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Vancouver Off-Topic / Current EventsThe off-topic forum for Vancouver, funnies, non-auto centered discussions, WORK SAFE. While the rules are more relaxed here, there are still rules. Please refer to sticky thread in this forum.
Willing to sell a family member for a few minutes on RS
Join Date: Apr 2011
Location: North vancouver
Posts: 12,628
Thanked 32,346 Times in 7,533 Posts
Failed 213 Times in 161 Posts
I'll play on this one. I'm a chef, my wife is a nurse. We pay 1480 a month, and are moving to a house with 2 fenced yards and will be paying 1600 a month, all bills included. The house is divided into 3 but is massive so I'd say our floor space is around 1200 sq ft. Its 100 years old, in good shape and on a bus route in kits. I cringe to think of what 1200 square feet with a yard would cost me in kits per month with 100k or so down payment. We are fairly decently paid for a young couple and I couldn't imagine the lifestyle change if we were to buy something of similar size/quality. No more M3 with new toys for it every month, no more dinners at our favourite restaurants, no more trips to whistler, no more nearly debt free life, (other than my mortgage in edmonton) no more nice clothes, new snowboard gear, etc. I can't comprehend what people believe they can afford in Vancouver. 100k household income does NOT mean a 500k condo is within reach although it seems people are getting into that situation all the time. Being house poor is something I will never allow to happen to me, I enjoy things and doing things way too much.
__________________
98 technoviolet M3/2/5
Quote:
Originally Posted by boostfever
Westopher is correct.
Quote:
Originally Posted by fsy82
seems like you got a dick up your ass well..get that checked
Quote:
Originally Posted by punkwax
Well.. I’d hate to be the first to say it, but Westopher is correct.
^ me and my wife just went through the same thing. Looking at selling our condo, putting down $160k on a 628k duplex. Even with that money down we would be looking at $3500-$4000 a month for the mortgage, property tax, insurance, hydro. Once we looked at that hard number we stopped looking and said screw that. We would have to give up going out for dinner 2-3x a week, holidays and pretty much doing whatever we want. For what? A house? Its not a dream anymore to own a house its a nightmare. Ill invest my 160k and make some real money instead of losing it in real estate.
Asking $998000. It is a duplex so the 4200 sqft land isn't all yours.
Say $998000 is the final purchasing price with taxes and fees included. $100K down, you are still borrowing $898000 @ 3.15% for 25 years, you are looking at $4319.16 per month plus property taxes, hydro/tv, and whatever other cost that is included with owning a home in Vancouver.
At the end of the 25 years, if nothing else has changed and interest stays at 3.15%, you would have paid an extra $397,615 in interest plus whatever you would have paid in property tax and other bills.
@$1200 for 25 years, you are looking at $360,000. Assuming a 3% increase per year, then that number will be higher.
__________________ Originally posted by Iceman_19 you should have tried to touch his penis. that really throws them off. Originally posted by The7even SumAznGuy > Billboa Originally posted by 1990TSI SumAznGuy> Internet > tinytrix
Quote:
Originally Posted by tofu1413
and icing on the cake, lady driving a newer chrysler 200 infront of me... jumped out of her car, dropped her pants, did an immediate squat and did probably the longest public relief ever...... steam and all.
I'll play on this one. I'm a chef, my wife is a nurse. We pay 1480 a month, and are moving to a house with 2 fenced yards and will be paying 1600 a month, all bills included. The house is divided into 3 but is massive so I'd say our floor space is around 1200 sq ft. Its 100 years old, in good shape and on a bus route in kits. I cringe to think of what 1200 square feet with a yard would cost me in kits per month with 100k or so down payment. We are fairly decently paid for a young couple and I couldn't imagine the lifestyle change if we were to buy something of similar size/quality. No more M3 with new toys for it every month, no more dinners at our favourite restaurants, no more trips to whistler, no more nearly debt free life, (other than my mortgage in edmonton) no more nice clothes, new snowboard gear, etc. I can't comprehend what people believe they can afford in Vancouver. 100k household income does NOT mean a 500k condo is within reach although it seems people are getting into that situation all the time. Being house poor is something I will never allow to happen to me, I enjoy things and doing things way too much.
