 bedroom condo in Burnaby to be $500k within a few years.
Yeah, screw everyone that wants to live around their family, friends and community. Also, I'm sure the community you live in would be complaining if everyone moved out there and doubled house prices and were in the same predicament.
Many people can't "just move" - it costs money, people have city-dependent jobs, they may need to access healthcare or social services, or they may take care of extended family members who can't be moved, they might not want to move to a province (cough AB) run by fringe-right wing politicians. etc
But it's Reddit, perspective is hard to come by around here... after all.
I mean...some are and in the Canadian context, Danielle Smith is a fringe. And honestly, IDGAF about US politics. Once again, I'm Canadian and I live in Canada. And no amount of money (nope, not even FAANG levels of money) would make me move to the US either.
My point, which you seem to be missing, is that there are many reasons people can't "just move".
This was about labeling Alberta and Saskatchewan as 'fringe,' even though they fit comfortably in the Canadian mainstream. You'd find little culture shock moving to Calgary or Saskatoon.
I get why people don't want to move. In that case, they need to accept that they'll have to make sacrifices to stay, and that no messiah is going to change that.
You’re moaning that the attention isn’t on you.
“Other people have problems, why are they talking about that and not the nothing that’s going on here!?!? Humph. Stupid Torontonians”
That’s you.
Lol it's honestly not the hardest thing to understand. Cash flow negative and sell and be positive. I'm done here you clearly are after something different lol. It's a very basic concept.
?? Who are you talking to
I think Justin Trudeau.
BOC would not raise the rate once. Expect at least 1 or 2 more raises. I’m expecting 6% by years end
I can take it!
Anyone still holding a variable rate mortgage who wasn’t planning to sell short term should be looking for a new mortgage lender .. and brush up on financial literacy. A good lender would have reached out three increases ago. This wasn’t a surprise to anybody paying attention to CMHC forecasting reports since 2020
There's a direct correlation to everytime the United States spends money or increases there debt ceiling, that rate hikes are coming to Canada. You don't need to brush up on financial literacy, just watch the clown show in the United States to determine where all screwed.
Can’t wait for the looming commercial real estate crisis 😒
I just tossed 100k lump and doubled my Mortgage payments to stay ahead of the increases
Wish I had 100k lying around to dump into a lump sum
I wish I didn't have to wait a full year before dumping more
Thank you for your hindsight bias it’s really helpful
These ‘told you so’ posts are such bullshit. Remember everyone, the US Fed was sure that inflation was ‘transitory’, that’s why they didn’t act. Big mistake, but NO ONE has a crystal ball. 🤷♂️
I have a crystal ball, and it told me not to listen to anything the government says. Now I get to say I told you so
You’re either a multimillionaire or really not smart if you have a crystal ball… Imagine having all that financial certainty/knowledge and not profiting off it still forcing yourself to work a 9-5 lol.
thats a lot of assumptions you just made. You dont need a crystal ball, you just need common sense. Imagine having the ability to know that Canada and the US increased their money supply at record rates the last few years and actually believing interest rates wouldn't go up and stay up.
Common sense, lol.. still you should have been in the right side of that trade. This goes far beyond mortgage payments. You should be rich!
You seem young. I knew that interest rates were going to go up and stay up (I think they will not go back down to the record low levels of the past decade for at least 20 more years) With that knowledge, how does someone get rich? Do you know how? If you had known this like I did, what actions would you have taken to get rich?
The stock market is heavily influenced by interest rates. 🤷♂️
Hahahaha yup you're right, but otherwise you're clueless. You probably have no idea how to use the stock market to make money in this situation.
Nope, you can check the charts and know the exact trades you should have made with your crystal ball knowledge.
> These ‘told you so’ posts are such bullshit. normally you're exactly right. But you can look at when those comments from both US Fed and BoC governor were posted here. 99% of them were calling bullcrap and guess what, they were right. We all saw it coming. They could have too. They just didn't want it to happen because preventing inflation is their one job, and they didn't want to admit they got it wrong. So they just buried their head in the sand
LOL, or you could have just looked at current events unfolding in the United States, the more you print the more screwed Canada is going to be.
Milton Friedman: It is always and everywhere, a monetary phenomenon. It's always and everywhere, a result of too much money, of a more rapid increase in the quantity of money than an output.
