Its pretty simple – the newbuild flip game is f-cking over.

NOt wasting anymore time speaking to a broken record.

You should be in politics – mindless drivel, repeat.

I do have something to say about the Urbanation report. But the Leafs are more interesting right now…even if we’re down 2-0.

And back in May, Urbanation reported that index prices of new condos in the Toronto CMA had increased 8.4% in the previous year, while condo index rents had only increased 1.1%. That’s a seven-fold difference.

http://www.marketwire.com/press-release/urbanation-launches-inaugural-condominium-rental-market-overview-essential-new-tool-1515417.htm

Urbanation also estimated that 7,000 new condo units will be going on the rental market each year for the next several years at least. That’s about a dozen 15-storey buildings’ worth of rental units coming on the market every year.

Imagine investing in a company whose price-to-earnings ratio went up 7x in the previous year, whose revenues are basically flat, and who is planning on issuing thousands more shares every year for the foreseeable future. The mind boggles.

Mad Max said, “As a sidebar, the S&P 500 is up 63% since October 2008, which were not even the lows (March 2009).”

You are aware that the 63% is just a recovery from the crash right? So the day before the crash up to today, the S&P is still down overall. Let’s say if I had $20,000 invested prior to the crash, I would have maybe $18,000 or $19,000 today. My investment would be in negative growth. In comparison the the RE market during this time, the gains have been tremendous.

Has David shown us any stats or examples of clients who have lost money in prebuilds to conclude that it’s a waste of time? No as far as I see, there was no such data to base this topic on. None, zilch, zero. And everyone seems to think yeah he’s right without a shred of evidence. Yet you’ve seem to completely uncritical of this and be critical when I’ve tried to back up my claim at least with some example. Having two examples is yes not representative of the overall picture, but that’s two examples more then the subject of this debate has.

It doesn’t take a genius or a RE agent to tell you that the market 4 years ago was cheaper then today, therefore anyone who bought property back then would have a gain. Maybe not 100% of everyone, but for the most part. Where have you been in the last four years? To say that my two examples isn’t indicative of the overall market is just ignorant.

“the idea that anecdotal, non scientific evidence, based on an impossibly small sample size represents a state of the market that will be portended into the future”

Your assumption that I extrapolated my clients profit to mean there will be future growth is wrong. You conjured that up all by yourself. I merely state a snap shot of this point in time, that they are up on their investment so it was a good move to but prebuilds contrary to this post’s pessimistic opinion. I didn’t state nor guarantee this trend will continue or last.

To recapitulate…your gripe are of two things:

1. I’ve used my clients growth as an example that the market will continue on it’s path. – Wrong assumption my dear. It was only to say some investors made money buying prebuilds contrary to this topic. There was NEVER an attempt to extrapolate into the future. You were falsely reading in between the lines.

2. My examples are non scientific, due to a small sample of the population. – True, but you must be ignorant to not believe in profit growth in the last 4 years of a hyper-active market.

The problem with economists is that they can’t seem to predict the TIME of when the bubble will burst. And who really knows how many more years of growth there will be 2, 3, 4?? 4 more years from today means 8 years since the economic instability of 2008. That will be 8 years of growth. That is a time frame that’s long enough for profits to be taken out. The analogy would be like a stock market chart. You enter the market at a point, ride the bullish market and cash out before it goes down. That’s all real estate is. It’s just another RISK investment like the turbulent stock market.

Again, if that is ALL that you wanted to say was the conditions are bubbling and a crash is on the horizon…thank you but I already knew this from countless analyst, economist who have been saying what you are saying for YEARS! Surely one day you will be right. Now do you want to tell us when it’s going to happen so I know not to plan my vacation?

Now this debate of the economy has sidetracked the original topic which was prebuilds are not a good investment, it would be nice to back that feeling up with some data rather than taking pot shots at agents who service clients that want to buy prebuilds. I think David has simplified and generalized too much then concluded as a whole that there isn’t any value in prebuilds, but on top of that he slandered that any agent who sells prebuilds are selfish self-interest bastards motivated by the 4%…and crab cakes. I think you’re being a little over the top?

The TRUTH is..there are some prebuilds which per square foot are way over what the comparable resale prices, but then there are some that are slightly over and some are under. It’s on a project to project basis. To single out ONE case to represent the whole market…well wasn’t that what MAD MAX griped over?

David said, “King West pre-construction developments are charging $650 per square foot for a building that ‘might’ exist in 3-4 years, but you can buy a comparable one today for $590 per square”

Mad Max said, “…based on an impossibly small sample size represents a state of the market (is misleading)”

Anthony says, “Touche!”

You just don’t get it. “…that 50% of the investors are up on their investment. Given your philosophy that we are not in a “normal” business cycle for quite a number of years, how do you explain the profits in the last 10yrs? You’ve seem to concluded that anyone who believes in prebuilds today is a moron and that the model of pre-construction profits is nearing an end…”

Please re read my post. If only 50% are up in a real estate bull market in 4 years, that is terrible. As a sidebar, the S&P 500 is up 63% since October 2008, which were not even the lows (March 2009). The wash of monetary stimulus has helped drive UP the prices of real estate in Canada, how do you not follow what I am saying? I think you are confused here. Re read my post.

I never said I was bearish. I said its dangerous for you to extrapolate the past into the future. That’s it. Your usage of the term ‘statistics’ is also dangerous. You have not presented any statistics whatsoever.

Never said I could predict the future. I said take the last 5 years in CONTEXT.

As Lord Keynes once said “As the facts change, I change”. To be anchored to a view, a recent narrative, regardless of context or facts, and to assume this will continue indefinitely into the future is how investors get laid out. But corrections are part of a healthy market and financial penalties are required for systematically flawed investment decision making.

