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I guarantee that housing in Toronto will continue to climb at 10%-15 % per year. Housing is the only thing keeping the Canadian economy afloat. The BoC has no c

I guarantee that housing in Toronto will continue to climb at 10%-15 % per year. Housing is the only thing keeping the Canadian economy afloat. The BoC has no choice anymore, they will pay your mortgage if necessary. I dare them to raise rates to just 5%, there will be a collapse that will leave half the country in the streets. If you can afford to buy, buy with both hands. You will double your money in the next 5 years, a house in Toronto will be over 5 million in the next decade.

jbay808 5y ago
Well, it better keep going for another five years after that, and then another five years after that, and so on, because anyone buying a $5 million 4-bed-2-bath house for their family is only more dependent on that trend continuing than the one who paid $2 million. The price tag is only justified when there's no end in sight to the appreciation. Nobody would pay $5 million for that house if its value stops rising, let alone starts dropping. The government can't guarantee real estate, because any 99.9% risk-free investment with 10% annual growth can be levered into a 99% risk-free investment with 100% annual growth, and that's going to absorb all available capital like a black hole. The more the government acts to reduce risk without offsetting that by reducing returns or increasing the cost of debt, the bigger that black hole will grow. At some point, it might be worth biting the bullet and incentivizing investments into sectors of the Canadian economy that aren't housing. If workers can see housing appreciating by multiples of the median salary, and entrepreneurs clue in to the fact that they'd earn more as a real estate agent than by building a tech company, "the Canadian economy depends on housing" becomes a self-fulfilling property. A few more doublings and then there's no point bothering to do anything else like growing food and assembling cars. Then you end up with a Zimbabwe situation where, yes, your house is worth a trillion dollars and rising, but it's not... good. But maybe if we keep pouring enough gasoline on it, we'll be able to put out this fire?
- stana 5y ago
  "The price tag is only justified when there's no end in sight to the appreciation." Isn't that pretty much the definition of an asset bubble. Prices have decoupled from underlying asset utility (eg. rent) and it has become speculation on future price growth. As no return to justify the price all of this seems to hang on optimism/pessimism of future buyers. And availability of easy credit of course.
bink 5y ago
I know you weren't saying this at all but that first sentence is dangerously close to "we've reached a permanently high plateau". https://en.wikipedia.org/wiki/Irving_Fisher https://en.wikipedia.org/wiki/Irving_Fisher

jbay808 5y ago

Well, it better keep going for another five years after that, and then another five years after that, and so on, because anyone buying a $5 million 4-bed-2-bath house for their family is only more dependent on that trend continuing than the one who paid $2 million. The price tag is only justified when there's no end in sight to the appreciation. Nobody would pay $5 million for that house if its value stops rising, let alone starts dropping. The government can't guarantee real estate, because any 99.9% risk-free investment with 10% annual growth can be levered into a 99% risk-free investment with 100% annual growth, and that's going to absorb all available capital like a black hole. The more the government acts to reduce risk without offsetting that by reducing returns or increasing the cost of debt, the bigger that black hole will grow. At some point, it might be worth biting the bullet and incentivizing investments into sectors of the Canadian economy that aren't housing. If workers can see housing appreciating by multiples of the median salary, and entrepreneurs clue in to the fact that they'd earn more as a real estate agent than by building a tech company, "the Canadian economy depends on housing" becomes a self-fulfilling property. A few more doublings and then there's no point bothering to do anything else like growing food and assembling cars. Then you end up with a Zimbabwe situation where, yes, your house is worth a trillion dollars and rising, but it's not... good. But maybe if we keep pouring enough gasoline on it, we'll be able to put out this fire?

stana 5y ago
"The price tag is only justified when there's no end in sight to the appreciation." Isn't that pretty much the definition of an asset bubble. Prices have decoupled from underlying asset utility (eg. rent) and it has become speculation on future price growth. As no return to justify the price all of this seems to hang on optimism/pessimism of future buyers. And availability of easy credit of course.

bink 5y ago

I know you weren't saying this at all but that first sentence is dangerously close to "we've reached a permanently high plateau". https://en.wikipedia.org/wiki/Irving_Fisher https://en.wikipedia.org/wiki/Irving_Fisher