Justin Time

[sburns]

The immigrants driving up the housing prices are not the refugees coming here with nothing and starting from scratch. I have no issues with such cases.

The immigrants driving up the housing prices are the rich international students coming here with mommy/daddy's money and buying property. These people are usually excluded from foreign ownership stats because they're considered residents after a short period of time. When I was at U of T a few years ago I met many such people. Here's how it works:

1. Kid with rich parents from from a foreign country (usually China) gets accepted at U of T or other university.
2. Kid gets students visas (ez pz) and moves here.
3. Parents start funneling money through the kid, usually in the form of buying real estate, small businesses, etc. I knew a 20 year old Chinese guy at U of T who was the legal owner of several gas station in downtown Toronto. Explain to me how a 20 year old student with no business experience or income ends up doing that.
4. Step 3 is usually facilitated by crooked mortgage brokers, lenders, casinos, real estate brokers, and lawyers who will happily accept money without reporting to FINTRAC.
5. Kid graduates from university, and gets a job in Canada for a certain number of years. Within a year of graduation they are likely permanent residents due to visa fast tracking for students/new grads.
6. Thanks to step 5, their property acquisitions are no longer reported under foreign ownership rules, which also means no foreign ownership taxes apply, because the owners are now residents.
7. Now the money really flows. The kid now starts buying more property with mommy/daddy's money -- in most cases the houses will sit empty.
8. The parents have now successfully sheltered millions of illegal money from China in the North American real estate market.

Meanwhile Joe Average and his wife trying to buy a house in the GTA on a 200k combined income are getting outbid because of Chinese buyers coming in and buying with favorable terms (over asking price, no contingent closings, etc.). The government could do something about it, but it requires a lot of effort (following the money) and would be bad for our economy (real estate market on fire == good).

Yup exactly. Can't agree enough. I've met a few of these students, not as far as you described, and all decent people, but gives me pause as to how they are living the way they live.

All those involved are getting comfortable with the easy money (real estate, schools etc), and driving up costs, while the rest of us have to suck it up and gov does nothing. Middle class squish, and burden with more taxes and expenses. ?‍

 

[GreyGhost]

Yup exactly. Can't agree enough. I've met a few of these students, not as far as you described, and all decent people, but gives me pause as to how they are living the way they live.

All those involved are getting comfortable with the easy money (real estate, schools etc), and driving up costs, while the rest of us have to suck it up and gov does nothing. Middle class squish, and burden with more taxes and expenses. ?‍

There is an estate lot subdivision near st Andrew's college. Almost every sale for the last few years has been to foreign students at the college. One to two million a house. Kids are in high school. Seems legit. :/

 

[Mad Mike]

The immigrants driving up the housing prices are not the refugees coming here with nothing and starting from scratch. I have no issues with such cases.

The immigrants driving up the housing prices are the rich international students coming here with mommy/daddy's money and buying property. These people are usually excluded from foreign ownership stats because they're considered residents after a short period of time. When I was at U of T a few years ago I met many such people. Here's how it works:

1. Kid with rich parents from from a foreign country (usually China) gets accepted at U of T or other university.
2. Kid gets students visas (ez pz) and moves here.
3. Parents start funneling money through the kid, usually in the form of buying real estate, small businesses, etc. I knew a 20 year old Chinese guy at U of T who was the legal owner of several gas station in downtown Toronto. Explain to me how a 20 year old student with no business experience or income ends up doing that.
4. Step 3 is usually facilitated by crooked mortgage brokers, lenders, casinos, real estate brokers, and lawyers who will happily accept money without reporting to FINTRAC.
5. Kid graduates from university, and gets a job in Canada for a certain number of years. Within a year of graduation they are likely permanent residents due to visa fast tracking for students/new grads.
6. Thanks to step 5, their property acquisitions are no longer reported under foreign ownership rules, which also means no foreign ownership taxes apply, because the owners are now residents.
7. Now the money really flows. The kid now starts buying more property with mommy/daddy's money -- in most cases the houses will sit empty.
8. The parents have now successfully sheltered millions of illegal money from China in the North American real estate market.

Meanwhile Joe Average and his wife trying to buy a house in the GTA on a 200k combined income are getting outbid because of Chinese buyers coming in and buying with favorable terms (over asking price, no contingent closings, etc.). The government could do something about it, but it requires a lot of effort (following the money) and would be bad for our economy (real estate market on fire == good).

