Vancouver's Real Estate Market

[Mr.HappySilp]

Originally Posted by Carl Johnson

even if we believe the Chinese are part of driving forces behind the recent real estate price increase, this hot money is not a stable foundation to build an economy. one minute they come, the next minute all leave to chase the next boom. the recent well-off Chinese immigrations have very little attachment to our canadian way of life and are not here for a long haul. if China cleans up its act on environment, food safety, and education there are very few reasons for them to move here at all as china is still growing at 7.5% while Canadian economy is just limping at the bottom.

Well a lot of these Money from china is from illgeal operation or bribe for the gov. officals......

[Traum]

And that's the thing -- is China going to clean up its act on all the problems it is seeing right now? My personal outlook on that is, the current government (the CCP, that is) is going to try many different small things to patch things up, but political structure there is so thoroughly corrupted to the core that at most, the attempted changes and reforms and only slow things down a bit until the shxt pipe really bursts (whatever outcome that might be). But until that Chinese shxt pipe bursts, Mainlanders are still going to try and find ways to get themselves out.

As far as I can see, the only effective way for us to wean ourselves off the Chinese hot money is if the Canadian government changes our immigration policy enough so that we are dramatically reducing our Mainland Chinese intake for new immigrants. Harper has already shifted things in that direction, so our new Chinese immigrant numbers are dropping very slightly. But it is obvious our government still want their money, so they are still going to come.

Grid,
I agree that it is our collective desire (or horniness, as some of us have put it) that is driving / keeping the market up. But what else is a normally rational person going to do? What I am saying is, when the Chinese hot money factor is acting as the leading agent to drive up RE prices, everyone else is forced to jump in on the bandwagon, or they are going to get left behind in the dust!

Using myself and 2 friends as examples, around 10-12 years ago, friend A had the money and the vision to buy himself a property. So his $300k townhouse at the time turned into a $700k asset today. Friend B had a little less money, but nevertheless bought himself a $250k apartment some 6-7 years ago, and now the place is worth close to $400k. Yours truly here didn't have enough money for a down payment until a year or two ago. So if you look at that 10-12 years span, friend A made a $400k profit while friend B still made a healthy $150k gain. And let me tell you, initially, friend A was not $400k richer than I was, nor is friend B $150k wealthier. Essentially, I failed to keep up because of my failure to get involved with the RE market at the time.

Until people start seeing reasons to suggest market downturns, the demand is still gonna be there.

[sekin67835]

Originally Posted by Traum

And that's the thing -- is China going to clean up its act on all the problems it is seeing right now? My personal outlook on that is, the current government (the CCP, that is) is going to try many different small things to patch things up, but political structure there is so thoroughly corrupted to the core that at most, the attempted changes and reforms and only slow things down a bit until the shxt pipe really bursts (whatever outcome that might be). But until that Chinese shxt pipe bursts, Mainlanders are still going to try and find ways to get themselves out.

As far as I can see, the only effective way for us to wean ourselves off the Chinese hot money is if the Canadian government changes our immigration policy enough so that we are dramatically reducing our Mainland Chinese intake for new immigrants. Harper has already shifted things in that direction, so our new Chinese immigrant numbers are dropping very slightly. But it is obvious our government still want their money, so they are still going to come.

Grid,
I agree that it is our collective desire (or horniness, as some of us have put it) that is driving / keeping the market up. But what else is a normally rational person going to do? What I am saying is, when the Chinese hot money factor is acting as the leading agent to drive up RE prices, everyone else is forced to jump in on the bandwagon, or they are going to get left behind in the dust!

Using myself and 2 friends as examples, around 10-12 years ago, friend A had the money and the vision to buy himself a property. So his $300k townhouse at the time turned into a $700k asset today. Friend B had a little less money, but nevertheless bought himself a $250k apartment some 6-7 years ago, and now the place is worth close to $400k. Yours truly here didn't have enough money for a down payment until a year or two ago. So if you look at that 10-12 years span, friend A made a $400k profit while friend B still made a healthy $150k gain. And let me tell you, initially, friend A was not $400k richer than I was, nor is friend B $150k wealthier. Essentially, I failed to keep up because of my failure to get involved with the RE market at the time.

Until people start seeing reasons to suggest market downturns, the demand is still gonna be there.

