Calgary Real Estate predictions?

[ken0042]

Yes and no, BTC.

Yes, its based on the assessed value of your house. But here's the simple version of it:

- City needs to collect let's say $600 million this year.
- They want to spread it out so that the guy in the million dollar house pays more than the guy in the $200K condo. (makes sense) so they send out the assesments; and each person will owe their proportioned amount.
- The assesments go out 20% high for everybody. Meaning the proprtion of tax owed still remains the same.

So the city could revamp its assesment proceedures to account for this one time fluctuation in the market. But that would still leave you with the same tax bill at the end of the day, and the city would have wasted 100's of thousands of dollars making your number more accurate.

Really all it means is the assesed value of your house is more than what you could get for it on the current market. It doesn't mean you are paying too much tax.

[burn_this_city]

Makes sense.. I was under the impression it was (ultra simplistic view)... (value) x (property tax %) so the increase would cause everyone to fork over more based on the higher assessed value.. I'm going to have to do a bit of reading on this to see what they base the actual taxes on, if its not entirely assessed property value.. Thanks..

[DementedReality]

Originally Posted by ken0042

.....

Really all it means is the assesed value of your house is more than what you could get for it on the current market..

i dont believe that ... i would not sell my house for the assessed value, it is a good 10% lower than even a conservative, down market valuation.

[Claeren]

Originally Posted by burn_this_city

Makes sense.. I was under the impression it was (ultra simplistic view)... (value) x (property tax %) so the increase would cause everyone to fork over more based on the higher assessed value.. I'm going to have to do a bit of reading on this to see what they base the actual taxes on, if its not entirely assessed property value.. Thanks..

You are hardly alone, far too many people do not know how it works....



Claeren.

[I-Hate-Hulse]

Here's an interesting snippet from today's Globe on whether it was better to own a condo in Calgary or units in Boardwalk for the last few years:

Over the three-year period from 2005 through 2007, the Calgary condo would have appreciated from $171,135 to $304,719, for a capital gain of $133,584 or 78.1 per cent. The net rental income over the period – gross rent minus condo fees and property taxes – was $26,485, for a further gain of 15.5 per cent.

All told, the condo owner would have made a profit of $160,069, for a return of 93.5 per cent on his original investment.

Most investors would kill for a return like that. Now let's see how Boardwalk REIT made out.

From 2005 through 2007, the initial $171,135 investment would have grown to $413,246, for a capital gain of $242,111 or 141.5 per cent. The investor would have pulled in an additional $38,490 of distribution income, for a further gain of 22.5 per cent.

Total profit: $280,601 or 164 per cent, beating the condo's returns hands-down.

There's no guarantee Boardwalk will continue to deliver such superb results. Indeed, the units are down 11.3 per cent this year.

But if you buy an apartment REIT instead of a rental condo, there's one thing you can count on: You won't be getting any calls in the middle of the night to fix a leaky toilet.

[Winsor_Pilates]

Originally Posted by Qwerty

Which is what? The USA has tanked, the east coast isn't doing much better, Sask? Look at the stats there, people have already moved there. If the USA goes into a recession house prices in Canada will fall. The US is Canada's largest importer and exporter and we are directly related to them. Like the old saying goes, when the US sneezes the whole world catches a cold.

That's Quite bleak. You believe "an old saying" and I'll believe current conditions. I guess we'll see which is stronger.
Western Canada will continue to grow in population for decades, wealth is strong, jobs are great, and people love living here.
This housing market is as strong as any out there.

And that includes Sask. Just cause people have moved there, doesn't mean more won't. Take a closer look at Regina and what house prices there are like. Lots of room to go up still.

Calgary is only beginning to get into the Condo game. People are barely living DT yet. The major players in Canadian Condo developing are just starting to care about Calgary, and the DT is still quite small compared to big cities.
Tons of opportunity for that market to expand over the coming years. Especially with the continued economic push from big businesses calling Calgary home.