Nice story, but foreign buyers are not making house ownership a challenge for young people, they are making the challenge all by themselves. Im old enough to have seen first hand what it took to get into the GTA housing market for the last 35 years. I think this has been beaten to death already on these forums -- home ownership is no easier or harder than it was 30 years ago, what has changes is 30 years ago a lot more young people sacrificed travel, cars, fancy rental digs, and location to get into their first homes.

Toronto prices are based on supply and demand. The GTA is a magnet for people because that's where the jobs are, there is no cheap land left -- hasn't been cheap for decades. And I don't think Joe average is being outbid by China, only 5% of new house sales are made to foreign buyers (TREB stats) - and that includes buyers on who are enroute and intending to live in those homes.

Look back over the threads that discuss this, there are lots of accounts from GenX folks that detail what they had to do 20, 30 years back -- their effort was a herculean then, perhaps harder and riskier than it is today.

 

[ChrisCBR]

Ah, so no different than what this regular working Canadian had to do when he bought his first house 35 years ago. Or what his regular working Canadian kids did in the last few years.

Thirty five years ago people in north Toronto were buying 10 minutes away in Vaughan, its nothing like this today.

 

[ChrisCBR]

The immigrants driving up the housing prices are not the refugees coming here with nothing and starting from scratch. I have no issues with such cases.

The immigrants driving up the housing prices are the rich international students coming here with mommy/daddy's money and buying property. These people are usually excluded from foreign ownership stats because they're considered residents after a short period of time. When I was at U of T a few years ago I met many such people. Here's how it works:

1. Kid with rich parents from from a foreign country (usually China) gets accepted at U of T or other university.
2. Kid gets students visas (ez pz) and moves here.
3. Parents start funneling money through the kid, usually in the form of buying real estate, small businesses, etc. I knew a 20 year old Chinese guy at U of T who was the legal owner of several gas station in downtown Toronto. Explain to me how a 20 year old student with no business experience or income ends up doing that.
4. Step 3 is usually facilitated by crooked mortgage brokers, lenders, casinos, real estate brokers, and lawyers who will happily accept money without reporting to FINTRAC.
5. Kid graduates from university, and gets a job in Canada for a certain number of years. Within a year of graduation they are likely permanent residents due to visa fast tracking for students/new grads.
6. Thanks to step 5, their property acquisitions are no longer reported under foreign ownership rules, which also means no foreign ownership taxes apply, because the owners are now residents.
7. Now the money really flows. The kid now starts buying more property with mommy/daddy's money -- in most cases the houses will sit empty.
8. The parents have now successfully sheltered millions of illegal money from China in the North American real estate market.

Meanwhile Joe Average and his wife trying to buy a house in the GTA on a 200k combined income are getting outbid because of Chinese buyers coming in and buying with favorable terms (over asking price, no contingent closings, etc.). The government could do something about it, but it requires a lot of effort (following the money) and would be bad for our economy (real estate market on fire == good).

Thank you, I have been saying this for years. The naysayers will never accept it even though Ive seen it with my own eyes.
Vancouver has thousands of these people.
Guy who was busted with the illegal casino came here several years ago and is probably running a real estate ponzi scheme. 50 properties in his name in Toronto. But no, foreign ownership isnt affecting our real estate market lol.

Go hang out in Markham or go to the track and take a look at how many exotics are driven by "students".

 

[FullMotoJacket]

That's pretty expensive light beer! in CAD that's $5.55 for singles, and $3.35 if you buy them by the thousand.

$3.33 CAD for tallboys (500ml). Mid to high for a craft beer here.

I guess you won't be buying their Advent Calendar, then.

 

[Evoex]

Nice story, but foreign buyers are not making house ownership a challenge for young people, they are making the challenge all by themselves. Im old enough to have seen first hand what it took to get into the GTA housing market for the last 35 years. I think this has been beaten to death already on these forums -- home ownership is no easier or harder than it was 30 years ago, what has changes is 30 years ago a lot more young people sacrificed travel, cars, fancy rental digs, and location to get into their first homes.

