Toronto Condos….let the rental glut begin!

I’ve written about the Toronto condo market several times already.  I’ve warned condo investors to get out while the gettin’s good.  I’ve warned that immigration alone and the Hot Asian Money story are not enough to sustain a market that has seen rampant over-building and blind speculation.

Most recently I highlighted CMHC data showing that the inventory of rental condos was building and that the condo vacancy rate in Toronto has now doubled what it was last year.

And now we see some anecdotal evidence courtesy of this gem of an ad on kijiji:

Let the supply glut begin!  Speculators are about to get the shake-down.  If you’re holding a cash-flow negative Toronto condo as an investment, the next 10 weeks will be the best opportunity you’ll get to dump it for some time.  Consider the coming rush of irrational buyers looking to beat the 5/35 deadline as a gift from heaven.

Sell now or be priced in!





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38 Responses to Toronto Condos….let the rental glut begin!

  1. Jordan says:

    I wonder if that is the condo developer or some kind of (crazy) property holding company doing the leasing? Either way, the numbers seem steep.

    • Jordan says:

      The phone number posted in the ad is the mobile number of a North York-based RE agent. (Easily verified through Google.)

  2. Tom says:

    The rents are too high for the average wage person living alone. There are lots of syndicates of investors from India, China and Israel. Strange thing is that older rental buildings have bigger suites and you pay less. Vacancies are still around 5% in those buildings. One of the biggest changes I have noticed is how high rents and values cause a housing formation change. Traditional household formations are being changed. Two people sharing a rental which was not prevalent prior to the run up. The community feel of a condo changes as well. Owners and renters collide on occcasion. The high prices have caused disharmony subltly. All I know is that wages are not going up proportionate to living costs. Something will have to give. People adapting in strange ways. For most the quality of life materiallistically will change.

  3. ATP says:

    “Strange thing is that older rental buildings have bigger suites and you pay less.”

    BIGGER is not always better.

    Now, HARDER (i.e. granite, stainless steel) is a different matter … 😉

  4. Mango says:

    You find an ad for a rental building and are calling for condo prices to be destroyed? Are you smoking crack? I don’t see any evidence of vacancy rates exploding?

    You are losing your edge as you can see that pretty much all your work is useless and pointing to nothing more than fairy tale dream of owning one day.

    A new low Ben.

    • data junkie says:

      Congratulations, Ben- you have your first troll!

    • I don’t live anywhere near Toronto or Vancouver. I stand to gain or lose nothing from the future direction of their real estate market, be it up, down, or sideways. I’m just sharing my observations and predictions, which strangely enough are backed by stats. Funny way to make an argument, eh? Try it some time. You’ll find it takes a few more neurons than simply suggesting that someone is smoking crack.

      • Mango says:

        I’m just sharing my observations and predictions, which strangely enough are backed by stats.

        You found some advert? What stats?

  5. Mango says:

    “Speculators are about to get the shake-down”

    From who?????????

    Global markets are booming

  6. jesse says:

    Those rents seem pretty reasonable. I’m sure the investor in question will be happy with a 4% return. Just make sure it’s held to maturity lol

    • Mango says:

      It’s not a bond, what maturity are you talking about? What is wrong with 4% – what do you expect? 20%

      Go put your money in a loser GIC and pay Rev Cad

  7. Evidently ‘global markets’ drive Toronto condo prices more than local overbuilding, excessive speculation, and tightening mortgage standards. A well-reasoned response.

  8. Draat says:

    Not quite as exciting as a Jerry Springer episode but the heated exchanges are a nice break from the standard comments where we first compliment Ben on his informative site then go on to agree with everything he said and add our own point.

  9. mac says:

    Vancouver SFH up 20% in 2010. That’s what happened. Just like I said months ago. SFH up hugely and condos sideways, if we’re lucky. But even that looks set to take off again.

    The financial advice on this blog can be construed as costly for those who were waiting on the sidelines in Vancouver in 2010.

    • Nonsense! The value of homes can increase by a factor of 10 this year and it doesn’t change the fact that they are unsustainable. As I’ve said, exponentially rising markets go further than you think, but they don’t correct by going sideways.

  10. Tom says:

    The stainless and granite is exactly what is wrong about society. No quality placed on energy efficiency or materials. Shrink the size. No thought to the long term. A bunch of greedy flippers in the market that could care less about 10 years from now. Fancy light fixtures falling apart after two years. Most downtown condo’s will require major restorations in 10 years. Reserves going to go up tremendously. Enjoy the sex appeal. Going to be paying big time in the years to come.

  11. Best Place on Meth says:

    Is Mango that Brad J. Lamb guy – you know, the TV personality “Big City Joker”?

    He’s awfully defensive about the real estate market in Toronto.

    • Mango says:

      First, I am not a guy. My husband used to read this crap on the web for years and I set him straight. Now we own real estate and have made healthy gains and still riding the long term view. In a way, it would be nice for market crash so we could add more

  12. ali says:

    Hey Ben,

    I live in Vancouver and I’ve been offered $378,000 for my apartment (private sale) by an investor that already owns one suite in my building. I can rent back for $1400 a month in a 5 year lease that I can get out of with a 60 day written notice. I think the market here is most likely going down and I think I should take the deal, but I’m at a loss as to what to do with the $378,000 (i bought 10 years ago and have clear title).
    I’m super tempted to put all of the money into big Canadian dividend paying companies to generate an average yield of about 5%, that would more than cover my rent by the dividends alone…fingers crossed for capital appreciation. Would that be crazy? I can get 2.2% in a high interest savings account but half of that will go to the government, and I think bonds are a really bad bet right now. Any insight or suggestions would be greatly appreciated.

    • Mango says:

      so you are going to take risk on the very banks that are printing the mortgages? Let me get this right, you are going to risk 378k for 5% when and then pay rent and lose 4.4%?????????

      why don’t you keep your apartment and pay your self a 4.4% annual return???
      That is what you are giving up on your lease back. I can’ believe you actually own real estate and made money. Unless you have full clarity on what do with the cash, continue to pay yourself

      Sounds as you get taken for a chump!

  13. ali says:

    I probably won’t invest in the Canadian banks, more the pipelines, oil & gas and other sectors.
    Also, I’m betting that the real estate market in Vancouver will not appreciate as much as the money I will have invested in the stock market, at least for the next couple of years, then I will look at reinvesting in the real estate market in Vancouver or maybe California.
    If those companies for some reason go lower than what I’ve paid for them and NEVER get back to that price (highly unlikely) then I made a bad bet, and I hold and keep dripping my 5% dividends and hope for those dividend increases.
    Just thinking this through, no need to be so snitty Mango

    • Mango says:

      ok, what do you think your 378k will drop down towards? Why don’t you start at that point and develop a framework.

      If you believe that your loss is 10%, 20% – you would spend that in rent in 2-4 year range anyway? Why don’t you give that some thought.

  14. ali says:

    at a 5% yield i’d make $1575 a year in dividends, plus I wouldn’t be having to pay $350 a month in property taxes and maintenance fees, so at a rent of $1400 I’d actually be ahead by $525 a month without any worries about building issues etc..

  15. ali says:

    sorry I meant I’d yield $1575 a month in dividends ….not $1575 a year.
    So I wouldn’t be losing any money by renting, I’d actually be making more money than if I were to own same suite. The only risk is if those stocks go down below my purchase price and never come back up. I’m talking about the Traps and Enbridges of the world

  16. ali says:

    I’d also lose if Vancouver real estate kept going up forever, but I’ve invested in real estate since 1982 and I’ve seen this scenario before:) I’m pretty sure I know where this is going.

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