I'll play as well in regards to the friends I know.
They are definitely house poor.
They really don't go out for dinners any more.
I have to ask them 6 different times to go out on dinners together, and they reject 5 out of 6 times.
I feel bad when I ask them, but at least we get to get together for house parties, so that balances it.
You know, since I bought my place I find myself not going out for nights on the town anymore not because I can't afford it, but because I find working in my garage, basement, or doing many other things around the place way more enjoyable. Plus I like cooking at home.
If a measure of an enjoyable life is by how many times you can go out to dinner, that's pretty laughable.
Have you ever thought that your friends just don't want to go out for dinners so often anymore?
Willing to sell a family member for a few minutes on RS
Join Date: Apr 2011
Location: North vancouver
Posts: 12,628
Thanked 32,346 Times in 7,533 Posts
Failed 213 Times in 161 Posts
Quote:
Originally Posted by Great68
You know, since I bought my place I find myself not going out for nights on the town anymore not because I can't afford it, but because I find working in my garage, basement, or doing many other things around the place way more enjoyable. Plus I like cooking at home.
If a measure of an enjoyable life is how many times you can go out to dinner, that's pretty laughable.
I think its pretty laughable that you took that from the conversation happening here. He's simply using that as an example. I certainly understand the satisfaction of enjoying your home, but its very much a balance. If you were house poor you probably wouldn't have anything in the garage worth working on, right?
__________________
98 technoviolet M3/2/5
Quote:
Originally Posted by boostfever
Westopher is correct.
Quote:
Originally Posted by fsy82
seems like you got a dick up your ass well..get that checked
Quote:
Originally Posted by punkwax
Well.. I’d hate to be the first to say it, but Westopher is correct.
You know, since I bought my place I find myself not going out for nights on the town anymore not because I can't afford it, but because I find working in my garage, basement, or doing many other things around the place way more enjoyable. Plus I like cooking at home.
If a measure of an enjoyable life is by how many times you can go out to dinner, that's pretty laughable.
Have you ever thought that your friends just don't want to go out for dinners so often anymore?
Asking $998000. It is a duplex so the 4200 sqft land isn't all yours.
Say $998000 is the final purchasing price with taxes and fees included. $100K down, you are still borrowing $898000 @ 3.15% for 25 years, you are looking at $4319.16 per month plus property taxes, hydro/tv, and whatever other cost that is included with owning a home in Vancouver.
At the end of the 25 years, if nothing else has changed and interest stays at 3.15%, you would have paid an extra $397,615 in interest plus whatever you would have paid in property tax and other bills.
@$1200 for 25 years, you are looking at $360,000. Assuming a 3% increase per year, then that number will be higher.
except you'll need to put down $200k instead of $100k like you said, otherwise you'll be paying an additional $20k for mortgage default insurance and at least 4% interest. You also need a combined income of at least $120k-$140k/year to qualify for a mortgage like that
Willing to sell a family member for a few minutes on RS
Join Date: Apr 2011
Location: North vancouver
Posts: 12,628
Thanked 32,346 Times in 7,533 Posts
Failed 213 Times in 161 Posts
Quote:
Originally Posted by xpl0sive
except you'll need to put down $200k instead of $100k like you said, otherwise you'll be paying an additional $20k for mortgage default insurance and at least 4% interest. You also need a combined income of at least $120k-$140k/year to qualify for a mortgage like that
I sure hope it takes A LOT more than 120-140k a year to qualify for that.
__________________
98 technoviolet M3/2/5
Quote:
Originally Posted by boostfever
Westopher is correct.
Quote:
Originally Posted by fsy82
seems like you got a dick up your ass well..get that checked
Quote:
Originally Posted by punkwax
Well.. I’d hate to be the first to say it, but Westopher is correct.