Toronto prices are based on supply and demand. The GTA is a magnet for people because that's where the jobs are, there is no cheap land left -- hasn't been cheap for decades. And I don't think Joe average is being outbid by China, only 5% of new house sales are made to foreign buyers (TREB stats) - and that includes buyers on who are enroute and intending to live in those homes.

Look back over the threads that discuss this, there are lots of accounts from GenX folks that detail what they had to do 20, 30 years back -- their effort was a herculean then, perhaps harder and riskier than it is today.

Then:

The Toronto Real Estate Board lists average home prices historically from 1970 to 2014. In 1990, the average annual price of a home was $255,020. That’s about $428,000 in 2017 dollars.

The last “housing bubble” in the city of Toronto occurred in 1989. Between 1985 and 1989, the prices increased by about $258,000 in today’s money.

But an economic recession in the early 1990s meant housing prices in Toronto collapsed. Between 1989 and 1996 average price of a home in GTA declined by about $195,000.

Now:

The Toronto Real Estate Board reported in February 2017 that the average selling price of a home was $875,983— that’s nearly 28 per cent more than than it was a year ago.

Then:

In October 1997, economist Kevin B. Kerr examined youth unemployment trends from 1976 to 1996. He determined that the average youth unemployment rate for people ages 15 to 24 was 27 per cent in 1996.

The same study also examined data from a National Graduate Survey, which concluded that real median full-time earnings of 1990 graduates with a bachelor’s degree was about $27,000 annually two years after graduation. In today’s money, that’s about $46,000.

Now:

According to Statistics Canada, the youth unemployment rate in Canada was 13 per cent in 2016.

A survey conducted in 2015 by the Council of Ontario Universities found that six months after graduation, the average annual salary for graduates of all university undergraduate degree programs was $41,839. After two years, the average annual salary was $49,170.

How much more does living in Toronto cost now compared to the ’90s?

Here is how expensive it is to exist now versus 20 years ago

theeyeopener.com

 

[ChrisCBR]

Nice story, but foreign buyers are not making house ownership a challenge for young people, they are making the challenge all by themselves. Im old enough to have seen first hand what it took to get into the GTA housing market for the last 35 years. I think this has been beaten to death already on these forums -- home ownership is no easier or harder than it was 30 years ago, what has changes is 30 years ago a lot more young people sacrificed travel, cars, fancy rental digs, and location to get into their first homes.

Toronto prices are based on supply and demand. The GTA is a magnet for people because that's where the jobs are, there is no cheap land left -- hasn't been cheap for decades. And I don't think Joe average is being outbid by China, only 5% of new house sales are made to foreign buyers (TREB stats) - and that includes buyers on who are enroute and intending to live in those homes.

Look back over the threads that discuss this, there are lots of accounts from GenX folks that detail what they had to do 20, 30 years back -- their effort was a herculean then, perhaps harder and riskier than it is today.

It isnt a nice story. This has been debated on here long enough and you simply wont acknowledge that you are wrong.

Young people 35 years ago were less educated, didnt work side hustles to the extent that they do today.
They didnt have to compete with money launderers from China for real estate.
They didnt have to compete with rich foreign kids for jobs to the same extend that they do today.

I went to school with many of these people, not just from China but some from the middle east and Africa.
All pretty much had a few things in common. Rich parents back home. No employment until their mid-20s as they are forced to find a job to stay in Canada. They have more time to study, more money for tutors, no part time jobs, no anxiety about paying bills.
Since they are already well off they are also willing to work for less. This pushes compensation levels down.
Look at a niche field like Actuarial science. Many in the field are rich foreigners. Compensation vs across the border is about 33% less despite the cost of living for the average Actuary being much higher here.

The ratio of home price to salaries were much lower back then. Sure interest rates were higher but they came down and many mortgages became tiny.
Rents were lower back then, allowing people to save more money.

It is more difficult for the average person to buy a home and start a family today than it was 35 years ago.

 

[ChrisCBR]

How much more does living in Toronto cost now compared to the ’90s?

Here is how expensive it is to exist now versus 20 years ago

theeyeopener.com

So in conclusion. More young people work today than in 1990. New graduates make slightly less money but inflation adjusted housing is over double what it was back then.
Sure looks like its easier to buy now........

 

[Mad Mike]

Thirty five years ago people in north Toronto were buying 10 minutes away in Vaughan, its nothing like this today.

