What’s your savings rate?
I thought the topic on what people pay for rent in Vancouver generated some interesting and informative discussion, so I’d like to do something similar on the topic of income and savings. As the majority of visitors here are… let’s say ‘sceptical’ about the Vancouver real estate market and likely financially cautious I don’t expect the results here to reflect the city at large, but I’m curious to see how much people are saving.
One argument for home ownership is that it acts as a forced savings plan, because the average person doesn’t have the willpower to save on their own. If you’re sitting out of the market waiting for a correction and renting for less than a mortgage would cost are you saving the difference? If loans disappeared and real estate in Vancouver was suddenly only available for cash would you be ready to swoop in?
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April 30th, 2008 at 1:28 pm
This is where I got the stamps as an investment anecdote.
http://www.spectator.co.uk/the-magazine/business/…
April 30th, 2008 at 1:25 pm
Anonymous/SATV
"expression of his feeling about the way thing should be"
Exactly! it was his feeling, it was not fact.
As for your repeated comments about Garth Turner, he has always said that boomers who have most of their money tied up in their houses should consider selling. He is an MP and makes a lot more than your typical warehouse worker, he'll also collect a large pension for life.
He is not saying "I'm an idiot and I bought a condo at the peak and think everyone else should buy at the peak so they can be like me" you're confusing yourself with him.
Do not get confused about who you are as you will never be an MP and will never be able to buy a house thirty or forty years ago like he did. His points apply here. There are hundreds of land rich and cash poor baby boomers in Vancouver west who have 90% ,or more, of their equity in their house. You never want to have all your eggs in one basket.
To dumb it down for you:
Imagine if you had $1.5 million dollars solely in tech stock ,that you bought at it's peak price in early 2000, because some warehouse worker told you that it would never go down, would this have been a good idea?
Wouldn't it have been better to have bought a house and some bonds too? Or some art. Or the best investment
Rare Stamps!
Posting under different names won't fool anyone. There is no one else on here who writes like a 7 year old girl.
April 30th, 2008 at 12:26 pm
bdk: I know what you mean: you better be prepared to back up claims with some decent arguments or what's the point? Christine's comments were more general in nature and I'm not calling anyone out but I have seen it get testy for no good reason.
April 30th, 2008 at 12:05 pm
bdk,
that's not true that was just expression of his feeling about the way thing should be so while asking you that question about tax return he also declare his exit with this
"I think this will be my last post here"
so his question was in flash back to change around as what should have done to be wise.
April 30th, 2008 at 10:07 am
1.If I were to claim that I'd bought a condo ,in Vancouver, last year for $800,000 and it had dropped to $600,000 this year but refused to say where it was located or why it had dropped 25% when the rest of the market went up close to 10%….
2.In school if I wrote an essay without doing any research and cited all sorts of my own "facts" which were obviously made up and then for the bibliography wrote "why don't you give me your tax returns and i'll show you" it would not have passed.
Tom Vu's reaction proved he was making it up.
April 30th, 2008 at 10:03 am
Christine,
well said-t.hu is very smart,he did not spend a minute to figure out what the hell is going on here.
April 30th, 2008 at 9:53 am
"If someone dissents, even slightly, with a rational argument or a personal anecdote, everybody piles on the “bull” to tell them how crap they are."
Christine, I have to agree that I find many comments here pretty insulting. The frustration with many long-time commenters here is that many of the arguments used to promote the "bull" case are filled with half-truths and in some cases blatantly incorrect information and logic. I think most commenters on this blog don't show up just to insult someone (though maybe there are those that do) and have a genuine interest in dispelling some of the myths floating around.
I have found some of the best comments come across as curt and agressive but that's because these commenters are smart, have done their research, and have answered the same questions over and over again for years now. I don't think it's anything personal; just be prepared to defend your position against some significant and well thought critique. I've made a few comments/arguments here that were shot down in no time flat. I sucked it up and learned from it.
