GVRD house prices and local incomes
This should be fairly self-explanatory, I’ve graphed data from BC Stats comparing the increase in local incomes to the run-up in house prices from 2000 to 2007. Why only up to 2007? Because that’s the last year I can find local income statistics from Revenue Canada.
The house price data comes from the house sales PDF link at the bottom of this page at BC Stats, while the neighborhood income statistics come from this page, and are available as a PDF or CSV. If anyone can find any other interesting data in that haystack I’d be happy to post it here to share with the VCI community.
So how about that growing gap between incomes and house prices? Can house prices grow that much faster than incomes indefinitely? We’ve already seen how well that worked out in the US.
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September 28th, 2009 at 7:37 am
Oh Boy, the clowns will be howling today.
Another death by cop, how many is that this month. I’ll bet its more dangerous to be arrested by the RCMP than to be in Afghanistan. This assertion is at least correct statistically.
http://www.vancouversun.com/ne.....story.html
Deadly bacteria on the beaches? Gee really? Pouring untreated hospital waste into the enviornment is a bad thing?
http://www.vancouversun.com/he.....story.html
Lets hear from the deniers on how we shouldn’t voice the truth.
Bring on the clowns
September 28th, 2009 at 7:51 am
If we could overlay monthly servicing costs taking into account the extension of amortization and interest rate declines I think it would be very telling.
We all know which way interest rates will be going and now that amortization periods have been stretched to 40yrs I can’t imagine they can go any further out ie you have to buy your house at age 25 to finish paying it off by retirement!
September 28th, 2009 at 8:04 am
@cashisking:
I read where they now have a mortgage scheme in Britian where you can now buy a fraction share of a property while the lender/government holds the balance of the shares.
The purchaser pays the mortgage on the primary loan and pays ‘rent’ on the outstanding square footage held in shares by the lender. The purchaser may buy more ‘shares’ over time. Ownership rights to sell are restricted to the lender. The first mortgage is extended to a maximum age of 75 years reached by the borrower. The scheme allows the hairdresser to ‘get on the ladder’ without being able to qualify for a mortgage…..ever. Very sneaky.
This manipulation puts a floor under prices by the action of the subsidy I suppose by which the prices can not get too high it is only the percentage of ownership that one can have in their own property will decrease with ‘affordability measures. Just insane really. It takes the ‘market’ out of real estate market. Its just a grandiose money sucking scheme to keep people pouring their money into a market which would falter other wise.
Paying a mortgage when you’re 75, holy shit.
September 28th, 2009 at 8:04 am
I think we all know why price/income does not matter, as the entry below clearly points out.
“Vancouver is the Swiss Bank account of International Real Estate.”
http://www.vancouverreflection.....e-outlook/
September 28th, 2009 at 8:38 am
from ol’ maggie’s site:
It’s a good time to be buying the right deal now.
Five to seven years out you’ll be glad you bought today.
The above photo is taken from my listing at Shangri-la, on the n.e. corner of the 53rd floor, 4500 sq.ft., listed at $5,890,000.
presented w/o prejudice……..
September 28th, 2009 at 9:28 am
From the Maggie Chandler puff-piece that Don Lapre (#4) helpfully referenced:
“Vancouver is the Swiss Bank account of International Real Estate”.
“The Olympics will at least double the number of people in the world that have heard of Vancouver and this will result in the growth going forward. The next 10 years will be more exciting than the last ten as we see escalating demand. Five to seven years out you’ll be glad you bought today.”
—
I’ve been a bear since at least 2004: A prospective buyer, looking for some semblance of sanity in RE valuations in Vancouver.
I see the profoundly out-of-whack fundamentals, the price/income and price/rent ratios that suggest prices should correct by >50% at some point.
My technical analysis of the price chart suggests we’ve had a sucker bear market rally into a double top. We’re still below July 2008 prices despite money being free. We were ironically & temporarily rescued by the fall 2008 economic crash and the resultant low interest rates.
From a sentiment perspective there is a surfeit of hubris in the bull camp. On some bull sites the bulls are running around like drunken soccer fans after a European Cup victory, kicking around the bears with impunity.
There are also stories of bears capitulating. There have been confessionals regarding folks buying, and major bear voices on the bull sites have fallen quiet.
All of the above suggests a double top is in place.
The most likely outcome now is price weakness as interest rates rise (next summer?) and listings start outstripping demand again. This will all occur through a time of ongoing weak economy and high unemployment. And once prices drop below the trough prices of winter 2008-2009 (15% off peak), the wheels will come off and we will see the really significant drops. My targets remain at least 50% off peak prices (real)
HOWEVER, when you read stuff like the Chandler claims (above), any bear is remiss if they do not consider the bull case. IMHO, the only things that could keep this bubble going are:
1. Cheaper than free money.
By this I mean ongoing very low interest rates, PLUS a series of government incentives to buy houses. This includes any further stimulus packages that rob from general taxpayers to support the housing market, in any form. This would be fundamentally very, very unfair on prudent citizens who don’t own property. Any such moves would lead me, personally, to consider taking this battle public. One could very vocally take to task any politician who moved to keep this asset bubble afloat at the cost of the general taxpayer base, and at the inevitable cost of FUTURE Canadian taxpayers. I don’t think we’d be alone in such a fight, but we would be in the minority, as homeowners make up a strong lobby group.