Thirty five years ago most of Vaughan was disconnected from the city. No bus service, many of the arterial roads 2 lane, and a mix of dirt and pavement. But let's compare anyway:

House Price: In 1985 you could buy a starter 3 bedroom semi in Maple for about $150K. You needed at least $20K in cash to cover down payment and closing costs. Today that house is going to cost you $800K and you would need $60K to cover down payment and closing.

Income: Lets say you were a jr professional or skilled worker -- a teacher, nurse, tradesperson. In 1985 you would have made $25K, today $65K. Now lets say you're buying with a partner with same income, meaning we use $50K and $130K respectively for the math.

Saving to get into the game: The cash required to get 'in the game' represents 40% of a year's gross income in 1985 ($20K), and about 37% today ($45K). Considering tax and cost of living were not substantially different in the year's dollar, the time to save should be about the same.

Mortgage. In 1985 mortgage rates were 13%, so the 135K mortgage would cost $1534/mo, or about 37% of gross income.
Today that mortgage would be at 1.6% on $771K, payments would be $3133/mo or 30% of gross income. (Jack that to 37%, the same percentage of income your parents paid and your house gets paid off in about 18 years).

Now here's the challenge for most new home buyers -- the $60K savings. In 1985, the folks I know that bought in drove old cars, saved wedding cash gifts, and ever spare penny in order to get into the game. My kids are moving through the age when I bought my first house -- they have a wide circle of friends, almost none are saving with home ownership as the goal.

 

[Mad Mike]

So in conclusion. More young people work today than in 1990. New graduates make slightly less money but inflation adjusted housing is over double what it was back then.
Sure looks like its easier to buy now........

That article tells me why the author is unemployable, she clearly doesn't have a clue about how finance works.

The cost of real estate is tightly coupled to lending rates, rates go down, prices go up and vice versa. Affordability comparisons are base on the monthly carrying costs, not the overall capital cost. The carrying costs as a percentage of income haven't changed a whole lot since 1985, there have been a few good years and a few bad, but overall not much different. Same for entry costs.

 

[ChrisCBR]

Thirty five years ago most of Vaughan was disconnected from the city. No bus service, many of the arterial roads 2 lane, and a mix of dirt and pavement. But let's compare anyway:

House Price: In 1985 you could buy a starter 3 bedroom semi in Maple for about $150K. You needed at least $20K in cash to cover down payment and closing costs. Today that house is going to cost you $800K and you would need $60K to cover down payment and closing.

Income: Lets say you were a jr professional or skilled worker -- a teacher, nurse, tradesperson. In 1985 you would have made $25K, today $65K. Now lets say you're buying with a partner with same income, meaning we use $50K and $130K respectively for the math.

Saving to get into the game: The cash required to get 'in the game' represents 40% of a year's gross income in 1985 ($20K), and about 37% today ($45K). Considering tax and cost of living were not substantially different in the year's dollar, the time to save should be about the same.

Mortgage. In 1985 mortgage rates were 13%, so the 135K mortgage would cost $1534/mo, or about 37% of gross income.
Today that mortgage would be at 1.6% on $771K, payments would be $3133/mo or 30% of gross income. (Jack that to 37%, the same percentage of income your parents paid and your house gets paid off in about 18 years).

Now here's the challenge for most new home buyers -- the $60K savings. In 1985, the folks I know that bought in drove old cars, saved wedding cash gifts, and ever spare penny in order to get into the game. My kids are moving through the age when I bought my first house -- they have a wide circle of friends, almost none are saving with home ownership as the goal.

Nice of you to cherry pick numbers to make your argument look stronger. Why pick 13.333% down payment for 1985 and 7.5% downpayment for today.
You pick the absolute lowest rate for current mortgages (Covid rates)
Easier to get into the game in 1985 when the average person lived at home and could start saving at age 18. They didnt need to get an education.
Interest rates declined in the 90s and 00s, meaning peoples mortgages became a joke, something current new home buyers can never have.
Savings accounts pay almost 0% interest today.
With the stress test good luck qualifying for a $770K mortgage with that downpayment and income.

 

[ChrisCBR]

The average freehold Toronto home in 1985 was $120K. Today its $1m. Run the numbers with those figures.
20% down since thats the standard.

