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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.
The fields in yellow are all editable, which means I can input the different scenarios on a case-by-case basis in the yellow fields for comparison and the non-highlighted fields are automatically calculated.
I can easily punch in the numbers and run the scenario as you posted below (higher ROR on investment, rent increases, etc.) tomorrow, just about to log off for the night.
Quick answers below in red...
Quote:
Originally Posted by Ferra
didn't really look at the numbers in detail...but I think even a 1% increase in house value will skew the numbers to the other side...(tho many will argue housing price won't be going up)
Yes it will definitely skew, but even with this scenario even at 0% growth you might just barely better off buying vs renting if you manage to sell in 5 years.
- I would probably use a higher investment return than a 2.3% GIC.... Of course, these can be altered as well. I chose GIC just for more conservative figures.
- strata fees is probably going to cost you more than $300/month? Strata fees were taken from MLS listing posted above
- doubt your rent will stay the same for 5-10years... Valid point, and again, can be altered on my spreadsheet. In my experience, my rent has been stable for the past 3 years, the owners tried to sell to no avail and plenty of similar units for me to move into nearby if they do ask to raise the rents.
in the end..i think these make-up scenarios are kinda pointless...
you can always make one better than the other by changing the parameters to your liking...(e.g. your investment return %, expected changes in home value, the unit price-to-rent ratio...etc)
I would do these analysis on a case by case basis using actual numbers you are faced with....but you really can't prove renting or owning is better than the other in general using some make-up scenario.. This is the reason I took the time to create this spreadsheet for myself, so I could easily get a rough idea on a case-by-case basis of what the turn out will be in the long run for various 'made up' scenarios.
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Quote:
Originally Posted by skyxx
Sonick is a genius. I won't go into detail what's so great about his post. But it's damn good!
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I personally wouldn't invest in GIC's but it's what most people know. I like my PGP, PHK, NCZ, NCV. That 125k downpayment = roughly $1200 extra monthly income... My principal can go up, down, left, right in value and I'd still get the same dividend. Average about 10% yield over the years I've owned them. Keep reinvesting every month and you get more the following month or use it for rent and live for free!
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1. strata fees are more than you think. $300 (for condo) is cheap if you can believe it or not. Townhouses, you are looking to start at about $200. As I said a few posts above, for the average condo, you are looking at $400+. And don't forget, like rental increases, strata fees increase yearly as well. I have owned for 5 years...and every damn year I get that letter.
2. In the last 5 years, my property has gone down in value....great for property tax, not so much if I wanted to re-sell. So, a yearly increase to property value may be a bit generous in some situation.
3. Rental increases. They do happen. They are based on inflation plus 2%. Here is a small history of increases: http://www.rto.gov.bc.ca/documents/GEN-01.pdf. Based on those numbers, if you had rented an apt in 2004 for $2000 and you received a maximum annual, in 2014 your rent would be $2837.
Is that REALLY possible? Probably not....I rented a condo in 2005 for $1000...as a coincidence, I saw an ad on CL for the same condo the other day...they are renting it for $1150.
As for those numbers being "real". They were based on 2 apartments in the same building...one for rent, one for sale. Try it...look on CL for an apt to rent then go find the same one on mls.
didn't really look at the numbers in detail...but I think even a 1% increase in house value will skew the numbers to the other side...(tho many will argue housing price won't be going up)
- I would probably use a higher investment return than a 2.3% GIC....
- strata fees is probably going to cost you more than $300/month?
- doubt your rent will stay the same for 5-10years...
in the end..i think these make-up scenarios are kinda pointless...
you can always make one better than the other by changing the parameters to your liking...(e.g. your investment return %, expected changes in home value, the unit price-to-rent ratio...etc)
I would do these analysis on a case by case basis using actual numbers you are faced with....but you really can't prove renting or owning is better than the other in general using some make-up scenario...
If anybody's interested, here's a 5-year breakdown with the following as suggested:
higher investment returns over 5 years
3% rent increase per year
higher strata fees
monthly contribution of the difference in rent to mortgage payments with compounding interest at 3%
At 20% down and 3% rates, your home value would have to increase approx 2.5% to break even with renting that same period.
For First-Time Home Buyers with less than 20%, mortgage rates will be higher requiring either a fixed rate or variable rate with the benchmark rate minimum (5.34% last I saw), plus CMHC insurance. With all that, the difference between buying and renting is much greater.
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Quote:
Originally Posted by skyxx
Sonick is a genius. I won't go into detail what's so great about his post. But it's damn good!