April 30th, 2008 at 9:14 am
I have to agree with t.fu up there. I've been reading this blog for over two years and recently it's just the same over and over, from the same old people. If someone dissents, even slightly, with a rational argument or a personal anecdote, everybody piles on the "bull" to tell them how crap they are. It's degressed into something very infantile.
I am a bear about where this market is headed, but I don't need to validate my position by making all homeowners feel like overextended idiots.
April 30th, 2008 at 7:20 am
My spidey senses were tingling and that usually means I'm reading a post by a Realtard(TM).
April 29th, 2008 at 6:42 pm
"Crabman, you can quote all the indexes and numbers you want, but, it’s a simple fact that a typical condo in NYC in 1990 more than doubled in price by 1996. I was there, I know."
Well, that just says it all, doesn't it? Confronted with numbers the troll scampers away in defeat to lick its wounds.
April 29th, 2008 at 5:47 pm
canadian mortgage problems?
http://tinyurl.com/3qn8g4
didn't think so
April 29th, 2008 at 5:26 pm
I decided I wasn’t going to get shut out of the market before it became unattainable like happened to many people in NYC who kept waiting for “The Big Crash” and for prices to tumble…
Bud – prices in NYC – even in Manhattan – cycle up and down and even crash on a very regular basis. A typical decade has swings of 25%. You can look this stuff up. Because of Manhattan's history and uniqueness, the data is better than for most other locales.
My favorite stat is that inflation-adjusted total return for commercial real estate in Manhattan between 1899 and 1999 is…
…wait for it…
negative 30%.
April 29th, 2008 at 4:29 pm
another math formula for you guys:
t.fu = tom vu
looks like bdk was the only one to sniff it out.
a lot of baby bears i guess, this gig is age dependant.
April 29th, 2008 at 4:06 pm
Bye!
April 29th, 2008 at 1:20 pm
I have my T4 and T4A's here for this year and can get my notice of assessment from last year, what's your fax number?
If you can't even make up, er, answer what basic industry you're in that brought you to Vancouver then you should take a deep breath and come up with a plausible scenario before getting mad for being called out as a BullS*itter.
April 29th, 2008 at 1:11 pm
"then maybe I’m just wasting my time here."
Life on the internet can be brutal. Thanks for the comments.
"it’s a simple fact that a typical condo in NYC in 1990 more than doubled in price by 1996."
Comparisons to NYC have been made here before. The main difference is the high prevalence of high salaries in Manhattan. Certainly not everyone who works there earns high wages but the ones living in Manhattan likely do and the ones that don't earn as much commute from other cheaper boroughs and cities.
The future can change but what I know now is that the total sum of salaries in Vancouver cannot support such a large ground swell in prices. There are pockets of affluence in the city due to differences in income but I just don't see the current distribution of prices compared to the distribution of incomes being sustainable unless prices drop or incomes rise.
April 29th, 2008 at 1:07 pm
If I really exist? Give me a break. Why don't you fax me your tax returns for the past 2 years first, then I'll give you all the personal information you're asking for.
I think this will be my last post here. This place is hostile to anyone but those who cling to their doomsday fantasies. Not interesting.
Bye!
April 29th, 2008 at 1:01 pm
T.Hu, what do you do that brought you from a world trade centre and financial hub to Vancouver?
How did the immigration process go?
Were you able to get a work permit right away?
Did your company sponsor you?
Or are you just independently wealthy?
If yes then how do you like paying the non resident tax?
Do you prefer paying higher taxes and higher prices to be in Vancouver versus New York? What industry could you work in here that pays more than New York?
If you really exist you'll have no problem answering these questions.
April 29th, 2008 at 12:20 pm
FYI, I just found this blog a week ago and have been reading the comments and decided to make my first post. So, if that makes me a troll, then maybe I'm just wasting my time here. I thought perhaps a different real-world perspective might be interesting, but, clearly not.
Crabman, you can quote all the indexes and numbers you want, but, it's a simple fact that a typical condo in NYC in 1990 more than doubled in price by 1996. I was there, I know.