MADMAX

I would never ‘ban’ anybody from my blog, and I approve 99.9% of all comments (sounds cliche, but I really do only delete on in a thousand).

Although, I came close to a “ban” last year, if you could call it that.

This one reader, who was very active with his comments, seemed to have turned on me once I wrote about the building where he lived. He then started posting two negative responses to EVERY subsequent post that I wrote! I didn’t mind, because ultimately I’m after all comments, links, RSS feeds, trackbacks, etc, and any content is good content, but eventually this guy started going back every day and posting negative comments on stuff I had written 2-3 years ago! He was now retroactively disagreeing with things I had written, just for the sake of doing so. He was spending hours and hours per week literring my blog with hate! I finally emailed him and said, “Surely you have better things to do with your time. I know I’m really cool, and downright awesome, but your infatuation with me is misplaced.” He never posted again.

In any event, I welcome any comments, whether they agree with my views or not.

On a long enough time horizon, every single reader will disagree with something I write. And how could it be any other way? Show me two people in life who are 100% aligned with everyting they do or say.

The day that I start to write all positive, glowing, generic posts that satisfy 100.00% of the readers is the day that my blog becomes like every other Realtor’s boring site…

Let’s back track. David said he doesn’t believe that there is value in pre-construction. I’m not sure exactly when he decided on that. Was it yesterday or three years ago or further? I don’t really know.

“You, unfortunately, seem to have a very dangerous view that seems to pervade your profession like a plague.”

I’m confused by this statement. What is my view exactly? I just commented on a post to say I don’t think the prebuild should be ignored entirely and you say I have a dangerous view which pervades profession because we don’t share the view that the investment world will combust shortly? If it does go in the way of the doo-doo bird, it won’t matter whether someone buys prebuilds or resale. And I think you’ve lost that point. Are you a real estate agent to tell me that prebuilds are not as good as resale? Because I can quite easily prove you wrong. There are some prebuilds selling less than the price of resales. Or are you just here to bemoan about us agents.

I came on here to state that as of roughly 4 years ago after the economic crisis of 2008, my investors are UP on their pre-construction investment if they sold their unit today. From my PERSONAL experience I found that pre-construction can be profitable and stated a couple of examples. Maybe I shouldn’t have used the word stat and used a better choice of words like example A or B. But let’s not wrap your head around “technically”. I’m not going to spend hours putting stats together for a blog comment. However let’s just hypothetically pretend that if we looked at the stats for pre-construction condos from Oct 2008 when the stock market crashed and onwards during the instability of the financial crisis which has lasted to today, that 50% of the investors are up on their investment. Given your philosophy that we are not in a “normal” business cycle for quite a number of years, how do you explain the profits in the last 10yrs? You’ve seem to concluded that anyone who believes in prebuilds today is a moron and that the model of pre-construction profits is nearing an end.

“As a result, the phenomenon you are discussing, of prebuild condos, works until it doesnt”

Are you saying that the strategy for buying prebuids HAS come to an end OR is coming to an end? Can you clarify this statement?

Not to belittle your wisdom but you don’t know where the world is heading tomorrow or the fate of the economy. You are a guesser just like everyone else but worse then that, you are judgmental on my profession as having a dangerous view or a view that isn’t in agreement with your economic commentary. You are like those economist that predicted Vancouver’s real estate would collapse for the last 25 years yet it hasn’t. And during this period people have pulled out large profits. Yes there are RISK inherited in every investment. What’s your point beyond that? There were risks in 2008, 2009, 2010, 2011 and so forth. When there is HIGH RISK and high uncertainty in the market, that’s when the profits are bigger than in a “normal” stable market because it can go either way. Anyone who rolls the dice during a high volatility period is either going to make a lot of money or loose a lot of money.

Look at the winter of 2008 when everything stopped. Are you saying that anyone who invested during that “uncertain market” is an idiot because they should have waited until the dust settled? Those are the people that pulled out the biggest profit before the market spiked the follow year. And the people who waited for the dust to settled are still sitting on the sideline because they have been priced out of the market waiting for a correction…which may or may not come.

Just because a possible bubble MAY be forming in the last number years doesn’t mean investors are insane to invest in pre-construction or resale for that matter. As long as they cash out and make the profit before the correction then they have solidified their gains.

Your position is that the bubble is definitely there and it has been building for years but hasn’t exploded. Other then that, there is no conclusion and who really knows when the big correction will come IF it ever comes. And during the time frame until such event, the opportunities MAY still exist. It will only be realized in time when we look back.

Finally your comment here is puzzling..

“This is what drives me nuts about your profession – you people are salesmen, not analysts, yet you present assertions and ideas as if you were quants, running regressions on prices, looking at historical corrections, comparable geography/economy matrices (Australia?), and running it in a scientifically acceptable way.”

I don’t know where you saw anything in my rant that was an analysis of the economy. Please quote where I was being an economist. In my post I only talked about MARKET VALUE. I talked about how I compared different projects to find the ones which I think has value. And I talked about profits from my clients investments. I seems like you are frustrated by RE agents. Well guess what, I can say the same about people like you who want to play “let’s predict the economy because MADMAX has a right to and RE agents don’t”. I’m frustrated that economist can’t seem to accurately predict the market each and every year for the last 5 years. And I’m frustrated that they’ve put the scare into people to the point that lives have been ruined because these people listened to “economist” and now they are priced out of the market instead of jumping in on it in 2008, 2009, 2010…when prices were lower. But the economist said the market will trend downwards 10% or 25% by the end of the year. So i feel your frustration. It is NUTS as you put it.

Thanks for your comments.