CalvinL

I always wonder how he got to the level of fame that he has today. I have to say he is a respectable guy in terms of integrity. He even returns management fee at one point due to under performance. He is a nice guy...but that itself doesn't guarantee investment success. He under-performed the market and made several big mistakes along the way. he came to our class once and talked about value investing. That was a good lecture and I think he understands value investing...but like a great UFC trainer, they don't always win in UFC ring.

"there is no particular reason why housing has to be affordable for the average person" I'd add that it's the average local person without foreign connection. http://www.baskinwealth.com/a-contrarian-view-on-canadian-housing/

from what I know. - Financing, if needed, would have been done in China a few years ago, not here. It's harder today with all the capital control policies but not impossible. - Most immigrants to Canada would be able to come up with 1M+ as a family. Selling any of their real estates in Beijing, shanghai, Guangzhou and of cos HK would generate that amount. (although most who had done that in the past few years would regret it now) - Family buying: one child policy in the last few decade means a couple in their 30s today would have the financial backing of both their parents. Living with inlaw and parents is the expectation but that's also quickly changing. of cos there are also mortgage packages designed for new comers in Canada from lenders like Genworth. Why would they do it - I have no idea. There is a rumour that's floating around - "in Canada you can get bankrupt and it does not affect your asset in China". I'll stop here lol....

I agree with your logic - the timing and probability is uncertain and no one will know if this is a bubble that's gonna burst soon or a bull market run that's just beginning. Other Catalysts: - Capital control by the Chinese Government. (Usually ineffective as people will always find a way) - Anti-immigration policy, Reduction of student permit/parents visa/work permit. by the Canadian Government - not likely given the current political environment - New immigrants preferring other cities instead of Vancouver/Toronto - I dont see how that's probable - Racism riots/Terrorist attack in Toronto/Vancouver - probability unknown, but that will be enough to scare off some immigrants who are here for their kids. - increased capital gain tax of any kind on property. That will trigger short term selling - We will know today. - Sudden jump in CAD - back to 1:1 USD? - Government providing significantly more permits for condo development in the next few years Valuation of housing is always relative. imagine a new Chinese immigrant from a major city come over and look at what $2MM can buy in Markham. And it comes with free English schools+free healthcare. Most would find it a steal. Our 35mm population just find it hard to understand what the 1.4B ppl are thinking.

The truth is you still need to "prove" cashflow. But that proof is where some brokers would bent the rules. I went to 2 different mortgage brokers and they both suggested me to "prove" cash flow by simply drafting a renting agreement with someone. There will be tax on those rental income, but the interest would be deductible. They really dont care if those rental incomes are legit. The message was "this is common sense and everyone does it. You are missing out if you don't" Their job is to present a case to the underwriters so that they don't have a reason to reject them.

You do need cash flows to sustain the property, but it could be done with a note from a friend saying they pay you $2000 rent/month for a 100sqft den (exaggeration for fun). Just pay tax that that and now your property is cash flow positive. And now off to the next bidding war ;D

Actually 200x to 250x is the norm now if it's in reputable school zones.

Its easier to find correlation rather than causation, but there is an interesting correlation here regardless. I find it hard to pinpoint the real reason. Most people say it's the foreigner tax, China capital control etc... Average home price could be misleading. From anecdotes I've read online, prices for homes under $2-3MM didn't come down at all in Vancouver.

Except for conjecture, do you have any real facts to back up these claims? I'm honestly curious. Simply check out Ratehub or ratesupermarket, talk to any one of the mortgage brokers there and find out the world of possibilities ;)

On a seperate note: If we are calling things "overvalued" or "undervalued" purely based on historical prices, how's that different from stock price chartists and speculators? To me the intrinsic value of a property is all the future rental income minus all cost discounted to present value. Have anyone crunch the numbers with a model (DCF etc) for their own situation in Canada? Rent vs Purchase, with different rate, rental prices, in dfferent location etc. What are your findings and what surprises you? if current pricing is "too high" or "too low", what would be the right pricing and what's the rationale? It would be interesting to see the assumptions behind certain model that lead to your stand on housing market valuation.

Ahhh... the great theory of value investing: go out and buy assets that have had very large run up in prices. Maybe you should compare your dad's situation to a guy who rented and put his down payment, and savings from repairs, forced principal payments, prop tax etc into BRK and see how that latter guy did vs ur dad. You don't need to be a math wizard for that either. If we value a house like a business, how would that look like to you? If people buy property with all cash and then try to rent it out, the rental return is at around 2-3%. Might as well just buy government bonds. The trick right now is to leverage up at low interest cost and magnify that return. Relative to the current mortgage rate and assuming 2% increase in rent every year, the current prices seem to be in reasonable range - If downpayment is at 20%, deduct all fees/maint/interest/tax the rental income could come in at around 8-15% on the downpayment depending on the building. Of cos, big assumptions: is the current rental price sustainable? what would be the mortgage rate/cost of capital in 5 years after the fixed term? Recent price run up right have deteriorate that return rate further and added risk to the investment, but a big run-up doesn't always mean an asset is already at overvalued category.

Don't forget structurally weaker demand and more supply coming in the future as the baby boomers start to die off. Basically all the tail winds that real estate had over the past 30 years are basically turning into headwinds over the next 30. It's true that the demand from baby boomers are dying out but I believe all projections point to an increase in population due to immigration, planning around 150k-300k per year. New immigrants likely won't find relatives, friends nor jobs beyond all the major cities. Housing prices is a function of income and leverage applied. I can see how prices would come down if 1. unemployment rates go up 2. interest rates go up. both are actual factors that will make mortgage payment affordable and lower the demand for rental units. 1. is dependent on the economy, and no one has the crystal ball. 2. is something that would likely be artificially kept low. The government both left and right have every incentive to keep the housing market up. I find it hard to imagine a scenario where the government keeps rate high as housing prices come down.

Sum-of-part analysis shows it's worth less than what it's selling for. http://time.com/money/4608082/mcdonalds-lawsuit-value-meals/

Chances are he will have a group of advisors holding his hands over issue he has no knowledge of, like foreign trade policies and military. The real concern I have about him is his moral ineptitude and the social progression over the past 8 years he could undo within his term.

This has been happening for decade. The incentive systems is all wrong in Canada. Some RE agent argues that they are bound by ethic code bla bla bla, but the incentive to block out other deals and favour double ended deals is huge. Always get the selling agent to represent you. The double ended commission ensures that they will go out of their way to seal the deal with you, or at least you wont place the highest bid and then find out that you miss out by $500. Some could easily block out other deals with "accidentally missed" calls and faxes from other bidders. What's worse I've heard is that selling agents are partnering with wealthy relatives to place fake low ball bids. All sorts of market manipulation and real ugly stuff is happening daily.