2. Some kind of freaky ‘safe-haven’ status for Vancouver.
The fact that housing prices have crashed just about everywhere in the whole world except in Vancouver, may just make rising prices here a self fulfilling prophesy. This is the argument that Vancouver will become the new Monaco, with wealthy folks attracting each other and higher prices driving even higher prices (a la the Chandler suggestion). I personally believe that the chances of this happening are very, very low, but not quite 0%. I also believe that these arguments continue to simply be stories that local speculators are telling themselves, and each other, as they continue to buy, buy, buy. But, one has to prepare for all possible eventualities. What I wouldn’t do, if this came to pass, is chase the bubble prices and buy. I’d likely move, or just keep renting and investing.
September 28th, 2009 at 9:31 am
Latest naughty developer: Omni Pacific
Even after the poor homoaners of The Village at Kanaka have surrendered their lives for half million mortgages, the torture continues:
Here come the liens
http://www.ctvbc.ctv.ca/servle.....lumbiaHome
for shoddy workmanship
http://cedarskyliving.net/
September 28th, 2009 at 9:32 am
Oh. So now that we have all heard of Salt Lake City, so what now?
Or Nagano? Or Lillehammer? Or Squaw Valley?
Dipsticks.
September 28th, 2009 at 9:51 am
The “world will learn about us” meme derives directly from the mythology of Expo 86. Of course Expo lasted for 6 months and had 22 million visitors, plus it just randomly corresponded to the inflection point on the immigration boom from HK. A 2-week winter Olympics in the middle of the greatest recession since the 1930s just isn’t going to see the same after-effects.
September 28th, 2009 at 9:59 am
Check out this video by Peter Schiff in 2006 saying how the housing market in the US is starting to collapse and why. Reminds me of Vancouver
http://www.youtube.com/watch?v=jj8rMwdQf6k
Basically the price you pay does matter, you value a stock by how much dividend it gives and if the dividend is too low then the stock is usually overvalued. Same with real estate you value a property based on how much it can get you in rent even if you’re going to live in it, it has to be cash flow positive and you need to get at least 5% a year on your down payment in cash flow not appreciation. You have to work to be rich not buy a house and live in it and then you’ll be rich, that’s how most real estate owners in Vancouver think buy a house sit on it and by the time you pay the mortgage off you’ll be a millionaire. The truth is you’re paying for any appreciation in the money you put in the house, interest, maintenance etc…
Check out my blog http://oitb.blogspot.com/
September 28th, 2009 at 10:22 am
i did not know that contractors can place a lien after the purchaser completes a deal with the developer..
i thought if my lawyer tells me there are no leins at the time of completion, the purchase is safe..
am i wrong???
September 28th, 2009 at 10:48 am
Boombust,
How poetic that you forgot to mention Sarajevo (1984). From hosting the games to civil war in less than a decade. The IOC sure made a good call there. I’ll bet you know one was thinking of it as a RE hotbed in the 90′s.
For all those that have lived in Montreal, how do you feel that after their olympics and the creation of the related olympic debt, the city went into the crapper resulting in the mass departure of numerous corporate headquarters and operations, further plunging the city into a state of limbo. They are still trying to deal with its effects and that only helped Toronto’s cause.
How did 1988 work out for Calgary?
Problem is that they say that kind of stuff to sway the opinion of the uneducated.
September 28th, 2009 at 11:08 am
@SD92129:
Coincidentally I listened to a speech by the Labour Party Minister of Olympics here in Britian today. Reading off the song sheet she was. Almost all the same catchphrases .
She went on for half an hour about history and Olympic cheerleading about regeneration, profits and blah blah blah, but not one word about Vancouver/Whistler 2010. There hasn’t been a single poster or advert regarding Vanc 2010. So I’m not sure if the world is coming. As far as I can see from a European perspective , no one knows about the Canadian games here.
One thing Britian is doing is pouring money and effort into kids sports programs. Campbell and the BC Libs are doing just the opposite. Aside from closing the schools, the kids are cannon fodder in BC.
September 28th, 2009 at 11:25 am
American “Rich Asians” lead decline in home ownership
“snip…
Nevertheless, as a population group, Asian homeowners fared far worse than others.
That revelation surprised some experts such as Edward Wolff, an economist at New York University.
“Based on their income and relatively low debt, one would expect that they would have a smaller decline in homeownership,” Wolff said.
The median annual household income for Asians was just over $70,000 last year, higher than for any other racial group.