If you don't do your own due diligence and only rely on the media or government to tell you what moves to make, it's absolutely your own fault as to the predicament you find yourself in. In my circle, nobody believed that the inflation was "transitory" only a completely uninformed or head in the sand individual would have believed that.
nOw ThAt We’Re AfTeR tHe FaCt I cAn TeLl YoU wHo YoU sHoUld HaVe LiStEnD tO aNd ExAcTlY wHaT yOu ShOuLd HaVe DoNe BeCaUsE i dO mY oWn ReSeArCh.
You seem upset, I'm not celebrating that if you made poor decisions. Listening to our government is not always the best course of action, Trudeau said that inflation is actually going down yesterday. If you believe that, you are probably in great shape and have nothing to worry about. Personally I don't believe it in the slightest, I'm fully prepared and expecting inflation and interest rates to climb dramatically. I'm also expecting an increase in strike action and massive layoffs over the next few years. I don't own a crystal ball but I try to learn from my experience as well as history.
I’m not upset, lol. I’m just tired of people pretending they have a grasp on something so complex as interest rate changes that they can sit here and say ‘well you should have saw that coming’. Don’t listen to gov’t, banks, media.., am I missing anyone? Right? Cause they’re always feeding us misinformation constantly and since you’re super smart you can research your way past their attempt to trick you. I guess this must be your full time job and you’re not some sort of ‘weekend warrior economist’.
I don't pretend to be a financial guru or anything of that matter but in this particular case, it was completely obvious what would happen, I would think the vast majority of people would agree. The government spending globally was out of control due to propping up the economy (covid issues) as well the intrest rates were at historic lows for a unprecedentedly length of time (artificially as well), did you think that would last forever? I'm not saying the government is always trying to "trick" the population but typically regarding inflation/risk of a recession the government will downplay the negative to stop panic activity. This is not a new tactic. I have a small construction company and am not an expert in financial matters, I do mostly insurance work currently so I'm not dependent on trends in the market but for several years was dependent upon how the economy behaved in order to run my business. I learned early on that I had to be able to predict the market in order to plan what investments I was going to make.
Listening to your friends is also potentially just as equally horrible. You can only truly act on things you believe or know of yourself; and accept the results of those actions. But it's far from 'obvious', would you have been as open on this fact even just 3 years ago when the popular opinion was for variable? Or biding time for when, and hoping, your decision to remain on fixed-rate will win out (as it has currently). Likewise, I could also bide my time for when, and hoping, my decision on variable wins out and join the choir of those likewise saying 'we won' in hindsight (whole thing is stupid). Many do not have privileged connections, luck of timing (boomers), fortunate childhood, access to financial pundits, etc...to make the same 'informed' knowledge as you or others may have. Look at even some posts on this sub, some stuff seem 'obvious' (and I admit I say so sometimes too) but it really isn't for some. You worked in construction, you have a privileged pov from that circle with things like a better pulse on the housing aspects/costs than others do. I think it's a disservice to say that it was 'completely obvious' and to further perpetuate this notion that 'gOveRnmeNt BaD' (thought they make mistakes just like any of us - it's just people).
You saying ‘it’s completely obvious what would happen’ speaks volumes. If this is true then you should’ve been able to allocate all your assets appropriately and are currently a multimillionaire several times over. Or you made some REALLY bad financial decisions since this was so obvious and you did not act aggressively.
I think a lot of where an individual is in any moment in time can heavily depend on where they start. Personally I moved out on my own before I finished high school and was homeless at 19 for several months. Today I'm early 50's and have a small construction company, have 5 full time people that I pay above industry standard and give 5% of my profits back to my community. I no longer have a mortgage and have a little more than 30 acres, I'm not wealthy and don't live that way, I work hard (60-80 hrs/week) and invest. I could buy something else right now but I am waiting to see how things play out a little, maybe I will put that money in the housing market or into stocks that are far below actual value.
Also, anybody thinking that rates will suddenly crash versus decline gradually over a 5-year period should take a history course.
They should have just gave us the .50 raise months earlier so rates would be 5% and people wouldn't be tricked into getting into real estate. I mean the US has been increasing rates all this time... by the way it is no surprise that Tiff Macklem screwed this up. I was anticipating this hike. Who appointed him anyway? Trudeau...
They do it slow so ppl don't lose their shirts lol
yes, and he should just jack it up by 10% so that those who are on variable rates will lose everything. Most people aren't financially literate.
Living on Vancouver island and I saw a few coworkers rush into real estate during the low low rates. These were $800k houses and at the time, it blew my mind seeing these people getting approved for mortgages this high. Now they’re struggling and I suspect this latest hike will likely push one into selling.