Home sales in Vancouver were up nearly 40 per cent in October compared with a year ago, when sales dropped following changes to the mortgage lending rules, the Real Estate Board of Greater Vancouver said Monday.
The board says 2,661 homes were sold last month through the Multiple Listing Service, compared with 1,931 a year ago.
Compared with September, sales were up 7.2 per cent.
“We continue to see fairly typical activity when it comes to monthly home sale and listing totals,” said Sandra Wyant, president of the Greater Vancouver board.
“Today’s activity is helping to keep us in balanced market territory, which means that prices tend to experience minimal fluctuation.”
Sales were 2.8 per cent over the 10-year average for the month.
Despite the sharp gain in sales, the total number of homes listed for sale on the MLS system was 15,257, down 12.2 per cent compared with a year ago, while the sales-to-active-listings ratio was 17.4 per cent for the region.
The MLS home price index composite benchmark price was $600,700 for Greater Vancouver, down 0.5 per cent compared with a year ago.
Sales of detached homes were up 35.1 per cent at 1,067 last month compared with 790 a year ago, while the benchmark price for detached properties decreased 0.5 per cent to $922,600.
The board said sales of apartment properties amounted to 1,098, up 36.7 per cent from 803 apartment sales a year ago, while attached property totalled 496, up 46.7 per cent from 338.
The benchmark price apartment price was down 0.9 per cent from last year at $365,600, while the benchmark price of an attached property was unchanged at $458,000.
__________________ Originally posted by Iceman_19 you should have tried to touch his penis. that really throws them off. Originally posted by The7even SumAznGuy > Billboa Originally posted by 1990TSI SumAznGuy> Internet > tinytrix
Quote:
Originally Posted by tofu1413
and icing on the cake, lady driving a newer chrysler 200 infront of me... jumped out of her car, dropped her pants, did an immediate squat and did probably the longest public relief ever...... steam and all.
Not sure if real or nominal, but regardless, highest payments whilst we have emergency rates, and a sluggish economy.
I can't imagine this will be pretty in the future. Would love to see the rest of this report/presentation
this is definitely going to end well when interest rate normalize. idk if the mining industry slowdown is having any impact on the downtown real estate market and vancouver in general. but I just saw a recent stat about half of the TSX venture mining companies are headquartered in Vancouver. with mining in a huge decline and no rebound in the near future this tells me there is going to be a lot of people out of work.
Not sure if real or nominal, but regardless, highest payments whilst we have emergency rates, and a sluggish economy.
I can't imagine this will be pretty in the future. Would love to see the rest of this report/presentation
Here's an article from the financial post regarding CHMC. In summary, bank profits are high as heck, and they are not worried about bad debt or mortgage defaults because it's all insured by CMHC. That's right, it's our tax dollars that will bail out these bad loans.
Spoiler!
The head of Canadian Imperial Bank of Commerce’s retail banking operation says he’s “comfortable” with the bank’s business mix despite continuing rapid growth of the consumer mortgage portfolio.
“In our own branded mortgage space we are now growing faster than anyone,” said David Williamson.
All the big banks have been aggressively pursuing the consumer loan business, especially mortgages, so CIBC is hardly alone on that front. But a key reason Canada’s fifth biggest bank by assets is confident the issue won’t come back to haunt it is that CIBC has worked hard to cut its exposure to potential losses.
“We’ve got the vast majority of our mortgages insured with the government of Canada,” Mr. Williamson said in an interview with the Financial Post, referring to coverage provided by the Canada Mortgage and Housing Corp. “Probably more than other banks.”
Related
TD, CIBC reach deal to share Aeroplan portfolio
CIBC to take short-term earnings hit from loss of Aeroplan customers
With all the businesses we are in “we look at the longer term view, and I’m really quite comfortable with our business mix,” he added.
Many analysts worry that soaring consumer debt levels could hurt the banks in the event of a sudden rise in unemployment or interest rates. The concern is that it could set off a wave of defaults that, given the precarious state of household finances, would reverberate through the economy.
The banks have largely insulated themselves through the use of CMHC insurance, with average coverage of their mortgage portfolios of more than 60%.