“It’s possible that it’s a regional effect,” Wolff suggested. “There’s a high concentration of Asian-Americans in California, and California got particularly hard hit by property (price) declines and high foreclosure rates.”
http://seattletimes.nwsource.c.....ers27.html
September 28th, 2009 at 11:26 am
Has anyone checked real estate is Sochi, Russia to see how the Olympics affects prices?
September 28th, 2009 at 11:33 am
Take the average income/home price comparison back to the mid ’80s if you want to see something really scary.
September 28th, 2009 at 12:01 pm
“Real estate is selling like hot cakes in Sochi, where prices have been growing annually by 20%-30% in the last few years. Unlike local residents, who buy housing seldom and cheaply, rich Russians from Moscow, St. Petersburg and the country’s oil-bearing provinces view real estate on the Black Sea coast as good investment. Before the IOC chose the venue among three candidates – Sochi (Russia), Salzburg (Austria) and PyeongChang (South Korea) – one hectare (2.5 acres) of land in Sochi cost approximately $10 million, and flats were sold at $3,000 per square meter in block houses and $7,000-$8,000 in elite housing.”
2007
http://russia-realestate.blogs.....sochi.html
September 28th, 2009 at 12:07 pm
I’d be willing to bet the proliferation of grow ops in the GVRD would follow that graph precisely.
September 28th, 2009 at 12:10 pm
Google translated update on Sochi.
“MOSCOW, September 16 – RIA Novosti. Sochi real estate market seems to have recovered from Olympic fever – both for the crisis year average cost of housing in the city has been halved, to 44.5 thousand rubles per square meter, wrote Wednesday in the newspaper “RBC daily “with reference to the data municipality of Sochi.”
http://www.rian.ru/crisis_news.....46010.html
September 28th, 2009 at 12:39 pm
#8 don’t forget Lake Placid and Sarajevo!
Lake Placid now has a prison where its Olympic facilities were, and we all know what happened to Sarajevo.
September 28th, 2009 at 12:41 pm
7 No Longer Looking :
Good link:
My guess is these people pre -purchased and then were stuck with the results. Unbelieveable amount of defective workmanship. Where does one begin ?. The resale market for such shit that will become quite well known ie “notorious” , hence avoided,
, given a predictable oversupply of also much better product.
September 28th, 2009 at 1:23 pm
@chumpdawg: Hey don’t diss Sarajevo real estate in the ’90s, it was a great place to look for a breezy “open concept” space. Complete with lead lined micro-windows and if you were lucky enough to find a spot in a building it was nearly guaranteed that there wasn’t much to block your view!
I never made it to Sarajevo but did see some of the surrounding terrain in that time period, it probably would have been an excellent time to pick up some property on the cheap for an investment. If you didn’t mind buying booby-trapped rubble with the previous tenants buried beneath…
I suppose it’s figuratively similar to what the situation in 3-5 years here will be.
September 28th, 2009 at 1:47 pm
# 13 realpaul:
@SD92129:
Coincidentally I listened to a speech by the Labour Party Minister of Olympics here in Britian today. Reading off the song sheet she was. Almost all the same catchphrases .
=========
Unfortunately, the world will never learn…
IMHO, The Olympics is simply a sales pitch by a multi-national corporation (IOC) to egomaniacal local politicians. There is nothing special about the Olympics, each sports has its own yearly championships, the Olympics is not much different than the PNE bringing a bunch of different entertainment together for a short time frame.
I can still recall way back when when BC tried to get the 1976 Olympics. How many are aware Whistler almost got an Olympics by default when Colorado voters vetoed hosting them?
The only blessing is after hosting them we won’t have to worry about getting them again in our lifetimes. All the other future host cities can worry about it.
September 28th, 2009 at 1:53 pm
realpaul:
I have a relative that was working in England.
He is a Canadian-born citizen and they will NOT let him back to work until he applies for the proper VISA from outside England(apparently this changed last past summer 2009).
He now has to fly back to Canada, apply and hope for the best.
I understand there is a bit of upheaval in Europe, and especially England, about foreigners having jobs.
September 28th, 2009 at 2:07 pm
I like how all the bullish arguments for Vancouver real estate are based on mysterious entities nobody can quantify or understand (sales pitches to catch fools). Salespeople result to this technique when a product does not do a good job on selling itself with its value or qualities.
Example, rich foreigners. Let’s think about this logically. Rich people who can just decide to plop down for a get-away place in Vancouver have already heard about Vancouver, and they will not be swayed to buy here when they see a guy blasting down Whistler in a spandex suit. However, some worker at the McDonald’s in Moscow will now suddenly know about Vancouver, but he is not coming here anytime soon.
Second, immigrating to Canada is complicated; wait times are long, people need a good reason to relocate, and the government controls how many people come in. Tell me how the Olympics will convince tens of thousands of extra people to apply for PR status in Canada?
September 28th, 2009 at 2:35 pm
Immigrants?
Top 10 countries of birth of recent immigrants, 1981 to 2006
http://www12.statcan.ca/census.....t1-eng.cfm
================================
It’s pretty clear that South East Asia has contributed the most immigrants.