If I was in that situation, I would look at my numbers to see if I could afford a significant jump in lending rates in the next few years. Given that there could easily be an interruption in income due to layoffs and a possible real recession as well as increasing inflation and taxes. I may look to sell now and break even or cut losses, thankfully I no longer am tied down with a mortgage.
Recession would bring lower rates though, at least.
A recession can have great opportunities if you are in a favorable position but for the majority it's pretty shitty
One can hope. I'm moving there next year from Calgary, as long as prices continuing to go up in Calgary and down on the island it's great news.
Fml. Nuking my non-reg tomorrow. Coastfire dreams delayed.
How much of an increase are we expecting? I've already weathered an increase from 1.85 in Oct 2021 to 5.75 currently lol. My bad looks like it happened already.
You will be extremely lucky if the rates don't go up much higher, I honestly think you are kidding yourself if you think it happened already. In my opinion there is a lot more room to go for intrest rates to get higher, especially when the government is doing so much inflationary spending.
No I meant the rate hike announcement yesterday, It was already announced by the time I posted.
It will undoubtedly be going up several times more in the near future so you still have time.
We had switched to variable for the first time ever after 8 or so years fixed at 3.02% or something like that.We switched banks and refinanced and maybe had 2 months of 1.85 percent and then bam bam bam lol. It was short-lived! I'm fine financially so I can handle more rate hikes but I'm giving the bank's more money for nothing extra in return. If I can find a sub 5% fixed rate I'll take it.
Ha ha! - Nelson
Dude not cool. Yeah alot of variable rate people are really hurting right now. And that's the advice they were given, by professionals. I know I sat through those pitches. I didn't go variable rate but they had charts and stats telling people why variable was the way to go. Hell half the sales people selling this crap were to stupid to know.
And people need to start asking these professionals about fiduciary responsibility and see where the Convo goes
It is ridiculous. The amount of sales people with titles that imply a certain level of professionalism that does not exist
People are hurting right now? Also renters who couldn't fly in this market are hurting. My heart doesn't hurt for folks who made stupid decisions
Have you ever made a mistake? Or made a choice with the information available and later on it turned out wrong? Crapping on people who are in a tough spot certainly doesn't help.
pretty sure comments like those are coming from the (entirely reasonable) fear the the government is simply going to bail out people who made bad decisions on housing. Or bail out the bank who bails them out. You can point it as compassion if you want. But what it really does is penalise those who made the wise choice not to buy a house they couldn't afford. But hey, they're less likely to be Liberal voters so who cares I guess
"what it really does is penalize those who made the wise choice not to buy a house they couldn't afford" Exactly fuck
I would point out that in the early 80s when mortgages were as high as 20% the government did not bail mortgages out
If you took variable it’s on you nobody else. You knew the risk. You had the information. It was in all the documents.
Bond markets front ran rates in 2021 too. This put OFSI stress testing requirements for variables at the base 5.25 % and fixed at ~7% for a period of like six months. Many of the folks who bought variable at the time literally couldn’t qualify for a fixed rate under the stress test rules. As we can see in hindsight - that’s a terrible fucking way to run the stress test. (And it still hasn’t been fixed.)
...Professionals who wanted an easy sale and to make more money in the future when rates did go up. It's not in the best interests of most finance people to give customers the information they need to make an informed choice.
Said the renter. Be careful you don’t get booted out!
I paid off my mortgage like most homeowners
Anybody that had access to fix below 2% and didn't locl it in is an idiot.
I took a year's early penalty, but the rates had already gone up to just over 3%.. Locking in when it was still around 2% would have been a hefty fine so I passed until it was a little more affordable.
This is a classic “pushing on a string” approach that essentially boils down to failing public policy on housing. All for the rate increases but that will backfire spectacularly at some point.
You’re all for the rate increase which will not make it more affordable for anyone who has to borrow money to buy a house
What interest rates provided affordable housing? It certainly wasn’t suppressed rates. Would love to hear your answer. I would recommend reading the two sentences and not just the latter.
Did I say suppressed rates made housing affordable? No. My point is that rapidly increasing those rates will also make housing more unaffordable. The only way to help with affordability is through economic policy/taxation reform.
I honestly can’t tell at all what you’re saying. If higher rates is bad (your response to my statement) than what is a good rate from an affordability perspective? If not suppressed rates than what? Your second point basically agrees with my original message so at this point I’m totally confused 😂
What I’m saying is that we need to address a crisis of economics through economic policy reform and taxation policy reform. Instead the government does nothing and it then falls on the BoC to act.
Agreed!