$24K downpayment is 8 months worth of a 1985 salary.
$200K downpayment is 42 months worth of a current median salary.

So yes the carrying costs might be only 10-15% more today in terms of yearly salary but the money required to get into the market is FAR higher. People start careers later and have more school debt. Cost of renting as a % of income is also higher.
All in all it is harder to save now and the money required to get into the market is higher. Hence its more difficult for the average person to buy today.

Average price of a 500 sqft shoebox in the sky is $600K now. A 20% downpayment is about 28 months of income vs the 8 months of income in 1985 for a house!

 

[Roadghost]

Nice of you to cherry pick numbers to make your argument look stronger. Why pick 13.333% down payment for 1985 and 7.5% downpayment for today.
You pick the absolute lowest rate for current mortgages (Covid rates)
Easier to get into the game in 1985 when the average person lived at home and could start saving at age 18. They didnt need to get an education.
Interest rates declined in the 90s and 00s, meaning peoples mortgages became a joke, something current new home buyers can never have.
Savings accounts pay almost 0% interest today.
With the stress test good luck qualifying for a $770K mortgage with that downpayment and income.

Also a 10% unemployment rate in 1985. Good jobs were hard to find after decades of economic mismanagement by P.E. Trudeau. If you had a good job, say GM it was easy to get a mortgage and buy a house.

 

[Mad Mike]

Nice of you to cherry pick numbers to make your argument look stronger. Why pick 13.333% down payment for 1985 and 7.5% downpayment for today.
You pick the absolute lowest rate for current mortgages (Covid rates)
Easier to get into the game in 1985 when the average person lived at home and could start saving at age 18. They didnt need to get an education.
Interest rates declined in the 90s and 00s, meaning peoples mortgages became a joke, something current new home buyers can never have.
Savings accounts pay almost 0% interest today.

Actually I picked numbers that were sympathetic to your argument, not mine. You could find a cheaper house now, not then, the pay scale I used is at the low end for the professions I mentioned today.

You are correct, interest rates did decline, and house values increased in step with declines. And yes, that did benefit many -- but it's not relevant as that has zero bearing on getting into the game. Also realize that a lot of folks had equity wiped out in the periodic market corrections. Once you're in there will be ups and downs - it's an investment with a 25 year horizon.

In 1985 you required 10% down vs 5% today, and in 1985 there was no relief for first time buyers on land transfer taxes.
I picked the rates that are available from any bank today for a high ratio mortgage, but feel free to increase the rate by 50% and you're still only paying 32% of gross income - a lot less than your parents paid.

The bottom line is if you want in, its no harder now that it was in 1985. If you set $200/week aside in an RSP and your partner does the same, reinvest tax savings and together you have $55K in 2 years. That's enough down and income to buy a home worth just under $700K,

 

[AllistonGT]

Nice story, but foreign buyers are not making house ownership a challenge for young people, they are making the challenge all by themselves. Im old enough to have seen first hand what it took to get into the GTA housing market for the last 35 years. I think this has been beaten to death already on these forums -- home ownership is no easier or harder than it was 30 years ago, what has changes is 30 years ago a lot more young people sacrificed travel, cars, fancy rental digs, and location to get into their first homes.

^^^^THIS
THANK YOU!

 

[Mad Mike]

The average freehold Toronto home in 1985 was $120K. Today its $1m. Run the numbers with those figures.
20% down since thats the standard.

$24K downpayment is 8 months worth of a 1985 salary.
$200K downpayment is 42 months worth of a current median salary.

So yes the carrying costs might be only 10-15% more today in terms of yearly salary but the money required to get into the market is FAR higher. People start careers later and have more school debt. Cost of renting as a % of income is also higher.
All in all it is harder to save now and the money required to get into the market is higher. Hence its more difficult for the average person to buy today.

Average price of a 500 sqft shoebox in the sky is $600K now. A 20% downpayment is about 28 months of income vs the 8 months of income in 1985 for a house!

In 85 our condo townhouse in Dundalk Drive at Kennedy and the 401 sold for 130k. Today it worth $675k. Not sure where your numbers came from, a freehold house at 120k in 85 would have been Whitby, Stouffville, Maple.