However, the RE bubble has been a global phenomenon and lured a “United Nations” of Greater Fools. In BC ??….there is nothing special about BC except in the eye of the beholder.
IMHO, the longer the correction takes, the worse it will be.
Why anyone thinks we will be immune to what has happened globally is beyond comprehension. It is simply a Gov’t endorsed and subsidized Ponzi scheme.
Bearish Since 2004, Looking For A Semblance Of Sanity in Vancouver RE « Vancouver Real Estate Anecdote Archive Says:
September 28th, 2009 at 2:36 pm
[...] September 2009 · Leave a Comment This extended anecdote and discussion from rentah at vancouvercondo.info on Sept 28th, 2009 at 9:28am [...]
September 28th, 2009 at 2:43 pm
Rafe Mair column on The Tyee
Lessons from 1983
http://thetyee.ca/Opinion/2009/09/28/Campbell/
Many may not remember the election of 1983. Bill Bennett and his British Columbia Social Credit party had been in power since December 1975 and, against all polls, won again. The issue was “restraint” and it resonated with the public, many of whom had been badly burnt by the recession the country was in.
Many — myself included — saw their houses falling in value to the point it was worth less than the mortgage. Or mortgages, since many took out a second mortgage to fund daily living.
A lot of voters saw the bureaucracies, especially in Victoria, as being bloated with high-paid sloths. They looked upon many government agencies, such as human rights tribunals, as being boondoggles masking more three-piece wastrels we could do without.
=======
See? It happened back then and can happen again. The only difference I see is that Gov’ts now were a bit forewarned and didn’t let nature take its course (like rising interest rates) ie they keep interest rates low to lull all into a false sense of security.
However, thats all there is left at the bottom of their bag of tricks. Future events will be out of their control.
September 28th, 2009 at 3:23 pm
Family is sitting on Trillion of dollars.
http://ctv2.theglobeandmail.co.....tvBeta=yes
September 28th, 2009 at 4:02 pm
G20 – Trade Imbalances
http://americacanada.blogspot.com/
Manipulating currencies compound global trade imbalances even further. Exporting nations become completely dependent on the lower dollar to hide inefficiencies as they grow. Importing nations find it very difficult to export given the exchange rate.
Furthermore, trade imbalances result in huge current account deficits/surpluses. Exporters must lend to importing nations to keep the imbalance alive (it’s simply a mathematical calculation). This increases the supply of the creditor’s currency available for exchange, driving its exchange rate down. The transaction also creates more international demand for the importers currency, driving its exchange rate up.
This process also increases the supply of credit inside the debtor nation lowering interest rates. The lower interest rate stimulates borrowing, which some of it is then spent again on imports.
None of this is sustainable. The whole puzzle requires debtors to continuously indebt themselves at an increasing rate in order to support export growth in the creditor nation. Interest rates can’t go lower than 0%. Eventually you reach a point where the game can’t continue.
===========================
September 28th, 2009 at 4:05 pm
The Inevitable Collapse – North America’s Leveraged Economy and it’s Effect on Canadian Home Prices
http://americacanada.blogspot......-real.html
September 28th, 2009 at 5:00 pm
“… will at least double the number of people in the world that have heard of Vancouver …”
And after watching 17 days of rain and riots they are going to want to move here?
September 28th, 2009 at 5:10 pm
@Chilled:
18 X Chilled Says:
September 28th, 2009 at 12:07 pm
I’d be willing to bet the proliferation of grow ops in the GVRD would follow that graph precisely.
**************************************************
Vote it down all you want boys, but the facts speak for themselves;
http://www2.canada.com/nanaimo.....id=2041210
September 28th, 2009 at 6:14 pm
I don’t see rents going up, at least in the West End. Comparable apartments rent for about the same I’ve been paying for years.
New condos are asking for 20-40% more in rent… for 20-40% less sq footage.
September 28th, 2009 at 6:29 pm
Whoa look at the size of that red graph. All that red sure dwarfs those other lines. That line, like, takes up the entire screen and fills it with red. Red, maaaaaannn, red. When is all this red going to stop.
September 28th, 2009 at 7:07 pm
The 1936 Olympics in Berlin worked out very well for Germany soon after.
Dontcha’ think?
September 28th, 2009 at 7:46 pm
Nah.
Unless, maybe, you lived in Charlottenburg.
September 28th, 2009 at 8:21 pm
Olympic games in Vancouver ? Where is that , in Holland?
September 28th, 2009 at 8:50 pm
@realpaul:
This is basically just ye olde “rent to own” scheme.
Executive summary: you pay above-market rent to get an option to buy at an above-market price.
Is that a deal or what?
The antidote is the same as always: just say no to excessive purchase prices.
September 28th, 2009 at 9:52 pm
The “world will learn about us” ..