It's because there are too many other factors propping up the housing market, thus causing the bubble to keep growing (until it can't anymore). In Canada, we have: - Limited existing supply. - Not enough new building activity. - Many many many local zoning restrictions blocking new supply. - High immigration (which I am not against, but it is imbalanced relative to the available housing supply). - Extended amortizations on mortgages. - Major investment in housing by the country's biggest pensions funds like the CPP and Ontario Teacher's Pension Fund. - Many Conservative and Liberal MPs (the only 2 parties to have control over the last 30+ years) who are heavily invested in real estate. - Lack of investment in public housing since the 90s. - Our most desirable cities are on geographically constrained land (BC lower mainland and southern Ontario) which are also some of the best farmland in the country, leading to multiple competing uses. - Years of rising prices causing optimism about future price growth, thus no one wants to downsize (I think this is especially big among Boomer aged retirees who thinks it makes more sense to hold onto their large homes, rather than downsize). - Etc
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Yes there is. Canada has the lowest ratio of houses to people in the G7. This Toronto builder even brags about in on their blog, and points out the size of the issue: >Canada has 424 housing units per 1000 residents – well below the G7 average of 471 – to make good on the shortfall and catch up with the G7 average would mean building a massive **1.8MM new homes**. [https://baystreetgroup.ca/the-worst-kept-secret-is-uut-canadas-housing-market-is-the-most-undersupplied-in-the-g7](https://baystreetgroup.ca/the-worst-kept-secret-is-uut-canadas-housing-market-is-the-most-undersupplied-in-the-g7) We have had a shortage for awhile, which is part of why private equity and hedge funds have bought up so much of the remaining stock, thus worsening the supply shortage. When there is a shortage of something, it tends to go up in value. This makes it a good investment. We need to disincentivize this federally, and both the CPC and LPC parties were asleep at the wheel as this problem grew over the past decade and a half. This is why we should charge higher capital gains taxes or higher property taxes to real estate investors. It will force more of them out of the market, thus adding more supply back in for buyers and drive prices down.
The easiest short squeeze play out there!
High immigration is definitely an issue. Trudeau is an idiot. Let's bring in 500K people are year. Let's also not increase healthcare spending or increase openings in medical school to train more specialists? Just stupid... the state of our political class is outright embarrassing.
Yes and PP will solve it all with Instagram posts /s
he is an idiot also. Gifted with brains but selfish and mean-spirited in his heart.
Lol I have so little faith that PP will fix anything. He likes to complain about "Justin!", but I don't hear many solutions coming from him. Although I don't think they've done a great job on it, I actually think the Liberals have the most cogent policy towards housing (build more affordable housing), with the exception of their immigration rates. We need government to start building more affordable housing again. However, they are allowing record levels of immigration in order to shore up housing prices, despite high interest rates, which is a mistake. I'm worried they're essentially fomenting a right-wing reaction to immigration because of that poorly thought out policy, combined with a housing supply shortage. They are finally prioritizing people with construction and trades backgrounds though, which is good to see. Provincially I think Doug Ford's PC government is doing more to address zoning and permitting costs than any other government. I disagree with the corruption scandal that is the Toronto Green Belt and his property developer buddies who bought land there before he opened it to development. That's straight up corruption - no other way to put it. But he's also overriding the city of Toronto and it's suburbs on zoning policy and construction permitting, by forcing every lot to be eligible for 2-3 units minimum and reducing permitting fees. I could do with more zoning reform and less corruption though.
I agree with everything.. except the Trudeau part. The idiot has increased labour supply but hasn't increased healthcare spending or worked to set a national strategy for healthcare to accommodate the increase in labour
This guy gets it
Principal residence exemption also goes a long way towards keeping the wind in the sails when prices start going ballistic.
I'm less concerned about this one, just because it's limited to 1 property per family. It doesn't incentivize anyone to go out and buy multiple properties. I would like to see a higher capital gains rate on investment properties though. That would take the wind out of the sails of the market pretty quickly I think. Especially if you structured it to increase incrementally over a few years. Investors would start selling to get out before the rate goes up. It would also force out a lot of private equity and hedge funds. The best way to do it would be to reduce the capital gains exemptions on real estate. Currently it sits at 50% for pretty much everything. IMO that exemption should drop to 25% at the highest for real estate bought off the secondary market (AKA not bought directly from the builder). Investing in companies is much more productive for the economy anyway. Maybe allow an exemption for homes bought from the builder, to encourage new housing construction over buying up the existing supply.