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1990 Mazda Miata - Sold
If anybody's interested, here's a 5-year breakdown with the following as suggested:
higher investment returns over 5 years
3% rent increase per year
higher strata fees
monthly contribution of the difference in rent to mortgage payments with compounding interest at 3%
At 20% down and 3% rates, your home value would have to increase approx 2.5% to break even with renting that same period.
For First-Time Home Buyers with less than 20%, mortgage rates will be higher requiring either a fixed rate or variable rate with the benchmark rate minimum (5.34% last I saw), plus CMHC insurance. With all that, the difference between buying and renting is much greater.
I thought I'd share a pretty interesting article on the media and how it affects property prices. Really good read imo.
you can read it here:
Spoiler!
This week, Yale economist Robert Shiller received the Nobel Prize in economics for his work examining the psychology of the financial markets. Important to Shiller’s theory of how bubbles form are “stories.” In other words, the kind of narratives we tell each other and ourselves about why the latest craze is somehow fundamentally different from — and better than — the previous craze. Among those stories is the oft-repeated axiom that house prices can never go down, which helped inflate the U.S. housing bubble right up until everyone realized that it wasn’t true. (In Canada, we could include the story of how we’re different from the Americans: Our banks are better regulated and take fewer risks, which means rising prices are driven more by economic fundaments, etc.)
Shiller has long argued that media is an important player when it comes to spreading such stories. He wrote an entire chapter on the subject in his 2000 book Irrational Exuberance in which he asserts that: “The history of speculative bubbles begins roughly with the advent of newspapers.”
News coverage can help fuel bubbles, he says, by creating a sort of feedback loop where, for instance, the media starts talking about how house prices are going up, which encourages more people to get interested in investing in housing, which causes the media to spend even more time talking about rising house prices:
From a paper in 2008 that can be found here:
I argued that the feedback that creates bubbles has the primary effect of amplifying stories that justify the bubble; I called them “new era stories.” The stories have to have a certain vividness to them if they are to be contagious and to get people excited about making risky investments. Contagion tends to work through word of mouth and through the news media. It may take a direct price-to-price form, as price increases generate further price increases.
In an admittedly unscientific experiment to test the idea that the media can fuel a bubble in the Canadian context, I’ve taken a look at the way the Canadian media has covered the housing market over the years. It shows what seems to be a pretty strong relationship between changes in house prices and changes in the volume of news coverage on house prices.
Here is a chart showing changes in both. House price data is from Statistics Canada’s new housing price index, while media coverage comes from the FP Infomart database of Canadian news outlets (including print, wire, broadcast and online coverage), which was compiled using the keywords “house prices,” “home prices” and “housing prices” (current as of Dec. 12, 2013.) It is not adjusted for positive or negative stories, but simply reflects the overall volume of stories about house prices. Changes to house prices and media coverage are both indexed to 2007, so that 2007 equals 100 on the graph:
During the bubble of the late 1980s, house prices jumped significantly between 1988 and 1989. News coverage about house prices similarly jumped between 1988 and 1989. But it dropped back in 1990, even though house prices were still climbing. (They didn’t start falling until 1991.)
House prices stayed flat or fell for the first half of the 1990s, bottoming out in 1996. News coverage, however, bottomed out two years earlier, in 1994, and was already trending up before house prices began recovering.
Most recently, news coverage peaked in 2008, which is understandable given the meltdown of the U.S. housing market and the burgeoning global financial crisis. House prices also peaked in 2008, fell in 2009 and then quickly recovered. Contrary to what might seem like a never-ending tidal wave of news stories about the country’s overheated housing market, coverage has actually been decreasing since 2008 (3,505 stories this year, compared to 4,375 last year and 6,136 in 2008.) There was a bump in coverage in 2012 that coincides with a faster acceleration in house prices that year compared to the slower growth we’ve seen for much of the past few years.
The news media loves a trend story, so it’s not surprising that rising house prices should catch our attention. What’s more interesting is that when house prices fall or flat line (as they did in the 1990s) the number of news stories about house prices also falls. Having the value of what is likely Canadians’ most important asset stay flat is arguably a significant issue for the economy. But an anemic housing market isn’t the kind of exciting trend that captures media – or public – attention. It is interesting, however, that news coverage of the housing market picked up in 1994 two years before home prices actually grew, meaning the media wasn’t simply picking up on an existing trend in the housing market.
On the other hand, falling house prices, as we experienced during the 2009 recession amidst a global financial panic, are a pretty big story. So it’s surprising that coverage fell that year. Granted, Canada hasn’t experienced the kind of massive meltdown in house prices that other countries have seen. Our corrections over the past 30 years, including in 2009, have been comparatively small, which might be one reason why they don’t make headlines the same way double-digit price growth does.