20% down is not the standard for first time buyers. It’s 95%LTV or 42%TDS. Works out to somewhere around 6.75% down payment. It was about 12% in 85 as HR mortgages were max 90% LTV and FTB had full land transfer tax.

Wrong on cost of rents. In 85 a bachelor at Jarvis and Church cost me $850, the year before a 2br at warden and finch cost $1000/mo. Today they are double, while incomes are 2.5x.

As for starting later, that’s a choice too. In 85 most left their parents home between 18 and 20, today that number is closer to 30.

 

[Evoex]

House prices themselves are an abstract number – the real question is how affordable a home is. Data from a 2011 Conference Board of Canada study on income inequality shows the average family after-tax income in 1984 was $48,500. In 2009, the latest date included in the study, income levels had risen to $60,000. In 1984, a house might have cost a family 1.6 times its annual income. Today, we're looking at a multiple of something around six.

2012 vs. 1984: Young adults really do have it harder today

Soaring tuition and real estate costs make it tougher for young people to be financially self sufficient than 30 years ago

www.theglobeandmail.com

 

[d4rktrooper788]

Nice story, but foreign buyers are not making house ownership a challenge for young people, they are making the challenge all by themselves. Im old enough to have seen first hand what it took to get into the GTA housing market for the last 35 years. I think this has been beaten to death already on these forums -- home ownership is no easier or harder than it was 30 years ago, what has changes is 30 years ago a lot more young people sacrificed travel, cars, fancy rental digs, and location to get into their first homes.

Toronto prices are based on supply and demand. The GTA is a magnet for people because that's where the jobs are, there is no cheap land left -- hasn't been cheap for decades. And I don't think Joe average is being outbid by China, only 5% of new house sales are made to foreign buyers (TREB stats) - and that includes buyers on who are enroute and intending to live in those homes.

Look back over the threads that discuss this, there are lots of accounts from GenX folks that detail what they had to do 20, 30 years back -- their effort was a herculean then, perhaps harder and riskier than it is today.

Sure, there are a lot of millennials who travel and spend frivolously -- don't get me wrong, that is happening too. But there are also lots of millennials that are top earners in their field and still can't afford anything reasonable without completely over extending themselves.

You mention supply and demand: if it were purely a supply problem, then the prices would still reflect what is affordable to top x% of Canadians in Canada. There are only so many young doctors/lawyers/professionals looking to buy starter homes in Canada, meaning that if it were only Canadians looking to get into these houses then eventually prices would come down. In this scenario, demand is capped.

The reality is that due to immigration, demand is not capped. There are tons of people with money outside of Canada looking to park their money here. Anyone who went to a big university in Canada knows this by interacting with international students. They are not reflected in your TREB stats because students are considered residents, and furthermore students who have graduated and work some trivial job also qualify for permanent residence very quickly. Don't even get me started on TREB either because they do not make their numbers publicy available so it could all be fabricated for all I know. All of these real estate boards have a vested interest in keeping prices and volume up so they are not an unbiased source of data.

And we haven't even gotten into taxes, cost of living/everything, wages/income, CHMC rules that favour people with large amounts of cash, AirBnB, and more. It's definitely not the same landscape anymore as it was in the 80s/90s.

 

[Mad Mike]

Sure, there are a lot of millennials who travel and spend frivolously -- don't get me wrong, that is happening too. But there are also lots of millennials that are top earners in their field and still can't afford anything reasonable without completely over extending themselves.

You mention supply and demand: if it were purely a supply problem, then the prices would still reflect what is affordable to top x% of Canadians in Canada. There are only so many young doctors/lawyers/professionals looking to buy starter homes in Canada, meaning that if it were only Canadians looking to get into these houses then eventually prices would come down. In this scenario, demand is capped....

If a top earning millennial drives an x5 and rents a $3500 condo, and does Bora Bora each spring he/she might have trouble saving.

I work with hundreds of them in my business, I’m amazed at how many young professionals buy a new car that’s worth more that their annual salary right after landing their first job.

Another one that puzzles me are the ones who rent fancy downtown condos. My daughter is in nursing, she has 3 cohorts that stepped into tiny $3000/mo downtown condos to live in cool areas.

I really don’t care what anyone does with their paycheque. But don’t whine about entry cost to home ownership, it really hasn’t changed for decades in the GTA.