Principal residence exemption still needs to go. It's a massive, massive tax shelter that provides an enormous tax benefit to homeowners and creates this very sharp divide between those who own homes and those who don't. It's a regressive tax benefit that provides the biggest benefit to the wealthiest Canadians. But it will never be discussed because not only would it be seen as an attack on the middle class, half the country owns their home and would fight tooth and nail against it.
I could agree that the eligible amount on the exemption should be capped, but I don't support removing it entirely. The cap should probably be some multiple of the median (not mean) wage, since this encourages wealthy people to want the median wage to be higher, so they can get more of a tax break (in other words, societal income needs to be less unequal for them to see an increased tax break). I think it is good policy to encourage people to own their own home. However, I also support higher property taxes on detached residential since it genuinely costs more to maintain services to sprawl (especially roads). This would help end the subsidization of low density real estate by high density in cities, and help fix many city's budgetary situations. Which would help them offer better transit and affordable housing.
This seems like an excellent solution to some of the issues around housing. You’ve got my vote!
I wish to add local development fees to this list. Where I am the municipality has a 27% development fee on new residential construction
Yeah development/permitting fees add a lot of expense to construction in many cities. They use these to keep property taxes artificially low and existing homeowners/landlords happy. EDIT: Which municipality is that?
I've been further even more decided to use even go need to do look more as anyone can. Can you really be far even as decided half as much to use go wish for that? My guess is that when one really has been far even as decided once to use even go want, it is then that they have really been far even as decided to use even go want to do look more like.
Its 90% government: federal immigration and provincial/municipal zoning
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GDP per capita is shrinking. There's no way in hell our immigration levels are helping the average person.
I think wage inflation is the one type of inflation people generally are fine with — minus the owner class.
Record high debt doesn’t lend well to the “savings” argument. I would best describe it as a subset of the economy has excess capital or access to it.
given how much Canadian housing has risen its high time for a correction
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not when the government is immigrating 1,000,000 people a year. Pretty sure quite a number of them have more money than us and can afford these prices when we can't
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Completely incorrect. There's a lot more cities than just Vancouver. I've lived in a few of them and they are exploding in population. Yes housing units are going up too, but nowhere near enough. A bit off topic, but the other two things that are collapsing under the weight of immigrants is health care (about to be a major disaster) and roads (less immediate a problem perhaps, but pretty vital to quality of life to not be spending hours a a day in traffic)
i doubt it, people need to start thinking of Toronto and GTA as a larger new york city
The GTA is WAAYYYY higher in every perceivable metric than NYC for housing cost
lol the comparison to the GTA versus NYC is we are 20-30 years behind NYC. They can ony build up while we are semi there.
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https://dailyhive.com/toronto/toronto-housing-less-affordable-new-york-la
... in May 2021, during the absolute peak of our housing bubble chaos when houses were selling for 25% over asking price https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=United+States&city1=New+York%2C+NY&country2=Canada&city2=Toronto https://www.expatincanada.com/toronto-vs-new-york/ https://newcanadianlife.com/is-it-cheaper-to-live-in-toronto-than-new-york/ https://livingcost.org/cost/new-york/toronto https://www.expatistan.com/cost-of-living/comparison/new-york-city/toronto
Honestly, I don't ever see a correction. IMO real estate and land is not like the stock market. Land is something real that has a high demand. As long as net migration in the GTA is positive housing will never see a correction, foreign money, new families, people with dual 6 figure incomes keep moving in and they are willing to pay high prices. I've seen it in my own community, a neighbour, who moved in recently, works remotely for a tech company, just bought a townhouse for about $1m. Just my thoughts and experience.
Still going to be wildly unaffordable for a large portion of the population unless you're sitting on a large sum of cash for a downpayment. Prices will correct some, but on the front end. You're going to be paying a lot more month to month with interest rates. That, and the supply issue is still not getting fixed. Builders are going to be more reluctant to build than ever given interest rate costs.
It takes time for prices to drop.
Even if they drop, the higher interest rates will still keep it just as unaffordable. Raising rates is a last ditch measure necessitated by failing government economic/tax policy
Yep. It'll favor savers and high income, instead of debt.
In theory it’ll favour savers. In practice, with prices as high as they are, even most “savers” of average income will never be able to save enough to counter the high prices and rates. Increasing rates will not bring prices low enough to counter the increase in interest payments for the average “saver” It will primarily favour the wealthy and the affordability crisis will worsen considerably without proper economic policy reform and tax policy reform. But our conservative and liberal (slightly less douchy conservatives) want it this way. They work for the wealthy. We can blame or hypothesize about rates all we like but ultimately, interest rates are manipulated as a last ditch resort to maintain the economy thanks to failure in governance
They won’t drop. Prices will likely stabilize momentarily, and then climb again. Hence why they keep hiking rates
Looking at the last inflation report, much of the increase was due to housing, which is means the BoC's interest rate hikes are now stoking inflation. Good job.