[flamey_mcflame]

If someone can explain to me how a city in the middle of the prairies can have housing values escalate the way they did in the second half of 2005 to the first half of 2007 and say that it is reasonable, I'd love to hear a logical explanation. I live inn a house that went from being valued from 500k to over 1 million. The housing market is just waiting for a major correction. We have many of the same problems that the U.S. is having. People buying housing with 0-5% down. Speculators and an abundance of residential homes on the market. Now, we have 40 yr mortgages which gives many people the opportunity to dump their houses if interest rates creep up after their initial fixed rate is completed. If someone bought a house at 5.5 rate and then will have to get a new rate that may be 8-9 points in two or three years. Imagine the increase on a monthly payment for these individuals/families on a 600 k home. Our debt to asset ratio may not be as severe as Americans, but it is still high. And most of our "assets" are considred our real estate property. North America, in general, is mired in credit debt. The " I want it, I'll get it and pay later crowd" segment of the population keeps accumulating debt and companies are willing to keep handing it out. We need to get back to solid fundamentals in consumer theory. Such as, not buying a house that is worth more than 3 times your annual income. Having to put 20-25% down before purchasing a home. All this stuff freaks me out, and not in a good way. Sometimes I think we are closer to a depression than a recession. I just wanna go out and spend all my money before it becomes worthless. Hate to think all these years of work and saving mean nothing if the monetary system collapses.

If I had a suggestion for Bernanke in the states, I'd say let the market correct itself. Lowering interest rates is just a stop-gap measure. This is how the mess started in the first place. If houses have be foreclosed and jobs have to be lost, oh well, better than a complete collapse of the economy. Institute banking and credit regulations, so not every Dick and Jane can't acquire more debt that they can't pay. Tired of ranting.

[Eric Vail]

Originally Posted by I-Hate-Hulse

Here's an interesting snippet from today's Globe on whether it was better to own a condo in Calgary or units in Boardwalk for the last few years:

Over the three-year period from 2005 through 2007, the Calgary condo would have appreciated from $171,135 to $304,719, for a capital gain of $133,584 or 78.1 per cent. The net rental income over the period – gross rent minus condo fees and property taxes – was $26,485, for a further gain of 15.5 per cent.

All told, the condo owner would have made a profit of $160,069, for a return of 93.5 per cent on his original investment.

Most investors would kill for a return like that. Now let's see how Boardwalk REIT made out.

From 2005 through 2007, the initial $171,135 investment would have grown to $413,246, for a capital gain of $242,111 or 141.5 per cent. The investor would have pulled in an additional $38,490 of distribution income, for a further gain of 22.5 per cent.

Total profit: $280,601 or 164 per cent, beating the condo's returns hands-down.

There's no guarantee Boardwalk will continue to deliver such superb results. Indeed, the units are down 11.3 per cent this year.

But if you buy an apartment REIT instead of a rental condo, there's one thing you can count on: You won't be getting any calls in the middle of the night to fix a leaky toilet.

In 2002, I bought a condo for $110,000, it cost me $10,000 for the deposit and closing costs - the rest of the downpayment and mortgage were financed. Over the years I have spent approximately another $10,000 on repairs, vacant months, and making up the difference between the rent collected and my monthly bills. I have invested $20,000 and since then the condo has increased to a value of approximately $260,000 and I owe $90,000 on it. So, my $20,000 which was paid gradually since 2002 has seen a return of $150,000. Investing that same $20,000 in Boardwalk would not give me close to the same return.

[Qwerty]

Originally Posted by Eric Vail

In 2002, I bought a condo for $110,000, it cost me $10,000 for the deposit and closing costs - the rest of the downpayment and mortgage were financed. Over the years I have spent approximately another $10,000 on repairs, vacant months, and making up the difference between the rent collected and my monthly bills. I have invested $20,000 and since then the condo has increased to a value of approximately $260,000 and I owe $90,000 on it. So, my $20,000 which was paid gradually since 2002 has seen a return of $150,000. Investing that same $20,000 in Boardwalk would not give me close to the same return.

You have made nothing unless you have sold it.

[Eric Vail]

Originally Posted by Qwerty

You have made nothing unless you have sold it.

Your assets don't have to be liquid to increase in value.

