Toronto's real estate market is imploding


#1

Originally published at: https://boingboing.net/2018/03/07/down-cad105k.html


#2

That makes me so happy. However, foreign buyers might not care about extra taxes if their other option is to lose money in their home countries. Canada might need a real regulation restricting foreign buyers.

It would also help if Ontario changed the laws regarding sprawl/density. You can’t just curb the demand, you need to increase the offer of new units. And ‘push’ some businesses out of the downtown core, ffs…


#3

Here’s hoping something similar happens in Vancouver shortly. I obviously don’t want the market to crash entirely (I’m thinking of over-stretched recent homebuyers here) but Vancouver is so unlivable that many of my working peers are fleeing the city.


#4

Downtown Toronto is a sea of construction cranes, and has been that way for a long time. At least at first glance this bubble has been driven more by speculation than a supply crunch.


#5

Most Canadians don’t think they’re in adjustable rate mortgages, they’re in ‘fixed’ mortgages. But usually it’s only fixed for 5 years after which you have to negotiate a new rate, even though it’s amortized over 30 years. And people don’t realize that due to the wonders of amortization, it only takes a couple of points of interest rate increases to double the size of your payment…


#6

I don’t know, I think most Canadians might just be in variable rate mortgages. I remember when I was buying everyone was trying to tell us that variable rate was better.


#7

It is, for the lender!


#8

According to this web page, as recently as 2012 most canadian mortgages (65%) were fixed.
https://www.ratehub.ca/mortgage-statistics-canada

Not sure about calling a 5 year fixed rate mortgage variable though as @bryanlarsen did. Do people elsewhere commonly have mortgages with the term equal to the amortization period?

Personally I do have a variable rate mortgage and it was the best financial decision I ever made. I bought my house in 2006 and will pay it off 10 years early without changing the payment amount during the entire time.

Obviously everyone’s risk tolerance is different but not buying the most expensive house you can afford goes a really long way.


#9

I’ve been locking in my mortgage for two years up until recently, since I could get a lower rate, and knew eventually things were going to go up. I read the writing on the wall this last go 'round, and locked in the longest term I could…and was really pissed five years is the longest they’ll let you go, regardless of amortization.


#10

Is it? Every bank I went to was trying to shove me into a fixed rate mortgage when I was in the market! I was under the distinct impression that fixed rate mortgages have a narrower margin for the bank.


#11

Honest question: how are you doing this? I really don’t understand what you’re saying, but it’s interesting. We can make extra payments against our mortgage, and can increase our payment, but I don’t follow what mechanism you’re using.


#12

Weird use of a dollar bill in the banner there. I think we moved to dollar coins in like 1985. How many people under 40 even remember them as more than a curiosity?


#13

I still have one my grandmother gave me shortly before they were phased out. She found the nicest, crispest one she could. It’s currently tucked into a DVD case; I should really do something with it


#14

The payment on a variable rate mortgage is fixed for the term (for the most part) and it is set high to allow rates to rise a couple percent without lengthening the amortization duration. This only gets recalculated if the actual amortization period goes longer than the 25 years or whatever. This means that you are already paying more or the same as for fixed even though your rate is lower than fixed.

As time went on for me, rates dropped and so the interest I payed each month dropped but since I kept my payment the same, I have put more down on the principal every payment. This is basically paying off a bit more of the principal each payment than you strictly have to.


#15

Ah, thanks for clarifying. So it’s dependent on the variable rate dropping below the fixed one?


#16

Well, the variable rate is always below the fixed when you sign. The gamble is that if/when it goes up, will it rise fast enough to cancel out the benefits you are getting from the start by paying a lower rate.

I can’t find it now but I remember looking at a graphic a few years ago that showed that there have only been a very small handful of times in the last 30 years where you are worse off with variable after the five year term.


#17

Since I bought in 2005, we’ve been in a variable. It’s been great for us. Now, it’s possible this is just a blip in history and things will go back to the bad old days in the 80s when rates exploded. I wish I knew.


#18

Just checked my bank, I didn’t realize the spread was that large. It was much smaller when I renegotiated.


#19

Well, the banks always sandbag the advertized fixed rates and I have heard that the spread today is much smaller than it has been. My sister and my sister-in-law have both purchased houses this year and both chose to get a the fixed rate as the spread didn’t seem to be enough for them. ¯_(ツ)_/¯


#20

I do own a place in Vancouver, and I’m not looking to sell for the next 20+ years or so. Even with that, I do hope that prices stabilize and slowly drop over the next few years. Too many of my friends and colleagues have had to leave the city because they couldn’t afford it.