In a far more rigorous experiment than this one, Cindy Soo, an assistant finance professor at the University of Michigan, published a paper earlier this year exploring the role that news coverage played in fuelling the housing bubble in the U.S.
In it she created a “sentiment index” by examining news coverage on the housing market in 20 cities between 2001 and 2011. Her experiment uses hundreds of keywords and controls for dozens of variables, such as whether the stories were positive or negative, whether they discussed actual market fundamentals, or whether stories were weekday hard news or weekend lifestyle pieces.
She found news sentiment closely tracked the housing market, so much so that a one per cent rise in news coverage on the housing market corresponded to a 0.6 per cent rise in monthly house prices. The relationship couldn’t be attributed to stories about market fundamentals, such as the strength of the local economy or mortgage rates. Interestingly, as in Canada, news stories about the U.S. housing market also peaked two years before house prices did. Going further, Soo found that her news sentiment index closely tracked surveys of recent homebuyers, who also tended to turn more negative on housing about two years before house prices fell. (Surveys of homebuilders similarly tracked house prices, although they tended to lag both news coverage and homebuyer sentiment by a year.)
She concluded that:
Sentiment growth is positively associated with future price growth, and is able to explain a significant amount of variation in the price changes above and beyond fundamentals. In particular, the housing sentiment index is able to explain an additional 70 percent of the variation in national house prices beyond observed fundamentals.
So can this help us forecast what will happen to Canadian house prices in the future? Since 2008, coverage of house prices has been falling for most years, although house prices are still rising, albeit at a slower rate. Admittedly, these are extraordinary economic times, coming in the wake of a global financial crisis that has prompted governments both here and abroad to implement incredibly lax monetary policies. But given a growing body of research that suggests the news media can not only inflate a bubble, but forecast when it might peak several years in advance, our comparative silence in recent years may end up speaking volumes.
coles notes: nobel prize winner has argued that media is an important player when it comes to spreading "stories" that explain or justify certain property or asset price increases. "In other words, the kind of narratives we tell each other and ourselves about why the latest craze is somehow fundamentally different from — and better than — the previous craze."
I find it really relevant to Vancouver because developers are one of the biggest purchasers of advertisements and providers of news source for newspapers and media.
It also relates to what I recently read in a RE blog about how the media is just regurgitating stories that they get from their sources, and it's funny because they don't even fact check (MAC marketing) or change up the stories to make it unique. It literally is copied word for word.
check out this Conan O'Brien segment to see how the media reacts.
i doubt media coverage of real estate has any meaningful impact on real estate whatsoever. canada's RE price went up because of low interest rate and how much money BoC pumped into mortgage back securities.
i think you give the media way too much credit if you actually believe just because they got some talking heads talking up or down on RE and it might actually move sales and price the coming month you got another thing coming. Interest rate and general state of the economy dictate RE trends. anything else is just noise.
^ I think it plays a factor, I'm not saying it's THE FACTOR. Look at how many real estate advertisements you see on your local papers, province, sun, 24Hours, Metro.
there's lots of reasons that others and I have already discussed as to why RE has gone up in this thread if you scroll through the many pages. I just brought up this point as it's something else that hasn't really been mentioned/discussed.
$1k-1.3k wouldn't be too bad for your own private entrance home vs renting a basement. But if the owners come & go at odd hours i would think the sound of a garage door opening/closing would make me go nuts. not sure if there's enough sound proofing to make it unnoticeable.
Rent may be cheaper now, but when you're 65 making $1000/month from your old age pension how are you going to afford your $2200/month rent?
Still selling porn, still writing books is my plan!
A lot of old people will be homeless in our generation. It is up to the individual to be responsible for themselves. Do whatever you can do to keep a roof above your head. You are ultimately responsible for your own place in life.
A lot of old people will be homeless in our generation. It is up to the individual to be responsible for themselves. Do whatever you can do to keep a roof above your head. You are ultimately responsible for your own place in life.
I totally agree with what you're saying, but from my own experience, the vast majority of people either underestimate how much money they need to set aside for retirement, or are simply unable to contribute enough to their retirement planning. The group that I dislike the most are the ones that refuse to give up a little (or a lot) in the present to save/plan for the future. At the end of the day, all of these under-savers / under-planners are going to put tremendous pressure on the social welfare system. And that goes directly against my belief of taking reasonable measures of being responsible for yourself.
This is why I've invested in cheaper condos in the valley that pay completely for themselves (Mortgage, strata, property tax). They're all paying me more return yearly than my RRSP's were and some one else is paying the mortgage.