That means lenders would be mostly protected from the direct impact of any downturn but even so, in such an event they would still experience a slowdown in their other consumer businesses.
CNW Group/CIBC
CNW Group/CIBCCIBC launches the new Aventura Travel Rewards Program.
Mr. Williamson made the comments at the launch of a credit card that holds centre stage in CIBC’s strategy to remain a leader in the travel rewards space.
The launch of the CIBC Aventura credit card comes two weeks after CIBC agreed to carve up its Aeroplan business with Toronto-Dominion Bank.
Under the deal, about half of the roughly one million holders of CIBC’s Aeroplan will be migrated to rival TD, which becomes the first new issuer of Aeroplan cards in two decades.
Unlike Aeroplan which focused on Air Canada, the new Aventura card will allow customers to accumulate frequent flier points to buy tickets on any airline.
Aventura also includes various travel and medical insurance benefits which are superior to most other cards, Mr. Williamson said.
Those enhancements make it one of the best travel rewards cards available, he said. “You put our [card] up against any other offer, it will show very well.”
More than 20 years ago CIBC launched its first Aeroplan card — the program owned and managed by Aimia Inc. of Montreal — setting the stage for what is one of the most profitable businesses in retail banking.
“It’s a dynamite business,” said National Bank Financial analyst Peter Routledge.
According to Mr. Routledge, the Aeroplan card holders tend to be well-off, often spending a good chunk of their disposable income using the card, and CIBC and Aimia collect about 2.5% of every dollar spent.
The travel rewards business has change dramatically since CIBC became an issuer and the market is now crowded. Still, the rewards are there for astute operators.
“It’s got good margins and we are continuing to grow in this space,” Mr. Williamson said.
we went from about $50 Billion dollars in insured mortgages by the CMHC in the early 2000's to about $700 billion today. I think the biggest mistake the government did was the 40 year amortization mortgages. That and relaxed lending guidelines such as no income verification and stuff like that.
So for the next 25-40 years (the life of a mortgage), us taxpayers have to be liable for this 700 billion dollars if a catastrophic event happens and real estate values crash. Great, just great.
So don't live in a $2k/month apartment and don't live downtown.
Do you really need to be walked through this or are you apart of the impatient self-entitled generation who wants every thing right now?
Come on dude, do you really not know how to budget and save money? Live cheap in the present for a goal in the future? Sound like a foreign concept to you?
This is why you probably don't work out, you don't fuck hot chicks, you don't have a sweet car, but you may have a few hundred grand in net worth
Then again, what have you done with your life but saved up? If you're finally a millionaire @ 40 but you did nothing but save up, date a 5, drive a Camry, and your big night out was going to Red Robin and the movies, well, enjoy it I guess!
This is why you probably don't work out, you don't fuck hot chicks, you don't have a sweet car, but you may have a few hundred grand in net worth
Then again, what have you done with your life but saved up? If you're finally a millionaire @ 40 but you did nothing but save up, date a 5, drive a Camry, and your big night out was going to Red Robin and the movies, well, enjoy it I guess!
Hey that kinda sounds like my life years back. Work out less now that i have a family. Had a townhouse in burnaby, and along with the working out that helped me fuck plenty hot chicks, found one i loved and married her, sold the townhouse, bought a house, suppose my net worth is well north of 100k (house poor) traded my sweet ride for a minivan (but i still have the gisxr and its for sale if anyone is interested) and i still enjoy them sauteed shroom burgers!
I admit, i dated some 5's. We've all brought things home we're not too proud of
__________________ Don't open your hood to strangers........ N 'ouvrez pas votre capot à des inconnus
WHY VANCOUVER REAL ESTATE IS NOT GOING TO CRASH
BY VANCITY BUZZ | 3 HOURS AGO | SPEAK UP
It’s Vancouver’s greatest economic export: telling everyone outside of Vancouver how great it is to live here. It’s even on our license plate (“the greatest place on earth”). No – we’re not arrogant, we just live in a delusional rainy day reality.