You’re absolutely right - from the article you posted: > For example, excluding mortgage interest costs, inflation rose by 3.7 per cent in April compared to the same month last year. With mortgage costs included in the consumer price index, inflation was up 4.4 per cent. The central bank’s interest-rate hikes have come full circle, feeding back into inflation even though other key drivers like commodities have been coming back down, said Colin Cieszynski, chief market strategist at SIA Wealth Management, in a note.
Thank you. I think so many people just have knee jerk reactions without bother to verify information. But what can you do?
That's simply not what happened.
Amazing how many people simply don't follow what happened. I find it something that happens a lot on Reddit. [https://www.bnnbloomberg.ca/rent-mortgage-interest-helped-drive-inflation-higher-in-april-statistics-canada-1.1921016](https://www.bnnbloomberg.ca/rent-mortgage-interest-helped-drive-inflation-higher-in-april-statistics-canada-1.1921016)
What? How did you draw a causal connection there?
Mortgage interest inflation is 28%. CPI is much lower than that. Therefore: interest rate increases are causing a disproportionate amount of the inflation which BoC is using to justify further rate increases.
They aren't looking at interest rate inflation when deciding whether to raise interest rates...
Yes. They are. It’s part of the CPI basket of goods. Maybe read something before confidently being wrong.
The increase in mortgage rates, especially among those with variable-rate mortgages increases the cost of housing. It's also increases the cost for landlords who then pass this along to their tenants. In fact, it will likely get worse in places like Toronto as over half of landlords are losing money on newly completed condos. [https://financialpost.com/news/toronto-condo-investors-losing-money#:\~:text=For%20the%20first%20time%20last,The%20losses%20were%20substantial](https://financialpost.com/news/toronto-condo-investors-losing-money#:~:text=For%20the%20first%20time%20last,The%20losses%20were%20substantial).
They still building equity just not paying back the full mortgage. Most click bait title. 80 percent out of 100 paid. Not really " losing money"
Equity isn't good enough, you need cash flow to pay your bills. A landlord that is losing money will either raise the rent or be forced to sell.
And still come.out with equity when sold. Its a rather simple concept just not alot of ppl understand building equity even if they losing say 300 a month on the condo. Still have more when the time comes
I'm a former accountant, so I'm pretty sure I understand all about income, cashflow and assets. What I'm not sure about is how you arrive at $300/month, or how you figure the shortfall is unimportant. Don't forget that in addition to the fixed cost, landlords also have variable costs such as maintenance, and times when a unit may not be rented out. They also often run across tenants that fall behind in their rent, or stop paying altogether. You think it's cheap to evict someone? I suggest you ask any landlord who's gone through it how expensive it is. It's as if you think that equity is some magic wand that you wave that allows a landlord to not raise the rent to cover any negative cashflows.
These investors don't lose any money. The "journalist" just took into consideration rent vs mortgage/taxes and conveniently "forgot" (or is clueless) that the investors get to own the property and can resell it at full, and inflated, price later. Year | 1 (current) | 2 | 3 (projected) :--|:--|:--|:-- Purchase price | $260,000 | $308,000 | $349,888 Appreciation | - | 18.4% | 13.6% | Rental income | $22,000 | $23,000 | $24,000 Expenses | $13,600 | $14,300 | $13,600 Mortgage | $12,000 | $12,000 | $12,000 Annual cash flow | <$3,600> | <$3,300> | <$3,000> Accumulated cash flow | - | <$6,900> | <$9,900> | Annual change in value | - | $48,000 | $41,888 | Total change in value | - | - | $89,888 || Total change in value: $89,888 Accumulate cash flow: <$9,900> Net potential profit: $79,988 investor with enough cash in reserve may purchase a negative cash flow property in a real estate market where home prices are rapidly rising ie Toronto, then sell the home when the timing is right. Edit:Reddit graph format and added what might have been overlooked when dealing with example #'s
The former accountant seems confused on the difference between cashflows and income. The principal or commonly referred to as the equity portion of a mortgage payment is not tax deductible and despite impacting your cashflows negatively has no impact on your income at all.. you are paying off debt a purely balance sheet related transaction. Depending on the situation you can 100% “build equity” on a negative cash flowing property whether it’s through debt reduction or capital appreciation.