I totally agree with what you're saying, but from my own experience, the vast majority of people either underestimate how much money they need to set aside for retirement, or are simply unable to contribute enough to their retirement planning. The group that I dislike the most are the ones that refuse to give up a little (or a lot) in the present to save/plan for the future. At the end of the day, all of these under-savers / under-planners are going to put tremendous pressure on the social welfare system. And that goes directly against my belief of taking reasonable measures of being responsible for yourself.
I don't really ever plan to "retire" I don't think. Working on the internet is kind of enjoyable, and writing is very fulfilling. There are some careers for sure that people need to retire from, a guy I know has been a miner for like 10 years and his body is fucked already!
If anybody's interested, here's a 5-year breakdown with the following as suggested:
higher investment returns over 5 years
3% rent increase per year
higher strata fees
monthly contribution of the difference in rent to mortgage payments with compounding interest at 3%
At 20% down and 3% rates, your home value would have to increase approx 2.5% to break even with renting that same period.
For First-Time Home Buyers with less than 20%, mortgage rates will be higher requiring either a fixed rate or variable rate with the benchmark rate minimum (5.34% last I saw), plus CMHC insurance. With all that, the difference between buying and renting is much greater.
I am sure the numbers are correct, but buying a house is also an investment. Vancouver has been a crazy real estate market for the past 30yrs. Every 10yrs there seems to be a major spike in prices, Just when people say it can't going higher, it does. If you bought before 2008, you are happy you bought vs renting
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I think 5 years is probably too short of a horizon to really realise gains. However I can see how a newly college grad see as the window to get his life started.
eg when I bought my townhouse in Coal Harbour in 03.. it didn't get until 09-10 to get the buyers in a frenzy.
In the end, it is location, location, location and don't overextend. There are other investments which makes you higher return that real estate right now, use that to build up your principle. My longest mortgage is 10 years and my shortest one has been 3.
Quote:
Originally Posted by Z3guy
I am sure the numbers are correct, but buying a house is also an investment. Vancouver has been a crazy real estate market for the past 30yrs. Every 10yrs there seems to be a major spike in prices, Just when people say it can't going higher, it does. If you bought before 2008, you are happy you bought vs renting
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Quote:
Originally Posted by godwin
My longest mortgage is 10 years and my shortest one has been 3.
Thats incredibly impressive. To be honest after looking at the numbers, the only way I will likely buy something in Vancouver after I sell my condo in Edmonton is if I can pay off the mortgage in 10-15 years. If that isn't realistic, I will continue to rent.
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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.
I notice on this forum, people seem to expect to get their property right out of college and right in Vancouver. I think with the increasing house prices, people should invest in something else or somewhere else for that matter, before settling down in Vancouver. It gives a broader view of life outside the BC bubble.
Quote:
Originally Posted by westopher
Thats incredibly impressive. To be honest after looking at the numbers, the only way I will likely buy something in Vancouver after I sell my condo in Edmonton is if I can pay off the mortgage in 10-15 years. If that isn't realistic, I will continue to rent.
Sonick is a genius. I won't go into detail what's so great about his post. But it's damn good!
2010 Toyota Rav4 Limited V6 - Wifey's Daily Driver
2009 BMW 128i - Daily Driver
2007 Toyota Rav4 Sport V6 - Sold
1999 Mazda Miata - Sold
2003 Mazda Protege5 - Sold
1987 BMW 325is - Sold
1990 Mazda Miata - Sold
Wheels are falling off in Canada. Jobs growth is non existent, if not negative, the cdn dollar is dying, making cdn real estate less attractive (in falling environment, yes I know it makes it cheaper, but I'd be waiting for more weakness if I were going to invest)
I tend to find, outside of monetary stimulus, a currency says so much about an economy.
I got out perfectly, earn an appreciating currency, not a depreciating currency - this is it, boys and girls, the next 5 years will smell like shit for real estate
Bombardier cutting 1700 jobs. Seemingly so many mass layoffs out east in recent months.
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Quote:
Originally Posted by skyxx
Sonick is a genius. I won't go into detail what's so great about his post. But it's damn good!
2010 Toyota Rav4 Limited V6 - Wifey's Daily Driver
2009 BMW 128i - Daily Driver
2007 Toyota Rav4 Sport V6 - Sold
1999 Mazda Miata - Sold
2003 Mazda Protege5 - Sold
1987 BMW 325is - Sold
1990 Mazda Miata - Sold
Bombardier cutting 1700 jobs. Seemingly so many mass layoffs out east in recent months.
And job cuts are just one part of it, I had out grown my job, spent a year looking for a good move, found none, got offered what I refer to as a joke locally.
Move abroad, earn 50% more! and pay less tax, work for a huge multinational, have endless career growth opportunities.. wtf Vancouver, wtf indeed, not a place to work, but a place to be rich in
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