April 29th, 2008 at 12:19 pm
"So, when I arrived here in Vancouver, I decided I wasn’t going to get shut out of the market before it became unattainable"
Glad you got in while you did. NYC rents and salaries are high enough to better justify the high prices. I don't see rents in Vanhattan keeping pace yet.
April 29th, 2008 at 11:35 am
Ignore the RE bots (t. hu et al) that troll the blogs. They're just trying to find a greater Realtard…
April 29th, 2008 at 11:05 am
I moved here from NYC, and see similar things happening in the RE market here that were going on in NYC in the early 90s.
Here is the Case-Shiller index for New York:
1990: 80.89
1991: 74.59
1992: 74.59
1993: 75.54
1994: 76.61
1995: 78.28
1996: 78.63
Exactly what similarities do you see to the current RE market in Vancouver?
The current CS Index for NYC is at 200, compared to the baseline of 100 in 2000. The Vancouver HPI is currently at 253 for condos vs. the baseline of 100 in 2001. So in this decade, Vancouver has gone up more than NYC, and New York is currently 7% below its peak and falling.
April 29th, 2008 at 10:59 am
Yeah, the difference is that New York has a vibrant economy, while Vancouver has an economy that is to a large degree built around building condos and selling condos.
I am getting an MBA. When I graduate I will leave Vancouver to make more money elsewhere. Many of my classmates feel the same way. Does that sound like New York to you?
April 29th, 2008 at 10:42 am
So, all in all, RE in Vancouver was a great investment last year.
And instead of taking the money and running, you put more on the table.
Come back this time next year and tell us how you're doing.
April 29th, 2008 at 10:29 am
So T.Hu, what exactly do you do that brought you from New York to Vancouver?
April 29th, 2008 at 10:11 am
Well T.hu I have to admit that so far Vancouver has been behaving like NYC. The question is whether or not we will end up like leisure playground Las Vegas. NYC had huge income gains due to Wall Street during the past decade but I just don't see the same catalyst here. While up to this point I have been wrong, I think fundamentals here will overpower momentum.
April 29th, 2008 at 9:58 am
I bought a condo last year and just sold it recently for $60K+ profit. I didn't save money all last year, but, now I can. I also bought a new, larger condo using some of the profits as a downpayment. I also used some of my condo profit to pay off other debt. So, all in all, RE in Vancouver was a great investment last year.
I moved here from NYC, and see similar things happening in the RE market here that were going on in NYC in the early 90s. RE prices in NYC starting rising quickly after a short recession, and everyone thought there was no way it could continue to go up. Well, it did. A condo I looked at in Manhattan for $350,000 in the early 90s is now worth 1.5 million today!
So, when I arrived here in Vancouver, I decided I wasn't going to get shut out of the market before it became unattainable like happened to many people in NYC who kept waiting for "The Big Crash" and for prices to tumble. Most of those people are STILL waiting years later. I'm glad I didn't wait this time.
April 29th, 2008 at 9:28 am
Anony,
I wouldn't eat at Earls if it was free.
April 29th, 2008 at 9:27 am
"The story posted by Londonernow about Richmond taxes is shocking."
I think some of the facts are missing from this story that might temper the sensationalism. Of course of all the cities in GVRD I think Richmond is ranked close to #1 for fiscal irresponsibility.
April 29th, 2008 at 9:09 am
The story posted by Londonernow about Richmond taxes is shocking. I can't believe it. What a mess this is turning into.
April 29th, 2008 at 8:43 am
Vanman,
We have a kid. We give him the best. Best food, best clothing and best gear. I just bought a new SUV so he could have a safe vehicle to ride in. We bought him one of the best strollers. Yes 2. One for $750 and one for $400. And yet, we could still save 30% of my income. It is simple. Just refuse to pay more for items like real estate.
Canada is going into a recession. The R/E markeet is falling. Cash is King. Buy less starbucks. Eat out less at Earls. Just spend less on things that don't matter. Do things free or cost less and that's good for your health. Walk the seawall. Go to the park. Go swimming. Fashion is a waste of money. Get rid of your cell phone.