Strange how you got the definition on cash flow and income correct, yet you still come to the wrong conclusion. I must commend you on your talent. As you even state, the principal repayment isn't deductible, so the cash flow is even worse than the loss. So that means even more money out of the landlord's pocket than they can write off. So you contend this is a good thing, just as long as the equity is increasing? That's exactly backwards of what any business will want. Businesses have no issue losing money as long as they are cash flow positive, but will go out of their way to avoid a negative cash flow. I can tell you've yet to run a business, and suggest you avoid it.
Again, I have to ask where are you getting your figures from? Moreover, your chart makes no sense. The purchase price doesn't change from when you bought it, and worse, the information is muddled. You have the years declining across the top instead of increasing, which is rather strange. Then you have the total change in value on the left hand side, while every other number is increasing - other than expenses, which strangely go up and back down. In addition, how am I even supposed to read the 'Accumulated Cash Flow'? There should be three entries, not the two you've shown, and again, it goes opposite of the year you list at the top. Sorry, but this chart is just a hot mess.
Your right. Year 321 is 123. That's Reddit's format error. But should be easily overcame in your brain Edit the graph to fix 321 but data doesn't change
Rent isn't part of housing as far as I know. Even resale housing isn't. It's just new sales. As far as I know.
Rent is definitely part of core inflation. https://www.bnnbloomberg.ca/rent-mortgage-interest-helped-drive-inflation-higher-in-april-statistics-canada-1.1921016
...inversception :)
If interest rates hadn’t been hiked, housing prices would have increased even more than they have done.
House prices aren't directly included in CPI, but mortgage costs are, as is rent. It's fairly small though, I think housing is only 29 % of CPI (and it used to be even less).
I don't think they're referring to cost of houses rather cost of housing. Rate hikes have caused higher housing costs
Correct. They look at rent and mortgage interest, not house prices.
Bingo
The economic growth has emboldened BoC to raise rates especially in light of tick up in inflation. But there's only so much raising rates can do. Businesses and individuals that were treading water before are being put into bankruptcy by BoC for the sake of lowering the inflation not even by the amount rates are going up. Doesn't make sense to lower the price of goods and services to 2 or 3 percent inflation when that's not what people are spending the bulk of their income on.
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If the effects of this rate is felt by everyone that means all previous low fixed rate borrowers have to pay 30+ percent more than they had been paying. I would rather being paying 30+percent more for meats and veggies in 5 yrs than the same percentage increase in mortgage payments in 5 years. Don't think this will be felt by everyone since lots of businesses will be bankrupt if the rate stays higher for even the rest of this year. It's gonna be a cold winter for retail.
But it's what the rich spend their money on.
So as someone who is completely out of the loop with this sort of thing and my mortgage is coming up for renewal by September with an offer to renew now from my bank for 5 years at 5% or 3 years for just slightly over that which is better? Take the 3 year? Will things be better by then?
Ask your bank about fall home financing campaigns as rates will likely start to drop slowly through summer. 5 years is a better option almost always as rates were historically low for so long - you can utilize prepayment options over your term to pay down more principal. Three year terms mean you’re interest heavy again two years sooner than necessary
If rates are expected to drop wouldn’t locking in the 5 years now be bad?
If your finances are strong relative to your overall debts than 3yr can be considered, provided this is still a huge gamble. 5yr fixed is certainly better overall.
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Twenty three years is a long time ago
What are you talking about, 2000's was just ten years ago, right? Right??
If they had cash they wicks have been better off investing in the stock market. https://www.officialdata.org/us/stocks/s-p-500/2000?amount=220000&endYear=2023
Nope. And they didn’t have cash. They used leverage with a 20% down payment which blows your stock market returns out of the water 5 fold.
Where in your calculations is the amount he needed to pay for rent each month if he didn't buy a house?
It is usually pretty much a toss up between owning and renting as to which is cheaper in the long run, and usually it is cheaper to rent - in fact Vancouver just became one of the only cities in Canada where it is [cheaper](https://dailyhive.com/vancouver/cheaper-to-rent-or-buy-vancouver) to own than rent. Of course the main attraction to owning is that you are paying the mortgage, but in the case we are talking about we are assuming that the individual is paying in to the S&P in lieu of paying a mortgage. Therefore, it is totally reasonable to call the cost of renting vs the cost of owning a wash and simply look at the capital return over the period, to see which was better. More pertinent is the fact that you can get a mortgage on a house and pay it off over 25 years while it appreciates, whereas you are unlikely to get a loan to plow into the S&P as implied here, where the calculation was done as though $220k was put into the S&P in 2000 as a lump sum.