I have a feeling you seem to believe that all the money from China is from corruption which is not true. I agree the Canadian government should be more tight on where the money comes from, but to suggest that Canada should reduce immigration for one race is absurd. You are perhaps mad at the new immigrants for buying the "entitled land" you deserve.

I believe the real estate in Vancouver is way too high for the locals to afford and I wish you and I will be able to buy a home in the future. If you want to point your finger at someone, point it at capitalism and the demand for cheap Chinese goods for all the money flowing in.

[4444]

Originally Posted by Mr.HappySilp

Well a lot of these Money from china is from illgeal operation or bribe for the gov. officals......

Or...

Court grants request to bar sale of Richmond penthouse - Richmond Review

[4444]

Originally Posted by Carl Johnson

even if we believe the Chinese are part of driving forces behind the recent real estate price increase, this hot money is not a stable foundation to build an economy. one minute they come, the next minute all leave to chase the next boom. the recent well-off Chinese immigrations have very little attachment to our canadian way of life and are not here for a long haul. if China cleans up its act on environment, food safety, and education there are very few reasons for them to move here at all as china is still growing at 7.5% while Canadian economy is just limping at the bottom.

I hear stories of Chinese parents of children brought here for school not considering Canada as a long term home for them or their children

Most are short sighted, but remember Hong Kong residents moving here in droves before the '97 hand over... Then how many, many went back after they realized china would leave hk alone (mostly).

I think the quoted is a totally valid thought.

There is no proof of significant Chinese acquisitions above and beyond legal immigrants, these immigrants are not enough to keep prices as high as they are.

[westopher]

Originally Posted by Traum

Using myself and 2 friends as examples, around 10-12 years ago, friend A had the money and the vision to buy himself a property. So his $300k townhouse at the time turned into a $700k asset today. Friend B had a little less money, but nevertheless bought himself a $250k apartment some 6-7 years ago, and now the place is worth close to $400k. Yours truly here didn't have enough money for a down payment until a year or two ago. So if you look at that 10-12 years span, friend A made a $400k profit while friend B still made a healthy $150k gain. And let me tell you, initially, friend A was not $400k richer than I was, nor is friend B $150k wealthier. Essentially, I failed to keep up because of my failure to get involved with the RE market at the time.

Until people start seeing reasons to suggest market downturns, the demand is still gonna be there.

This is such a ridiculous way of valuing a real estate purchase. Just because your place went up 150k, doesn't mean you made 150k. The money spent on maintenance, interest, taxes, condo fees, etc all play into the equation. As well as the potential premium you have paid over renting a place of the exact same quality. The thing about real estate that makes is such a shit show is people's short sighted view of how they spent their money and the "profit" they invent in their heads to make themselves feel warm and fuzzy. Not saying that your friends came out on top or not, just saying there is WAY more to the big picture than what the average blind investor sees. Also, unless they leave this real estate market, these "profits" don't mean shit, because they still need to go buy a place that blew up as much as their places. It stuns me how few people see the big picture in real estate, because I wouldn't consider myself a very mathematically smart person, but I am rational. Real estate has become little more value to the average person than adding a theoretical value to your "net worth" to make them feel good about themselves. Perhaps I'm being overly cynical because I don't understand why I bothered to get into the real estate market. That 100k down payment could have made me a lot more money somewhere other than a condo. I'm not against the idea of buying a place, but I understand I am paying a premium to fulfil the "dream of your own home".

[Traum]

Originally Posted by sekin67835

I have a feeling you seem to believe that all the money from China is from corruption which is not true. I agree the Canadian government should be more tight on where the money comes from, but to suggest that Canada should reduce immigration for one race is absurd. You are perhaps mad at the new immigrants for buying the "entitled land" you deserve.

I believe the real estate in Vancouver is way too high for the locals to afford and I wish you and I will be able to buy a home in the future. If you want to point your finger at someone, point it at capitalism and the demand for cheap Chinese goods for all the money flowing in.

I completely recognize that a lot of Chinese money comes from sources other than corruption. The Chinese rise and economical miracle from the 90's to the late 2000's is no coincidence -- it made a lot of people very rich, both from legitimate and illegitimate sources.

I have a general unfavourable impression of Mainland Chinese people not because of their race, but because of their actions and lack of civility. When you pee/shxt on the street or in a mall's garbage can, when you don't fxxking have any clue how to drive, when you barge out into the intersection under a green light when the road ahead is already blocked up, when you go into a McDonald's and claim that you're being discriminated because the server doesn't speak Chinese, I think my sentiments are justified and have absolutely nothing to do with racism. I have Chinese coworkers (both from the Mainland and otherwise) that are an absolute joy to work with.