The Economics
The definition of a real estate bubble is when the price of an asset rises above what local incomes can afford. It’s that simple. If the locals can’t afford it – then an asset is over priced. How do we gauge if something is too expensive?
Easy – we have historical real estate valuations that are based on the incomes of local residents. The historical national average over a very long period of time is approximately three times income to one. What does this mean in English and not finance talk? It means that if you and your partner make a combined income of $100,000 per year, then the house you should be buying is about $300,000.
This isn’t an exact science – but that sounds about right for affordability doesn’t it? This way you can pay your mortgage, save for your kids college, perhaps take a vacation every year or two, and save for a rainy day.
So here’s the magic question – if the rest of Canadian families are making $100,000 per year and buying $300,000 houses, how much do pay at the greatest place on earth?
Well, let me assure you we’re not making any more money: Vancouver is not a great place for young couples to get ahead (think Calgary, Fort Mac, or Toronto if you want to live somewhere and make good coin). So if a Vancouver couple is making $100,000, the average home they are purchasing is $900,000. These aren’t exact numbers, but give or take $100,000 in either direction and you’re probably about bang on. So what are the implications to this?
If you believe in putting down a 25 per cent down payment you’d have to first save about $225,000 to just for your down payment. That’s nearly the cost of a $300,000 house that everyone else in the country is paying. Comparatively speaking, your mortgage is $450,000 higher with living in Vancouver than somewhere else in the country.
That, ladies and gentlemen, is pure insanity.
Never mind the increased mortgage cost, the real cost is what you pay in interest for borrowing that insane amount of money.
I whipped out my trusty mortgage rate calculator (never leave home without it) and believe with a historical 5% interest rate (with a 25 year mortgage), the amount of interest a Vancouver resident will pay in real dollars is $508,794 (Simple Mortgage Interest Calculator | CalcMyMortgage.com).
I hope you love living in the greatest place on earth is worth giving your retirement, college kids savings, and your first born child to the bank, because that’s basically what it’s costing. The average Vancouver family could literally own three homes if they lived somewhere else.
So now that we’ve already figured out that its completely unaffordable to live in this city, let’s try to determine why.
The Limited Land Argument
From a geographic perspective, Vancouver is unlike most American (and Canadian) cities in the sense that we are surrounded by mountains, water and the international border with the United states. This creates a limited space for the region to build housing for its residents.
It’s simple, Vancouver is not a city that can just perpetually build out in every direction (like Calgary), which means we all get stuffed in next to each other as prices continue to escalate. Despite the limited land argument, this is not the main reason why the average Vancouver home is more than twice the national average.
The Foreign Money Argument
Metro Vancouver is touted as one of the most “ethnically diverse” places to live in the world. There’s no argument there, this must be one of the only places in North America where you can live a comfortable lifestyle and never have to speak a word of English.
This has caused Vancouver to be a hot bed of foreign ownership and investment in our real estate, and this is the key reason why Vancouver real estate prices are so high. How you say? Let’s dissect further.
I never really understood why foreigners want to live in Vancouver so much. I mean, why Vancouver over any other city. You would think they would want to live somewhere else like Seattle, Toronto or Montreal. What makes us so special?
There are already well established immigrant communities in Vancouver. Don’t believe me? I would challenge you to hang out in Richmond for the day and take a poll of how many people speak English versus a foreign language. It makes perfect sense – if you wanted to buy real estate outside your own country, you’d buy the next best thing and that’s exactly what Vancouver offers this wealthy foreign contingent.
You need a lot of money to buy real estate in Vancouver, right? The people that can afford to still buy in Vancouver are not exactly middle class, they’re business owners, professionals, and basically already very wealthy in their own country. To these people it doesn’t matter if a Vancouver home costs $500,000, $600,000 or a million dollars.
They’re recession proof, this is the key argument that every real estate analyst (that’s calling for a Vancouver housing crash) is missing. The local residents are simply completely priced out of the market, they’re not buying locally or at all. Ask any realtor (selling houses and not condos) how many of his/her sales are to foreign versus local money. I did a poll in of three realtors in Burnaby and each told me greater then 90 per cent are offshore or only live for a portion of the year.