===================================
That’s what I am afraid of, too. They will learn about the endless rain, the grey skies, beggars and mentally ill roaming the streets, the drugs and the gang slayings, the inadequate public transit, the lack of culture, the missing and murdered women, the pathetic media; and when they go home, they will appreciate the place where they live just a little more.
September 28th, 2009 at 9:57 pm
Post whatever graphs you may, but at this point incomes don’t matter.
As long as the attitude towards embracing debt persists, Vancouver prices will remain elevated.
It would seem that whenever we hit a ceiling on affordability, something comes along to smash through it.
0% down, low rates, 35yr AMTs, etc. have all played a role in pushing prices up over the past 8 years.
Now with the HST coming in next year, more panic buying is ensuing.
I don’t expect the market to correct until at least 2011.
By then, I’m not sure how many bears will be left standing.
How many can stomach another 2 years of insanity?
September 28th, 2009 at 10:26 pm
@chumpdawg:
Excellent idea. Rebuild the olympic village into a prison after the event. They could even move some young criminals from the prison in the centre of Burnaby (next to BCIT) for better location. Definitely, our suffering young felons deserve some mountain view and convenient means of transportation instead of shoveling snow and digging uranic ore past the polar circle. Yeah, and don’t forget to rename this new Olympic Village station to Federal Prison. That will add the city some charm.
September 28th, 2009 at 10:49 pm
@!(EconomicsDegree): Been sampling the local crop a bit much?
September 28th, 2009 at 10:57 pm
So judging by the graph we started the decade off with houses costing about 5-6 times a families income and now we’re what? 10X? Gee, I just don’t see how this could go wrong.
September 28th, 2009 at 10:57 pm
Is Strataman around? Didn’t he promise to do a write up on problems with some of the new buildings?
September 28th, 2009 at 11:30 pm
cutbacks coming. thank goodness we have the olympics!!! the mountains!!! RE!!! no property tax increases!!! really?
September 28th, 2009 at 11:42 pm
41 – “How many can stomach another 2 years of insanity? ”
————–
Why not? Does me no harm at all. Rents remain comparatively cheap, so in what way is it hard to stomach the sight of retards paying 2 to 3 times my monthly rent to their bank in interest in order to live in a smaller condo than the one I live in?
September 29th, 2009 at 12:29 am
Strataman is probably busy patching up all those condos so they can limp along until the warranty expires…..
September 29th, 2009 at 1:13 am
Hmm… I appreciate the effort, but I worked up some stats from the sources that you indicated as well, and there are some major differences including how we interpret income. I don’t think that you can just add male and female income to get total “household” income. Similarly, I look for percentage changes in income vs. % changes in RE.
In terms of income, I pull figures from tax filings.
In 1993, the median income from taxpayers in Vancouver was $37996. In 2006, this value rose to $64172. That’s a 68.8% rise in earnings for reported taxpayers – (this isn’t quite the same as household income either, but imho, better than adding male and female numbers). Of course, this may not be quite accurate either. One can assume that some are able to purchase homes while paying little income taxes (cash rich foreigners), and by the same token, not everyone who pays taxes owns a home – we might assume that people in higher tax brackets are more likely to buy. Admittedly, there are lots of conflicts and interpretations in these numbers.
In terms of housing prices,
In 1993, Average Vancouver homes cost $279758. In 2006, $509876. A percentage increase of 82.2%
So, taken in large blocks, housing prices did “accelerate” faster than household income but not in the way seen by your original chart. In smaller blocks, there were periods when income rose (from 1995-2001), but RE prices didn’t change much at all.
Let me know if you’d like to have my excel spreadsheet.
September 29th, 2009 at 1:54 am
Tim are you saying that averaage family income was only $37996 in 1993? I ask because $64000 is for families not individuals. For individuals its still down in the upper $30′s.
September 29th, 2009 at 2:00 am
@NO – LYMPICS:
The Inevitable Collapse – North America’s Leveraged Economy and it’s Effect on Canadian Home Prices
http://americacanada.blogspot&.....-real.html
================================================
Thanks for the link. Very informative (and well written) article.
September 29th, 2009 at 2:12 am
@NO – LYMPICS:
#24, NO, there has been a backlash against immigrants of all stripes into Europe since the huge waves of economic migrants from Iran, Iraq, Afghanistan, and all of Africa started hitting the beaches ( through the chunnel in the back of lorries).
The EU bleeding hearts settled on a ‘wet foot dry foot’ program and it has caused the border countries to be swamped with illegals, overwhelming the existing social services. Britian has been legally beating them off as the law states that they must apply for refugee status in the country of entry before gaining entry to the EU country of their choice.
England has become an island fortress again. I had to remind one border agent who parroted the ‘why are you here’ questions that being a well dressed older gentleman from Canada it was highly unlikely that I was here for the welfare and free ride. She tacitly agreed and waved me on.
About the Olympics coming to town. Lets not forget that the OLympic entourage and press corp is something like 200,000 parasites and hangers on. All of who we have to pay for to live in luxury while they are here. This is all courtesy of the BC taxpayer, and will hardly be people desperate to find a new home in Canada.