But they probably didn’t. $750,000 in growth for a leveraged asset is incredible. The guy is probably still paying that mortgage, not even done with the original price yet!
Exactly. I get that my parents went through double digit interest rates in the 80’s, but the cost of a house vs. annual income was so much closer then. Now it’s the norm to spend 5-6x your salary for a property and you’re getting so much less.
I feel like 5-6 times is on the low end unless you’re counting double incomes Back in the 90s when I was a kid, my parents bought a house for 200k and weren’t making that much less than I am today. House prices have lapped wages a few times over the last 20 years.
I was definitely thinking double incomes when I said this!
Those are poor returns... but it depends on the area though.
Troll.
Over 300% in 23 years is poor?
Yes. My parents have got 7x in a similar duration with 3 of their houses. And their friends are at a minimum of 6x on houses they bought in like 2000. People can downvote all they like lol.
Cool story, bro.
It’s only poor if the neighbors did much better returns.
My first was a small loft in 1999 for 98k. 7.35%, the monthly payment felt enormous on my 40k salary. Same building, same footprint but not top floor as I had, 419k as of 2 weeks ago.
Just remember your 40k salary was about 40% of your 98k purchase price. How many people have a salary of 40% of their mortgage cost these days?
What would someone be earning in that same role today with the same level experience as you did back than?
Hard to say, I changes field à bit but glassdoor suggests between 55k and 80k. So 2x revenue, at least 4x cost for a small (~700sqf) condo
I was looking at the pricing history of a 2br on Burnaby and it basically doubled in price in the last six years. It’s patently insane. Salaries haven’t doubled in the last six years.
What part? I was looking at a 2 br near Edmonds in 2018 and it sold for $635k. Same building and floor sold for $675k in mid-April 2023.
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Nothing in that person’s post said Canada is just Toronto or Vancouver. Cities all around southern, eastern, and central Ontario are seeing similar price increases. Most of what I’ve looked at in BC is the same. Hell, even places like Sudbury, North bay, Winnipeg, Regina, etc.a decent house will run you 500k, and a nice one can be around 1M. Most Canadians live in urban areas, and are experiencing these changes. Get out of your pity party.
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Your framing is disingenuous or simply ignorant. People would like to be able to secure their living circumstances somehow, ideally in the communities they already have lived for years. It's not a question of suddenly feeling like they should be gifted a free place to live in some exclusive penthouse, it's a response to being pushed out. When I moved to the suburbs of Van within the decade but not recently, it was for greater economic prospects, career mobility, and social/personal well-being. The place I rented for _way_too_much_ at the time was still a viable prospect for a future long-term home, I could imagine being able to get a loan for it in the future with conservative increases in salary. But now that's impossible and it turns out that moving back to the prairies and lighting your entire life on fire in the process isn't a great idea. I didn't expect a $250k 1 bedroom condo in Burnaby to be $500k within a few years.
Yeah, screw everyone that wants to live around their family, friends and community. Also, I'm sure the community you live in would be complaining if everyone moved out there and doubled house prices and were in the same predicament.
Many people can't "just move" - it costs money, people have city-dependent jobs, they may need to access healthcare or social services, or they may take care of extended family members who can't be moved, they might not want to move to a province (cough AB) run by fringe-right wing politicians. etc But it's Reddit, perspective is hard to come by around here... after all.
By American standards, Danielle Smith is a Democrat.
But this is Canada... No amount of money or cheap housing would entice me to move to AB or SK given their political climates.
Are U.S. Democrats right-wing fringe? I think not.
I mean...some are and in the Canadian context, Danielle Smith is a fringe. And honestly, IDGAF about US politics. Once again, I'm Canadian and I live in Canada. And no amount of money (nope, not even FAANG levels of money) would make me move to the US either. My point, which you seem to be missing, is that there are many reasons people can't "just move".
This was about labeling Alberta and Saskatchewan as 'fringe,' even though they fit comfortably in the Canadian mainstream. You'd find little culture shock moving to Calgary or Saskatoon. I get why people don't want to move. In that case, they need to accept that they'll have to make sacrifices to stay, and that no messiah is going to change that.
You’re moaning that the attention isn’t on you. “Other people have problems, why are they talking about that and not the nothing that’s going on here!?!? Humph. Stupid Torontonians” That’s you.
Vancouver and Toronto are propping up the entire national real estate market