If you are a wealthy Hong Kong or Mainland Chinese businessman worth millions of dollars, do you think it matters if the Vancouver real estate market crashes? Of course not, they’re investing in Vancouver real estate with cash. They don’t need Canadian mortgages and they wouldn’t qualify anyways, they don’t have any Canadian income.
Their money is made somewhere else – so they just pay cash. If you’re worth millions of dollars, do you think you will care if your $1 million dollar house declined in value by 20%? No – of course you don’t. That’s precisely why the Vancouver market is not in for a housing crash.
Could we see some sort of “correction” of 10 – 20 percent? Sure we could – I wouldn’t say a 1 million dollar box in the sky condo that declined to $800,000 a “huge real estate crash.”
It certainly would be a decline in price – but it’s not exactly going to change the game and make real estate affordable in this city.
How We’re Different then the American Real Estate Crash
Wealthy offshore investors purchase homes in cash (not credit). Therefore less leverage making the market more stable.
Local residents mortgage themselves up with real estate they can’t afford, but they’ll get by through renting out the basement, spare upstairs bedroom, and eating canned soup.
There’s no real trigger for a crash as “thousands of owners flood the market with listings” because the majority of Vancouver real estate are all long term holders and not flippers.
American mortgages are different than Canadian mortgages with respect to the fact that in the United States, you can literally just mail the bank the keys to your place and move out. In Canada, when you default on your mortgage they come after the mortgage owner’s personal assets.
How the Government Can Actually Be Useful Here
Living in a place where foreign investors and non-residents are buying up all the affordable real estate is nothing new. There are similar situations all around the world where this is happening.
Think about it – if you were worth millions of dollars and lived in a developing or politically oppressed country, wouldn’t you want to store your cash in a delightfully, economically and politically stable jurisdiction? You have no idea what the government will do next month never mind the next 50 years. This is what the Government can do:
Start collecting statistics on local real estate. I know it’s crazy – for all of the unnecessary stuff that government does, they haven’t even mandated that proper statistics start being collected for who buys and owns real estate (arguably our most precious asset as a country).
Consider implementing foreign ownership rules in a phased approach over time. Why is it that whenever a foreign government wants to buy a big natural resource or technology company, it becomes mainstream news and it’s subject to a “net benefit test.” But when the same thing happends to individual residents (i.e. real estate being purchased en masse, severely disrupting the equilibrium of a local market), it’s ok and no one does anything. I personally do not care if BHP wants to purchase Potash – where do politician’s think the natural resources are going to go? England? I won’t babble too much about this because that’s a separate opinion article.
The Canadian Government needs to get serious about this foreign ownership of our real estate. Residents need to start standing up and protesting our land being sold to the highest bidder in another country who doesn’t truly plan to live here.
Other countries have implemented foreign ownership rules successfully, most notably Sydney, Australia. Our real estate and home prices are not an investment, they are a home.
It is not good for our society to live in a place where homes are expected to increase $30,000 per year. Posted via RS Mobile
I continue to ask myself, after reading all of the threads here and elsewhere, why are people still here? Metro Vancouver has no jobs, no economic prospects, "hippie" politicians, and people who don't care about the well-being of this place.
People should just pack up, move to Alberta, make 6 figures, and call it a day. Exporting commodities is all we're good at now anyway. (Semi-serious) Posted via RS Mobile
i failed teh above because it was just the worst article ever, so poorly written, totally one sided.
i love how recent history (<10 years) means we can completely ignore everything else - vancouver has had a large asian community for a LONG FUCKING TIME, this isn't a new phenomenon
ugh, such an ugly article, the person who wrote it is probably wearing skinny jeans drinking coffee in a starbucks on a mac.... living with his parents
"American mortgages are different than Canadian mortgages with respect to the fact that in the United States, you can literally just mail the bank the keys to your place and move out. In Canada, when you default on your mortgage they come after the mortgage owner’s personal assets."