Patriotz, exactly, rent to own. The buyers can ‘purchase’ more ‘shares’ and thusly raising their mortgage and ‘lowering’ their rent, a scam indeed. The idea hides the fact that ‘the buyer still has to pay back all the money’, and if you pay too much, well thats a big probelm when you’re 75 and the scheme runs out isn’t it.
September 29th, 2009 at 2:26 am
@other ted:
#50, OT, 64 K does seem a bit high for families even, if only by the differance of 6 thousand that I last observed which was a tad under 58. People may wave this away also and forget that this is gross income, before, long before the tax man bites off the approx 70% IN DIRECT AND INDIRECT TAXES. Before rent, mortgagae and food etc etc .
Credit reporting shows us that CDNs are 158% indebted in terms of debt/income ratios. Credit debt is EXPLODING !!!!!!!
I also read recently that the figure for savings in Canada was only 4.5% and conversly we ( pop cdn)spend 94.5 cents of every dollar earned. Thats cutting it all a bit close isn’t it?
September 29th, 2009 at 5:02 am
@realpaul:
SAVINGS RATE
B.C .: -2.9 per cent
Alberta: 14.3 per cent
Ontario: 3.6 per cent
Quebec: 2.1 per cent
Canada: 3.7 per cent
http://www.theglobeandmail.com.....le1276619/
Economically BC is a phenomenon unto itself, and it’s not a pretty one.
September 29th, 2009 at 5:33 am
Skye “Strataman is probably busy patching up all those condos so they can limp along until the warranty expires…”
Totally and absolutely correct, weather is closing in and all the roofing membranes we are working on are not closed! All my projects are re and re; appears the 10 year roof warranty is the lifespan of the roof.
Hint; Steer clear of Green Roof buildings! Mucho dinero!
September 29th, 2009 at 7:28 am
@tim:
According to the REBGV, the benchmark detached went from $320k in 1993 to $890k last month. A gain of 178%.
September 29th, 2009 at 9:35 am
That 178% works out to 6.5% yearly increases. Anyone who bought in 1993 is doing well. Sure there are maintenance, taxes, and inflation, but one must also take into account rentals and buying vs renting. Will the average be 2.5mil in 2025?
September 29th, 2009 at 9:36 am
It’s clear that Vancouver will continue to be THE place to come and visit for many years to come. Just look at the flight roster at YVR sometime and you will see that Vancouver is clearly the #1 travel destination for everyone. Every single visitor that comes to this place wants to live here instantly. I’m not sure if it’s the drugs, the gangs, the expensive booze or the pricey real estate that attracts them here. Who knows. One thing is for sure though: VANCOUVER REAL ESTATE NEVER GO DOWN!
September 29th, 2009 at 10:02 am
#56, Well, I was looking at this chart: House Sales —BC Multiple Listings ( http://www.bcstats.gov.bc.ca/d.....ut/mls.csv ) from the links above. It’s probably not limited to detached housing, so you have to take that into account. From 2006 – 2008 it rises fast (see below). Unfortunately, the links above don’t have income stats beyond 2006, and I’m too lazy to look for that data.
2006 – 509,876
2007 – 570,795
2008 – 593,767
#50, I pulled the values from the BC Taxation Stats – from the links in the original article (Column V, Row 57 for 2006). It all came from the same column, so I can only trust that it’s calculated consistently, whether for individual or household. Column name is ‘Average Income’ and there’s actually two of them. I discriminantly took the column that might help prove that housing is affordable. Critically, I’m trying to work out best and worst case scenarios.
Personally, I’ve been working to buy a condo. In adding the $350/month maintenance, $200/month property tax, and $150/month in insurance, that accounts for $700/month on top of my mortgage. I just don’t see the value. So guys, I’m a “wishful” bear, but I don’t think that the stats from the links above prove our point.
September 29th, 2009 at 10:08 am
strataman
green roof buildings aren’t good ? I like them ! at least I like the look of them.
http://www.ecodesigntechnologi.....Roofs.html
although it’s not too hard to picture mud and bugs and worms finding their way lower than intended…
September 29th, 2009 at 10:23 am
It would be easier to understand and compare values on your graphs if you just stuck to simple 2d bar/line graphs instead of using the fancy graphics there.
September 29th, 2009 at 11:01 am
Strataman:
Please include a green roofs expose’ when you do your article…of which many of us are looking forward too.
The proponents of green roofs claim there are no problems, and insurance companies have no concerns ?
Obviously you know otherwise…
September 29th, 2009 at 11:16 am
# 46
I see the COV is anticipating a $6o+ million deficit.
QUOTE:
The weak economy has severely cut into the city’s revenues. Development permit fees alone fell 50 per cent, to $12.5 million, Louie said.
Meanwhile, expenses have risen. Cuts at the provincial and federal level have shifted costs to the city, Louie said.