April 29th, 2008 at 8:31 am
"We have been parents ourselves and believe me, we tried saving but at 40% or even 30% is difficult. Your child control your expense. Ask any parents around and most of them use credit."
Like real estate itself, there is effectively no limit to how much you can spend on your kids. At some point you need to trade off your wants with your means and there will inevitably be someone richer whose kids are afforded more. When I was growing up I saw lots of families going into debt to support their children's lifestyles; it was a conscious choice and I assume they knew the consequences. For many it is worth it but it's difficult to know where to draw the line.
April 29th, 2008 at 7:58 am
…For those who are single and save lots, please drop down to a kiddies store…
The vast majority of kids stuff – especially clothes – is over-priced crap. So much of it ends up at Value Village 'cause kids outgrow it before the third was that -really – places like VV are where the bulk of "kids shopping" should happen.
"Toys" are even worse. Here's a hint to prospective parents – unless you intellectually cripple your offspring EVERYTHING is a toy to a wide-eyed, new-to-the-world youngster!
Kids certainly cost money. I can remember distinctly the moment when our first became a line-item on the family food budget. But for the vast majority it's only stifling if you let it be. It's a shocking thing to say, but iPods for pre-teens is a PARENTAL choice!
April 29th, 2008 at 7:55 am
$500 for entertainment and $250 a month towards vacations?
Sheepless,
This is with two kids, what kind of vacation do you think 4 people get for $3k? And I believe that $500 for entertainment would cover sports, music lessons, summer camp, babysitting, the odd dinner out, etc… $500 may be a little high but not by much.
Granted if you're going into debt by $1100 a month losing the vacation, entertainment and new cars would quickly turn the negative balance into a positive.
April 29th, 2008 at 7:12 am
I am low income earner after six month of my job i bought a condo and i paid off mortgage with in 10 year as rate of pay also increased 3times since than, after one year of my purchase me and my brother bought a house in 1998,I also have a car,I got marry after 4 to five year of my purchased property.I also have a son,because of increasing family size i moved back to appartment in 2004,I also bought 2 more unit in 2006 and 2007, my wife is also low income earner
My wife also eat my income by saying "oh honey you have got highest rate of pay than her"
I like to pay 100% of my income to lower down mortgage debt because money have no value if it is not in the market.about financial freedom I have a line of credit in that case I assume I pay nothing to bank because i can use that money anytime just to cut this sort.
In economy and real estate sense"saving is not a saving unless you save your money with a sense from paying more later than today".
Real Estate is up,Rents are up,feul energy prices are up,Grocery prices are up.definitely saving without spending in the above have no value.
In my first case I have a paid of condo if i can just stop there despite low income all my money is in pocket while you guys-most of singles,tenent,no car and plan to proceed the way it is.if our parents thought the same way we were not even here in this world.
Nothing to force or change the topic,I like your views it's all about how to stay happy but nothing about you are right or i am right as long as we are happy my opinion.
April 29th, 2008 at 6:04 am
Patriotz said:
The US is near the bottom on income taxes, yet it has a negative savings rate. Japan is also near the bottom, but it has a very high savings rate.
I say: You are comparing apples and oranges here. US, traditionally had a positive savings rate (not as high as Japan mind you) during the last couple recessions and NEVER had a long recessionary period like Japan does now. Instead, the last tech bust in the last recession was not deep, severe and long enough. This bolds true with Canadians as well. So, people's thoughts then were to spend more and save less. This was the breaking point and got us where we are today — a negative savings rate. Whereas, Japan has been and STILL IS technically in a recession since the early 80s. When you are in a recession especially a long one like Japan where property prices keep dropping and dropping slowly every year, what do you think people's thoughts would be? Capital preservation!! It's a no brainer. It got to a point that nobody wants to spend, everybody wants to save. In fact, this is actually BAD for the economy. Because if very few people want to spend, you would then need to create less products and provide less services. What do you think if we all save and spend less? There will be few jobs on the ski hills, few jobs at Starbucks and very very few jobs at local restaurants — people bag everything to work or cook at home. In fact in Japan, the most secure and recession proof jobs were in the governmental agencies. And this is true to this day as well.