As far as immigration is concerned, I would very much like to see new immigrants who are willing to embrace the Canadian way of life, while at the same time bringing and preserving their own cultural flavours into the mix. As Jason Kenney correctly pointed out, the Canadian passport is not for sale. We want people that are willing to embrace our beautiful country and help build it to a better future.

[Traum]

Originally Posted by westopher

This is such a ridiculous way of valuing a real estate purchase. Just because your place went up 150k, doesn't mean you made 150k. The money spent on maintenance, interest, taxes, condo fees, etc all play into the equation. As well as the potential premium you have paid over renting a place of the exact same quality. The thing about real estate that makes is such a shit show is people's short sighted view of how they spent their money and the "profit" they invent in their heads to make themselves feel warm and fuzzy. Not saying that your friends came out on top or not, just saying there is WAY more to the big picture than what the average blind investor sees. Also, unless they leave this real estate market, these "profits" don't mean shit, because they still need to go buy a place that blew up as much as their places. It stuns me how few people see the big picture in real estate, because I wouldn't consider myself a very mathematically smart person, but I am rational. Real estate has become little more value to the average person than adding a theoretical value to your "net worth" to make them feel good about themselves. Perhaps I'm being overly cynical because I don't understand why I bothered to get into the real estate market. That 100k down payment could have made me a lot more money somewhere other than a condo. I'm not against the idea of buying a place, but I understand I am paying a premium to fulfil the "dream of your own home".

I don't see why considering the net asset / net worth is a ridiculous way to value a RE purchase. People take all kinds of measures to hedge against losing their place in the economy. That is what investment (of any kind) is meant to do. RE is merely one form of investment that happens to be, at least on the surface, more easily understandable for a lot of people than, say, securities. So people get into it.

[iEatClams]

let's talk RE in terms of Risk.

I'm pretty risk averse, and assume others on here would be as well.

Let's say im looking to buy a property for say 700K, here's whats going through my head.

in my opinion, based on today's prices, whats the ->
1.probability that market will continue to go up 10%+ a year? almost zero, I can't see it happening, less than 0.5%
2.probability that market will continue to go up a little, like 1-3%? VERY LOW,I'd say about 5% probability
3.Probability that market will stay the same? Decent, 25%
4.Probability that market will drop 5-15%? Pretty good imo, 65%
5.Probability that market will "crash" - greater than 35% decreases? Low - say 5%.


So knowing that I think there's a greater than 50% chance the market will go down, I'd wait it out until the odds are in my favour. Why buy a place for 700K when there's a very realistic chance that it could be worth 600K in the next 1-3 years? 100K is a lot of money for the average person.

If I don't buy, and the market goes up say 5%, im missing out on what? 35K? but the probability of increasing imo is again, 5%. do I really think that house will be worth 735K a year or two down the road? most likely not. ask yourself this when looking to buy? What do you think the price of the home will be in next year? if you think it will be lower? wouldn't it be wiser to wait?

people dont do these type of calculations when they buy, they get impatient and all caught up in the "hornyness" and end up overbidding, or listening to their realtors who has a vested interest in them buying the home. what's wrong with renting, or living with parents until prices get better? there's very little risk with renting or staying with the parents. lots of risks with buying.

Until the risks/reward ratio is on your side, just wait.

[sdubfid]

Heres something to think about:

I know multiple houses in tri-cities area that were bought for ~160k in the late 80's and sold for ~1.2million in 2012. That's roughly 8% per year return on investment over about 26 years. Provided you paid in cash. If you had a mortgage then it would be less+renovations and maintenance etc. In about 2004-2005 the same houses were selling for 400k. Prices tripled in 8 years. All houses in my example were bought by people that don't speak a word of English and they sit empty now.

Do the numbers over a long period of time and rate of return is not that great in my opinion, there are exceptions of course. From 2004ish to now it's an excellent return as long as you don't need to buy in the same market.

