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Originally Posted by SeeGeeWhy
I agree with what you're saying to a point, but what happens when a city reaches a significant population milestone like 1MM citizens? Is there a critical mass there that helps support a higher average price and p/r ratio? With inflation adjusted commodity prices being higher than long-run historical levels, is there enough to support a shift in the economic fundamentals of property values in energy focused urban centres like Calgary?
I don't know where you got your figures, but I think an interesting study would be to look at other Canadian cities like Vancouver, Montreal and Toronto to see what their p/r ratios and average SFH levels did when they hit different population milestones (might tell you what milestones are significant, and what are not i.e. 1MM might be signficant, but the 2MM level might not be). It would also be interesting to compare other energy cities stats in the past 6 years - http://www.energycities.org/partnership.asp
I think that high p/r ratio is a strong argument for council to approve secondary suites. The ability to generate rental income would increase, and it would help support the house prices that we are seeing.
All of that said, your stats are very much focused on Calgary and would speak more to a Calgarian house bubble, not a Canadian House Bubble. |
Really? Wouldn't adding more rental supply further depress rental rates and thus increase the p/r ratio? Or would there be a corresponding drop in housing prices to account for such lower rental rate?
Personally a historically high p/r rate tells me to rent and invest the difference. Those who stress "Buy now or miss the boat", fail to understand that return generated on investments might very well exceed returns on RE and/or pose much less of a risk to your capital base because you can diversify among different asset classes. Investments also offers more flexibility with lower transaction costs than buying houses.
Of course the big issue with the 'rent + invest' vs. buying is that a lot of people do not have the dicipline to invest the extra free cash flow. In that case buying is the superior choice because building equity is far better than wasting money.