While some people save more money than others, the real driving reason for mass savings is a catastrophic event like the great depression or a LONG recession. We may have one coming soon.
Having said that, saving money especially when you have kids is very difficult. In fact, Canadian Money Saver in 1999 had an article about a woman who made her millions in the dot.com and how she managed to save, invest and own her own home and pay people to mow her lawn. She then criticized how everyone couldn't be like her and parents especially being so financially poor and their inability to retire young.
There was a great debate about who she was and how daring she was making comments that parents spent money and credit like it was free. The woman promised to write more articles, but when the great dot.com bust came and went, she disappeared never to reveal her other financial success secrets. I forgot her name, but later we found that she was single, never married and never experienced in raising kids, but made comments that raising them would be as easy as being single.
The point I want to make is this, raising a kid is not cheap. For those who are single and save lots, please drop down to a kiddies store, there's one on Marine Drive next to a McDonald restaurant called TJ kiddies store. Check the prices out and check especially how busy the store is. While a single individual can save lots by choosing certain inexpensive products and forgoing the rest, a growing child needs the best nutrients and products. You can shortcut if you want, but the best child grows up with the best food, best education and best care available. This is something that woman and I think many of you singles do not understand. We have been parents ourselves and believe me, we tried saving but at 40% or even 30% is difficult. Your child control your expense. Ask any parents around and most of them use credit. I know we did and we are still frugal with money. If your kid is sick, really sick like one of our friends did with a tumor like lump on her chin. Eventually doctors here recommend them to send their child over to Toronto for expedited treatment. They had to pay for their stay for a month, leave their jobs and pay for their own plane ticket. That was an out of pocket expense that they did not expect and neither would our government pay them back. Their kid was in great pain if that child has to wait a year for elective surgery and their parents see their child in pain, would you DO ANYTHING to save her. Sure they are out $10,000 and owe the credit card monies. But that's part of raising a kid.
This is a cost that as a parent can not foresee or plan for that. And yes, they did use maxed out on both of their cards.
So saving money is easier when you're single. It gets more difficult as you start a family and have kids that will eat into your savings fairly quickly.
April 28th, 2008 at 11:56 pm
We are lucky enough to be in the top categories on each of the income and savings questions on the survey, and we still have no plans of buying back in any time soon.
Two things top economists agree on regarding what is going on in world economic picture are 1: it is not good, and 2: we have never seen anything quite like it before. We are staying liquid in case some of the very interesting, scary and increasingly likely scenarios come down.
We also drive 10+ year old cars and saving has become a bit of a game these days. It really helps (I guess on to the tips) to have a significant other that is not into 'stuff' either. And we have found that we are now anti 'stuff' as statement about how hard the consumer lifestyle has become on the planet. If you have not seen it yet this is a great site on that topic: http://www.storyofstuff.com/ It is very well done.
We still live very well enjoying skiing and getting out doors in all kinds of ways. Just at the moment we do it from a basement suite that is close to the outdoors we love. Our rent is ridiculously cheap.
Quicken, as suggested above, helps as it provides a reminder on how the money is piling up and how liquid we are if needed.
Sure we'd like to buy back in at some point but for now this works quite well.
April 28th, 2008 at 11:25 pm
But if you’ve got kids and an median income & the kids need medications, milk, diapers, etc., it goes on the credit card.
I'm not sure you get it. Buying stuff on credit means you get less stuff for your money than paying cash. In aggregate, of course – you're trading more stuff today for a lot less stuff tomorrow. But tomorrow arrives pretty quickly, and then you're going to be getting less stuff for the rest of your life.
If you cannot support ordinary consumption needs on a median income, you are living beyond your means, and you are going to be forced to accept even less consumption in the future than if you hadn't borrowed. Multiply by 4 million (BC) or 300 million (US) and you have a whole society that has hocked its future.