hahahaha, really? that's an interesting fact, because only a small number of states have non-recourse loans.
i won't pick at it anymore because i could be here all day, but WOW! this proves how poor our media is (i know it's not a news source, but still shouldn't be published anywhere - this is almost fear mongering)
WHY VANCOUVER REAL ESTATE IS NOT GOING TO CRASH
BY VANCITY BUZZ | 3 HOURS AGO | SPEAK UP
It’s Vancouver’s greatest economic export: telling everyone outside of Vancouver how great it is to live here. It’s even on our license plate (“the greatest place on earth”). No – we’re not arrogant, we just live in a delusional rainy day reality.
The Economics
The definition of a real estate bubble is when the price of an asset rises above what local incomes can afford. It’s that simple. If the locals can’t afford it – then an asset is over priced. How do we gauge if something is too expensive?
Easy – we have historical real estate valuations that are based on the incomes of local residents. The historical national average over a very long period of time is approximately three times income to one. What does this mean in English and not finance talk? It means that if you and your partner make a combined income of $100,000 per year, then the house you should be buying is about $300,000.
This isn’t an exact science – but that sounds about right for affordability doesn’t it? This way you can pay your mortgage, save for your kids college, perhaps take a vacation every year or two, and save for a rainy day.
So here’s the magic question – if the rest of Canadian families are making $100,000 per year and buying $300,000 houses, how much do pay at the greatest place on earth?
Well, let me assure you we’re not making any more money: Vancouver is not a great place for young couples to get ahead (think Calgary, Fort Mac, or Toronto if you want to live somewhere and make good coin). So if a Vancouver couple is making $100,000, the average home they are purchasing is $900,000. These aren’t exact numbers, but give or take $100,000 in either direction and you’re probably about bang on. So what are the implications to this?
If you believe in putting down a 25 per cent down payment you’d have to first save about $225,000 to just for your down payment. That’s nearly the cost of a $300,000 house that everyone else in the country is paying. Comparatively speaking, your mortgage is $450,000 higher with living in Vancouver than somewhere else in the country.
That, ladies and gentlemen, is pure insanity.
Never mind the increased mortgage cost, the real cost is what you pay in interest for borrowing that insane amount of money.
I whipped out my trusty mortgage rate calculator (never leave home without it) and believe with a historical 5% interest rate (with a 25 year mortgage), the amount of interest a Vancouver resident will pay in real dollars is $508,794 (Simple Mortgage Interest Calculator | CalcMyMortgage.com).
I hope you love living in the greatest place on earth is worth giving your retirement, college kids savings, and your first born child to the bank, because that’s basically what it’s costing. The average Vancouver family could literally own three homes if they lived somewhere else.
So now that we’ve already figured out that its completely unaffordable to live in this city, let’s try to determine why.
The Limited Land Argument
From a geographic perspective, Vancouver is unlike most American (and Canadian) cities in the sense that we are surrounded by mountains, water and the international border with the United states. This creates a limited space for the region to build housing for its residents.
It’s simple, Vancouver is not a city that can just perpetually build out in every direction (like Calgary), which means we all get stuffed in next to each other as prices continue to escalate. Despite the limited land argument, this is not the main reason why the average Vancouver home is more than twice the national average.
The Foreign Money Argument
Metro Vancouver is touted as one of the most “ethnically diverse” places to live in the world. There’s no argument there, this must be one of the only places in North America where you can live a comfortable lifestyle and never have to speak a word of English.
This has caused Vancouver to be a hot bed of foreign ownership and investment in our real estate, and this is the key reason why Vancouver real estate prices are so high. How you say? Let’s dissect further.
I never really understood why foreigners want to live in Vancouver so much. I mean, why Vancouver over any other city. You would think they would want to live somewhere else like Seattle, Toronto or Montreal. What makes us so special?