[I-Hate-Hulse]

Originally Posted by fotze

But if you took your $20k and then borrowed $90k to invest in REIT then you would have.

Precisely. Actually by my eyeball Boardwalk was about $15 back in 2002 and was at $45 for most of last year. Had you invested $110,000 back in 2001 you'd have $220,000 in capital gains. Plus it yields about 4% so add about $28,000 in distributions to that.

I believe that was the point of the article - that it's possible to ride the property wave with equal or better return without having the hassles of being a landlord. This isn't meant to be a sweeping generalization that stocks are better than property, as obviously not all REITS and stock did as well as Boardwalk. Just trying to point out there are many ways to skin a cat...

[SeeGeeWhy]

Originally Posted by I-Hate-Hulse

Here's an interesting snippet from today's Globe on whether it was better to own a condo in Calgary or units in Boardwalk for the last few years:

Over the three-year period from 2005 through 2007, the Calgary condo would have appreciated from $171,135 to $304,719, for a capital gain of $133,584 or 78.1 per cent. The net rental income over the period – gross rent minus condo fees and property taxes – was $26,485, for a further gain of 15.5 per cent.

All told, the condo owner would have made a profit of $160,069, for a return of 93.5 per cent on his original investment.

Most investors would kill for a return like that. Now let's see how Boardwalk REIT made out.

From 2005 through 2007, the initial $171,135 investment would have grown to $413,246, for a capital gain of $242,111 or 141.5 per cent. The investor would have pulled in an additional $38,490 of distribution income, for a further gain of 22.5 per cent.

Total profit: $280,601 or 164 per cent, beating the condo's returns hands-down.

There's no guarantee Boardwalk will continue to deliver such superb results. Indeed, the units are down 11.3 per cent this year.

But if you buy an apartment REIT instead of a rental condo, there's one thing you can count on: You won't be getting any calls in the middle of the night to fix a leaky toilet.

Did the article also examine how many people took out mortgages with 0 - 10% down to buy Boardwalk REIT units in that same time period (or opened 10:1 margin accounts)?

A lot of people did this with their condos and saw a much greater return on their invested capital - put in 17K for the mortgage, use the mortgage to buy the condo, sell the unit for a profit of 130k... that's a "780%" return on what actually came out of their pocket, plus any rental income they would have collected.

That same 17k, invested in Boardwalk would have made a lot of money, but nowhere near what was earned with the leverage available in the loose mortgage lending that has been available in the past few years.

Sure, on a 100% cash comparison, this is analysis holds water, but not everyone has 170k kicking around to push into REIT units.

[MacDougalbry]

Boardwalk REIT as of Sept 30 2007:

Assets: 2.2b
Liabilities: 2b.

Equivelant to having 20% down on a property.

The comparison in the newspaper article is therefore totally flawed. You'd have to do a comparison of buying a Calgary condo with 20% down versus buying the REIT.

[Eric Vail]

Originally Posted by fotze

But if you took your $20k and then borrowed $90k to invest in REIT then you would have.

I would have had to make the payments on the $90 K out of my pocket. As it was, the rent I collected paid most of it.

[Radley77]

Typically, when looking for a good investment opportunity, one expects a higher return than a safe investment like a bond.

A mortgage product has risk and therefore should have a higher return than a bond. By an analysis of the spread above the safe investment vehichle one can determine periods of heightened risk in the credit markets.

Typically, heightened risk in the credit markets has accompanied recessions. Also, this has proved to be one of several warning indicators for the peak in the housing market cycle.

As you can see in the following graph, large jumps in the risk spread (red zone) have typically accompanied the start of a bear market in real estate. In addition, a recession has often followed a sharp increase in the risk spread. Currently, the risk spread is the highest it has been since the early 1980’s bear Calgary real estate market.

This sort of analysis is useful in identifying some of the creamier investing opportunities (green zone) when the risks have been smaller.