I'm talking about consumption. Borrowing money for investments makes sense if the yield is higher than the cost of borrowing. Like houses used to be.
April 28th, 2008 at 11:16 pm
Check out Mish blog, he has a comment up about Vancouver and property taxes,
http://globaleconomicanalysis.blogspot.com/
April 28th, 2008 at 10:16 pm
I hear ya, aetakeo. The remarks thus far have been specific to each person's situation and the bias is that most seem to be coming from people without kids. Your last point is the most true: As we get richer, it gets easier to stay rich.
In the last five years I've dug myself out of student loans and am finally enjoying the benefits. But to get to this point was rough. To save money I've lived in some pretty horrible places.
April 28th, 2008 at 10:02 pm
Another reason to ditch the car (if almost $1.30 a litre doesn't do it for you already)
Home Prices Drop in Areas with Longest Commutes
http://tinyurl.com/4oo8oc
April 28th, 2008 at 9:55 pm
Whoo! Looks like I've fallen in with a rich crowd, here. My family is clawing its way up to middle class. This question y'all are asking:
"Don’t people who talk about “having to borrow to get by” understand that not only is borrowing not income, it reduces your disposable income?
Comes down, some of the time, to poverty premiums. Now, I live near Yaletown – and yeah, it does indeed sometimes come down to Keeping Up With The Joneses.
But if you've got kids and an median income & the kids need medications, milk, diapers, etc., it goes on the credit card. You hope like hell that something in your economic picture changes and the work you're doing will pay off. I think there's a lot of that going on out there – wages aren't going up but credit is cheap.
We're not doing badly – putting away 10%, getting those student loan debts chunked down – and we've managed to add about 30K to our net worth in the past 5 years. Our net worth is still negative, but we're rapidly advancing on zero. But I've been really poor. I have indeed put essentials on credit, and I have also used those awful check-cashing places, and I knew what total crap it was at the time. I'm not a spendthrift: I don't like shopping – and I brown bag, make my own coffee, buy used, have no car, all that jazz.
As we get richer, it perversely becomes easier and easier to make choices that save me money.
April 28th, 2008 at 9:37 pm
Off Topic, however, if you want a really good laugh, read the comments section attached to the 15 Real Estate Myths article in the Vancouver Sun…..totally panned with a small sprinkling of bullish sentiment. I think the Sun is embarrassed such that they have already been removed from the home page. Here it is:
http://www.canada.com/vancouversun/story.html?id=…
April 28th, 2008 at 9:21 pm
It is too difficult and slow to save based on Canadian tax rates on income.
Note there is no correlation in industrial countries between income tax rates and savings rates.
The US is near the bottom on income taxes, yet it has a negative savings rate. Japan is also near the bottom, but it has a very high savings rate.
Looking the other way, Germany has high income taxes, but it has a much higher savings rate than Canada or the UK (I think UK has gone negative actually).
Even within Canada, BC, which has the lowest income taxes for the middle class (yes lower than Alberta), has the country's lowest savings rate – negative.
Err, and I thought Toronto had higher average incomes than Vancouver
It does, a lot higher, and that shows you how insane RE prices are here. BTW a big chunk of local income comes from – surprise – RE, which means we're in for a Florida or San Diego-style death spiral once the party ends.
April 28th, 2008 at 9:18 pm
A quick way to increase your monthly paycheques, if you don't already do it, is to file a t213 "Deduction at source" form with your employer after making a lump sum rrsp payment or providing your monthly rsp contribution details (rsp can be cash if you don't want to invest in equities)at the beginning of the year, if you do this you are keeping your money instead of loaning it to the CRA interest free.
April 28th, 2008 at 8:28 pm
Re Dr. Housing Bubble.
I know this is California where public transit is pretty bad, but $875 a month so you can own two cars, $500 for entertainment and $250 a month towards vacations? I'll bet the house has 3.5 bathrooms and way more space than they need to live.