Canadian Multifamily Bubble? Sadly the US can watch from hindsight.

Interesting peek at multifamily in Toronto and Vancouver, worth a read to see how many rationalizations you recognize (or have uttered yourself).  Nice quote: “If builders stopped building today, there’s five years worth of supply that is about to be delivered, relative to what normal population growth is.” Sound familiar? They’re even starting to do NINJA liar’s loans.

Toronto home and condo prices are amazingly high, the average price for a detached home C$543,993; for condos it’s ‘only’ C$343,835. In Vancouver the median price for a detached home is C$678,000! That’s almost 11x the median pre-tax income there. In fact Vancouver is the second most expensive housing market in the English speaking world after Hong Kong.

And it’s not just houses and condos. A broker in Vancouver emailed me a 59 yo 14 unit property in a nice location with an asking price of  $464,286 per unit (or per suite as they say in Canada) and a 2.4% Cap Rate! But you know what- somebody will likely pay it, with all cash. Word is there is a lot of flight money coming from Asia that is looking for a safe home which means the market isn’t driven by investor returns. Still doesn’t mean that there’s no bubble however. On the one hand when I start to get that ‘did I miss this market’ feeling that usually means I’m too late; on the other Keynes reminds us that markets can stay irrational longer than we can stay solvent.

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