And salary increases for city employees of four per cent in both 2010 and 2011 also have boosted expenses, Coun. Suzanne Anton said. “That is a big hit for the city.”
=============
So permits are down 50%…..I presume from last year when things were tanking….
So much for the “boom”.
Then they have to pay City Staff 4% increase for 2010 and 4% for 2011…I assume this is compounded so ultimately ends up a bigger increase. That’s insane, but all to predictable as all local gov’ts wanted to buy labour peace for 2010 games…add that to the long list of liabilities hosting the Olympics brings.
They also dance around tax increases, they don’t want to “raise” taxes ….I read into it that they may go for 8% increase from last year again.
The SHTF folks, and there is more on the way.
September 29th, 2009 at 11:40 am
Speaking of Sochi…
Report: Sochi Olympic budget triples
http://www.ctvolympics.ca/news.....cid=rsstsn
September 29th, 2009 at 12:36 pm
@tim:
I totally agree. I pay less than $800 to rent a fairly large one bedroom aprtment right downtown. Granted, it’s cheaper than market value, but why would I pay $700 a month + a ridiculously overpriced mortgage payment just to say ‘I own’?
On top of the other expenses of owning a condo, if you get out voted by the strata to redo the lobby, or redo this, or that, you have no choice but to cough up your share of the money. Condo = Big Scam IMO. Buy a house or don’t buy at all. And not in this bubble market. A home is not an asset anyway, unless it generates cashflow …
http://www.conspiracyoftherich.com
September 29th, 2009 at 1:23 pm
# 64 link
MOSCOW – Hosting the 2014 Winter Olympics will cost more than one trillion rubles (C$36 billion), nearly three times the original estimate, a Russian business newspaper reported Tuesday.
The newspaper Vedomosti, citing documents from the Ministry for Regional Development Ministry, said almost 700 billion rubles (C$25.2 billion) of that would come from the federal budget, with the rest to come from private investors.
The report is likely to add to concerns that Russia saddled itself with a hugely expensive vanity project with its successful bid to hold the Games in Sochi.
———
This is nuts….people should be in revolt.
September 29th, 2009 at 3:53 pm
“This is nuts….people should be in revolt. ”
Actually, this sounds about right, for Russia.
The 2010 games are going to cost 12 times the advertised price. That’s nuts!
September 29th, 2009 at 3:59 pm
#67
Its simple, they forgot a “zero”. Typos happen all the time.
September 29th, 2009 at 6:42 pm
Here’s a real-estate anecdote:
A co-worker just bought a 600sq.ft. apartment downtown for $360k. He is thrilled that his mortgage will only be about $1500/month with a 35yr, 3.7% 5yr fixed. Although he plans to live in it eventually, he hopes to rent it out for a year at $1500/month.
Another co-worker is in the midst of buying an apartment in the suburbs, and it turns out there is a bidding war on the place she likes. She goes to co-worker #1 and asks advice (since he is so experienced), and he says “if you like the place then add $10k to your offer! That’s only, like, $5/month over 35 years! It’s not an investment, but a place to live. And don’t think about the total amount or total interest. You’ll never own it, but in a few years you can sell it and make a bit of money and get a bigger place if you want. Now is the time to buy though!”
I think that pretty much sums up who is buying right now. If you are only concerned with your monthly payment, believe that real estate always goes up overall, and that what’ll happen in five years is so unknowable that it’s not worth worrying about then this market is for you! I’d have spoken up, but since I am the only person at work who still rents and isn’t actively looking to buy nobody wants to hear it. And besides, I’m not so sure anymore either.
September 29th, 2009 at 7:12 pm
Oh, one other choice quote from co-worker #1. When asked how high to go in a bidding war situation: “Go just to the point when you feel like you’ll puke.”
September 29th, 2009 at 7:34 pm
“Go just to the point when you feel like you’ll puke.”
I think it’s also the sensation you feel when you’re on a roller coaster that’s just left you weightless and is about to plunge…
“And besides, I’m not so sure anymore either.” « Vancouver Real Estate Anecdote Archive Says:
September 29th, 2009 at 7:54 pm
[...] are having their faith tested and their feet held to the fire. Sign of a market top? This from skiff at vancouvercondo.info September 29th, 2009 at 6:42pm [...]
September 29th, 2009 at 8:40 pm
skiff,
Your anecdote reminds all of us that it is not “Rich Asians” or “Rich Albertans” or “Rich Whatever” that are buying all this expensive real estate. No, its just average fools with average incomes who have too much access to cheap, easy credit. I’ve never been so sure myself, but I don’t talk anymore either. I don’t want to be remembered as the doomsayer and somehow blamed when it all comes to pass.
September 29th, 2009 at 8:50 pm
BTW a bidding war for a suburban condo? I wonder what suburb. If there is one thing that stayed weak during that latest bull run, its been suburban condos. Maybe it was a nice part of North Van or something.