There are already well established immigrant communities in Vancouver. Don’t believe me? I would challenge you to hang out in Richmond for the day and take a poll of how many people speak English versus a foreign language. It makes perfect sense – if you wanted to buy real estate outside your own country, you’d buy the next best thing and that’s exactly what Vancouver offers this wealthy foreign contingent.
You need a lot of money to buy real estate in Vancouver, right? The people that can afford to still buy in Vancouver are not exactly middle class, they’re business owners, professionals, and basically already very wealthy in their own country. To these people it doesn’t matter if a Vancouver home costs $500,000, $600,000 or a million dollars.
They’re recession proof, this is the key argument that every real estate analyst (that’s calling for a Vancouver housing crash) is missing. The local residents are simply completely priced out of the market, they’re not buying locally or at all. Ask any realtor (selling houses and not condos) how many of his/her sales are to foreign versus local money. I did a poll in of three realtors in Burnaby and each told me greater then 90 per cent are offshore or only live for a portion of the year.
If you are a wealthy Hong Kong or Mainland Chinese businessman worth millions of dollars, do you think it matters if the Vancouver real estate market crashes? Of course not, they’re investing in Vancouver real estate with cash. They don’t need Canadian mortgages and they wouldn’t qualify anyways, they don’t have any Canadian income.
Their money is made somewhere else – so they just pay cash. If you’re worth millions of dollars, do you think you will care if your $1 million dollar house declined in value by 20%? No – of course you don’t. That’s precisely why the Vancouver market is not in for a housing crash.
Could we see some sort of “correction” of 10 – 20 percent? Sure we could – I wouldn’t say a 1 million dollar box in the sky condo that declined to $800,000 a “huge real estate crash.”
It certainly would be a decline in price – but it’s not exactly going to change the game and make real estate affordable in this city.
How We’re Different then the American Real Estate Crash
Wealthy offshore investors purchase homes in cash (not credit). Therefore less leverage making the market more stable.
Local residents mortgage themselves up with real estate they can’t afford, but they’ll get by through renting out the basement, spare upstairs bedroom, and eating canned soup.
There’s no real trigger for a crash as “thousands of owners flood the market with listings” because the majority of Vancouver real estate are all long term holders and not flippers.
American mortgages are different than Canadian mortgages with respect to the fact that in the United States, you can literally just mail the bank the keys to your place and move out. In Canada, when you default on your mortgage they come after the mortgage owner’s personal assets.
How the Government Can Actually Be Useful Here
Living in a place where foreign investors and non-residents are buying up all the affordable real estate is nothing new. There are similar situations all around the world where this is happening.
Think about it – if you were worth millions of dollars and lived in a developing or politically oppressed country, wouldn’t you want to store your cash in a delightfully, economically and politically stable jurisdiction? You have no idea what the government will do next month never mind the next 50 years. This is what the Government can do:
Start collecting statistics on local real estate. I know it’s crazy – for all of the unnecessary stuff that government does, they haven’t even mandated that proper statistics start being collected for who buys and owns real estate (arguably our most precious asset as a country).
Consider implementing foreign ownership rules in a phased approach over time. Why is it that whenever a foreign government wants to buy a big natural resource or technology company, it becomes mainstream news and it’s subject to a “net benefit test.” But when the same thing happends to individual residents (i.e. real estate being purchased en masse, severely disrupting the equilibrium of a local market), it’s ok and no one does anything. I personally do not care if BHP wants to purchase Potash – where do politician’s think the natural resources are going to go? England? I won’t babble too much about this because that’s a separate opinion article.
The Canadian Government needs to get serious about this foreign ownership of our real estate. Residents need to start standing up and protesting our land being sold to the highest bidder in another country who doesn’t truly plan to live here.
Other countries have implemented foreign ownership rules successfully, most notably Sydney, Australia. Our real estate and home prices are not an investment, they are a home.
It is not good for our society to live in a place where homes are expected to increase $30,000 per year. Posted via RS Mobile
Vancitybuzz has been posting a lot of pro-real estate situation/industry articles lately, me thinks they're getting some "incentive" to
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me thinks they're getting some "incentive" to