I know 2 people under 25 who just bought places in the past month. They both made spur of the moment decisions and went from not even thinking about buying a place to buying one within weeks. Reason being "they don't want to pay some assholes rent" They couldn't even answer basic questions about their mortgage when I asked them.
Variable or fixed? "Whats the difference" Boom 300g mortgage. More in interest and strata fees then their previous rent. Doesn't matter that there is a full size outdoor style hot tub in the bedroom and the place is probably rotten. Instead of going skiing or out for dinner people are buying place like its a leisurely activity. Actually they aren't buying anything, they are selling their soul to the bank.

But what do I know, I lived in a cardboard box for over a year

[Gridlock]

Originally Posted by 4444

Or...

Court grants request to bar sale of Richmond penthouse - Richmond Review

$65,000 is a modest income?

Fuck Vancouver.

[subordinate]

Shit Sdub, you almost made me splurt out my coffee.

And that article....2 kilos of cocaine, sounds like a party house.

[Great68]

Originally Posted by Gridlock

$65,000 is a modest income?

Fuck Vancouver.

What do you consider modest?

[subordinate]

50k

[Traum]

Originally Posted by Great68

What do you consider modest?

For what it is worth, the average Canadian income seems to hover around $39k to $46k per year, depending on which survey you are looking at. So anything above that range, I would consider it to be above average. Anything below would qualify as modest. So $65k is definitely anything but modest.

[4444]

According to statistics, less than 5% of ppl In vancouver earn >$100k.

$65k, compared to avg. is more than modest.

Still won't buy u shit, though

[Spoon]

Modest in comparison to spending at least. Let's not be nit picky now.

[dinosaur]

It confuses me as to why so many think that this RE "problem" in the Lower Mainland/BC is a result of the Chinese....

[belka]

Originally Posted by 4444

According to statistics, less than 5% of ppl In vancouver earn >$100k.

$65k, compared to avg. is more than modest.

Still won't buy u shit, though

With the high cost of housing, how the hell do they afford it? I visit my parents in Kamloops in a new area of town. Houses are an average 400-500k and I know that there aren't that many high paying jobs in the city. How do people afford them?? These are mostly younger families with kids, not retired people with tones of cash.

I know real estate is a good investment blah blah blah, but you have to draw the line at living comfortably vs. living in the biggest house you can afford just getting by paycheck to paycheck. I think its insanity.

[iEatClams]

Originally Posted by dinosaur

It confuses me as to why so many think that this RE "problem" in the Lower Mainland/BC is a result of the Chinese....

yea, there seems to be too much blame on chinese money. Chinese money is one of the many reasons why RE prices are high, but let's not ignore the others that people have mentioned:

1. speculative investors
2. cheap debt, low interest rates
3. relatively easy lending criterias (talking about 40 year amortization and no income verification, CMHC, 5% down payment etc). things only started getting more strict recently. this relates to #1. speculative investors who buy to flip.
4. house "horny" culture where everyone wants to own.
5. relatively lack of supply up until the last couple years in relation to high demand. up until 2011, there weren't that many developments and new subdivisions. now there seems to be hordes and hordes of towers and multi-family building and housing expansions (burke mountain, fraserview area, langley etc). prices = demand + supply, basic econ 101.
6. relative lack of land, Vancouver is kind of locked in terms of land, we cant go north bc of mountains, west bc of Waters, south bc of borders, but still lots of room east though. - the counter argument is that Toronto and other cities are not bound by these boundaries and yet their prices are increasing rapidly too.
7. Vancouver is a top notch city: mountains, clean air, clean water, safe etc.

[dinosaur]

Just as a side-note....this "house horny" term is fucking hilarious...someone needs to copyright that shit, lol!
Posted via RS Mobile

[UFO]

Originally Posted by 4444

Thing is, history has shown us that fundamentals dictate long term prices, while some could argue Vancouver is growing, sadly it's more of a state of mind than actual fact. We have no economy, hootsuite is a peon of a company if it were in Silicon Valley (which has comparble real estate prices), that's speaks volumes to me right there.

If all of a sudden we suddenly saw head offices relocate from TO or Calgary, I'd change my tune, but that will not happen. We also won't become a secons Silicon Valley, we may have some small start ups which get a lot of attention, but again, it's just that, disproportionate attention versus the actual economic benefit.

People will start to say 'oh it's been 5 years of bubble territory, maybe this is just how it is' - those people need to be patient, people's emotions take a long time to reach breaking point, but when the view on real estate changes, it will get ugly quick. Just look at the US, the bubble there began in the early 2000's after cheap money was introduced to stimulate the post dot com crash of 2000/2001, burst in 2008/2009. Things take time.