Try one of these rent vs. buy or rent vs. sell calculators to find out if investing in real estate works for you:

Rent Vs. Buy Calculator
http://www.ic.gc.ca/epic/site/oca-bc.../ca01821e.html

Rent Vs. Sell Calculator
http://www.forbes.com/fdc/rentorsell.shtml

[Cowperson]

This is pretty funny . . . . in a desperate, hand-wringing kind of way:

More than 30% of U.S. homeowners who bought in the past two years owe more on their mortgage than their house is currently worth, a housing market research company said on Tuesday.

The housing market peaked in most U.S. markets in the past two years. Of home buyers in 2006, 39% of those with a median 10% down payment now have negative home equity similar to 30% of those who purchased in 2007, said online company Zillow in its quarterly home value report.

Overall, only 3% of those who purchased in 2003, and less than 1% of all homes in the United States regardless of when they were purchased, have negative equity.

http://www.financialpost.com/story.html?id=303418

Of course, it could also mean that 70% of those who bought in the last two years have positive equity in their homes.

And it doesn't appear to change the stat that less than 1% of all USA homes have negative equity.

Cowperson

[Mr.Coffee]

If your the type of person that thinks real estate is linked to the health of the economy, and that Calgary's economy is linked to the Oil and Gas sector, you may think twice about any predictions of increases in the next couple years.

The Oil and Gas sector downtown is in a bit of a downturn. Not a massive one, but a little one. That's probably a good thing, because prices on just about every item in the city were escalating quickly.

At my place of employment, it seems that every well we try and get moving forward gets pulled back because it "isn't economic" beyond '09. The new royalty structure on our Alberta properties is way too burdensome with the existing cost structures in industry. Our President recently scaled back big time on Alberta investments.

Rig utilization has lowered and services are moving out of province.

I realise this is a different sector, but I think it could impact real estate, as there will be more jobs available (the service side is going to get hit hard and people will be laid off). Just the other week we lost 5% of our company.

People don't realise what's happening- but they will because of the lag effect of the Calgary economy.

[Red]

More and more houses are being reduced in price. People will continue to do that as they have to compete with their neighbours. It's likely going to get worse as more houses are expected on the market in the spring.

There is a large and vocal crowd that's denying the downturn, they are the people that bought recently and are talking themselves in to believing that things will be fine. Can't blame them, it must be hard on them watching the market correction. A lot of people overpaid by a massive amount, one must wonder what could happen if those people start walking away from these houses. It could get ugly in a hurry.

[Johnny 99]

Housing prices are going nowhere but down. Good luck. Calgary simply isn't a major city like Vancouver or Toronto that can support itself on the basis of it's own population. I simply can't understand why people were so gung ho to buy houses at hugely inflated prices the way they have the past couple of years. Did they really think prices were going to stay that high?

[Dan02]

Originally Posted by Red

There is a large and vocal crowd that's denying the downturn, they are the people that bought recently and are talking themselves in to believing that things will be fine. Can't blame them, it must be hard on them watching the market correction. A lot of people overpaid by a massive amount, one must wonder what could happen if those people start walking away from these houses. It could get ugly in a hurry.

I think you're confusing the US with Calgary, yeah the Calgarys market is high but we don't have near the issues the US has which has lead people, particularily in California, to be walking away from their homes.

For people to start walking away the market needs to take a massive dive, people don't walk when their house is worth 10k less then their mortgage, they walk when it's 50k+ less then their mortgage.

When you consider at very least as far as i know in Canada even with a high ratio mortgage you need to put 5% down, you already have built in equity so the market needs to drop 70k for your 400k house to be worth 50k less then your mortgage.

The US real estate crash was as result of bad lending policies from the banks, such problems are not nearly as prevalent in Canada. subprimes loans were a great option to start but then suddenly your rate jumps and your payments bloom and people couldn't afford them anymore, this lead to a glut of houses on the market as people who couldn't afford their payments tried to dump their homes. Then you've got people with 100% financed loans who have no equity in the house at all.

If you seriously expect the Calgary home market to take such a hit people are just walking away from their homes I think you need to get your head examined, Calgary is not experiencing all the same downward pressures that the US has.

Regardless(irregardless??), this thread is worthy of a bookmark so 6 months from now we can serve out some crow pie al a mode whoevers right