I agree with your points. But you've acknowledged that things take time to crash and burn, yet your tone implies you are expecting coporations to relocate to Vancouver 'all of a sudden' and for the next Silicon Valley to just pop up overnight. I know you don't mean it verbatim, but I feel there are some inconsistencies in your expectations.

Economies take time to build, small startups grow (hopefully) into medium companies. New small startups show up to take their place, etc etc. 1000 new tech jobs is still 1000 more than 0, and better than having those same 1000 people working in the retail and service industries; if anything it spurs an increase in retail and service to meet the needs of those 1000 new well-paying jobs, should be no news to you. You are, have been, and will be very patient in waiting for the fundamentals to play out and for everything to correct in a crash and burn fashion, and it still may very well do that. But are you unwilling to use some of that patience on economic growth because of the little underlying data on how to accurately predict this? The way I see it, everything takes time. I'm curious/willing to see how all of this 'growth' plays out, and I don't think the crash and burn rhetoric needs to be replayed time over time, but then I'm also quite laissez in most of my opinions

[4nik8]

Originally Posted by westopher

This is such a ridiculous way of valuing a real estate purchase. Just because your place went up 150k, doesn't mean you made 150k. The money spent on maintenance, interest, taxes, condo fees, etc all play into the equation. As well as the potential premium you have paid over renting a place of the exact same quality. The thing about real estate that makes is such a shit show is people's short sighted view of how they spent their money and the "profit" they invent in their heads to make themselves feel warm and fuzzy. Not saying that your friends came out on top or not, just saying there is WAY more to the big picture than what the average blind investor sees. Also, unless they leave this real estate market, these "profits" don't mean shit, because they still need to go buy a place that blew up as much as their places. It stuns me how few people see the big picture in real estate, because I wouldn't consider myself a very mathematically smart person, but I am rational. Real estate has become little more value to the average person than adding a theoretical value to your "net worth" to make them feel good about themselves. Perhaps I'm being overly cynical because I don't understand why I bothered to get into the real estate market. That 100k down payment could have made me a lot more money somewhere other than a condo. I'm not against the idea of buying a place, but I understand I am paying a premium to fulfil the "dream of your own home".

Strictly as a money making investment real estate is not always your best option but...

One huge thing I think you may be over looking is you have to live somewhere. Assuming you can't live with your parents for free you are either buying or renting.

paying 150,000 over 25 years for something now worth 400,000 is heaps better than paying 150,000 over 25 years in rent and having nothing.

[!LittleDragon]

People often underestimate how much interest they're paying over 25 years. $150k at today's low rates is $780 a month, over 25 years is $234,000. That's $84,000 in interest provided rates don't go up or down.

Dial it back to 2000 when you're more likely to find a place for $150k, rates were at about 8%, $1145 per month and $343,500 total. That's over $193k in interest. I sure hope it's worth way more than $400k when the mortgage is done because that $56k in profit is easily chewed up over 25 years by things like property tax, strata, repairs, operating costs, etc.

Think about how much you're paying in interest and how long you could've rented for that. I keep hearing renting is throwing money away but borrowing to buy is also throwing money away. You just have to figure out which one works out in your favour.

If I ever decide to buy a home, I'll be borrowing as little as possible to do it. For now, my downpayment is generating more than enough dividend per month to pay my living expenses. This essentially allows me to live for free for the time being.

Before I get blasted for not taking into account that rates have dropped since 2000, this post was meant to illustrate the point that a lot of money is going towards interest that the bank is charging you. People often just see the monthly payment and say they can afford it, not knowing how much money they're throwing away over the years in interest. Take that from my post, not my lazy math... lol

[4444]

Originally Posted by belka

With the high cost of housing, how the hell do they afford it? I visit my parents in Kamloops in a new area of town. Houses are an average 400-500k and I know that there aren't that many high paying jobs in the city. How do people afford them?? These are mostly younger families with kids, not retired people with tones of cash.

I know real estate is a good investment blah blah blah, but you have to draw the line at living comfortably vs. living in the biggest house you can afford just getting by paycheck to paycheck. I think its insanity.

Here's how they, and everyone else affords it:

5% down, 7% cash back mortgage (I.e. Net 0% down and closing costs covered), cheapest money in history to, in the short term, keep monthly payments low.

Will end in tears