September 29th, 2009 at 8:52 pm
Skiff funny story. I can only laugh at those people. what is sad idiots like that have been proven right for the last 5 years at least. When things go wrong of course it will be the governments fault or whatever excuse they can come up with.
September 29th, 2009 at 8:56 pm
@No Longer Looking:
What you are saying in economic lingo is that the locals are the marginal buyers, the buyers who actually set the price. If the “Rich Whatevers” were setting the price, no locals would be buying.
Another way of looking at it is if the “Rich Whatevers” are driving the market, why are the developers spending so much money to market their projects to ordinary local people?
September 29th, 2009 at 8:57 pm
@No Longer Looking:
Believe it or not, the bidding war is in Metrotown.
September 29th, 2009 at 9:22 pm
That chart there looks like a big rocket, haha….you people here are bickering while smart business people are scooping up land hands over fist.
More mainlanders from China to invade Vancouver next week. If you people have a clue, there’s a real estate tour from China to Vancouver during China’s national holiday. Jack the real estate up baby! All aboard!
Happy economic times coming around the corner and let’s celebrate!
September 29th, 2009 at 9:54 pm
that supraboy sure is a silly dink!
September 29th, 2009 at 10:10 pm
RE: #61 by skiff
Thanks for the entertainment, but if only that were the worse anecdotal behaviour of FTBs.
I’ve seen far worse.
September 29th, 2009 at 10:13 pm
@kansai_92: Kansai…. tell us a few FTB stories, please…
September 29th, 2009 at 10:24 pm
Frank, guess what, check out how real estate is moving in the West side, it’s getting cranked up higher.
Please raise your hands if you are jobless right now. I bet all of you are working and making money, therefore, the real estate markets will not tank.
I’m sure everyone here has a job and constantly post their gibberish here during their downtime. This city is so freaking unproductive, yet we all get paid +50k and complain about high real estate prices. It ain’t high if everyone’s pulling in good salary.
September 30th, 2009 at 12:00 am
yes supra boy, but with an average household income of 68k, “everyone” is not.
September 30th, 2009 at 1:01 am
FTB story #1:
Guy I used to work with. Had lunch with him a few weeks ago.
He tells me he bought a pre-sale down at the Olympic Village the week before.
So I get curious and start poking around. I ask him which building and turns out he doesn’t even remember.
He says it’s not exactly in the Olympic Village, but it’s next to it. He tells me it’s 630sf and the price was $399,000. Completion is more than 2 years away.
The more and more I talked to him, the more clueless he turned out to be.
Me: It’s kinda small. Do you plan on living in it?
Him: Nah, I’ll probably rent it out.
Me: What do you think you could get for rent?
Him: I’m not sure. I’ll probably break even.
Me: Do you know how much strata fees are?
Him: Doesn’t say. I’m sure it’s not too bad since it’s small.
Me: Hmm… are they holding a low mortgage rate for you?
Him: No, my pre-approval is with RBC.
Me: Rates could be quite different in two years time.
Him: Well I can always sell it. Worst case I’ll probably break even.
After a while, I felt really bad cuz it seemed like I was grilling him in a police interrogation, so I thought I should change the subject.
September 30th, 2009 at 1:03 am
What a great chart. It looks even worse when you include earlier data and how it relates to average family incomes. To be honest — even if this trend is sustainable, its not a great life. With both parents working and spending 50% of their income on housing, it doesn’t leave much for food and other necessities. Vacations and fun time are reduced to short trips to metrotown and long weekend camping trips at Alice Lake. Its like living in the greatest (or one of) cities in the world, but you are too busy working to really enjoy it. Kinda sad when you think about it.
September 30th, 2009 at 5:08 am
@rentah:
One has to distinguish between a RE market being expensive and in a bubble. There are and have always been expensive places to live – both to buy and to rent – because the people who live there make a lot of money. That’s normal. It is not normal for prices to be out of whack with rents – that’s a bubble.
As I have already said, if rich buyers were supporting prices, there would be no need for people like Chandler to be making her pitch to the general public.
There is no credible scenario for increasing real median incomes, and thus increasing real median rents in Vancouver. This is the only way that current median prices can be supported. Inflows of rich people may result in gentrification of a few areas (i.e. increasing real rents which support higher prices) but in no way can support higher rents, and thus higher prices, metro wide.
September 30th, 2009 at 7:53 am
@patriotz:“There is no credible scenario for increasing real median incomes, and thus increasing real median rents in Vancouver. This is the only way that current median prices can be supported.”
—-
I agree. Thus my ‘close to zero percent’ estimate that Vancouver magically transmorphs into some kind of monetary-political safe haven for… who?.. millions of Chinese millionaires?.. during…what?.. a time of global unrest and hyperinflation?…(Or of any other unexpected scenario along those lines.)
But, given the absolutely whacky monetary moves we have seen thus far from various governments, and given that Vancouver stands out globally like a sore/soaring thumb (depending on perspective) of bullet-proof RE ‘investment’, the risk is not absolutely zero.
—
PS: The mere fact that bears like myself are entertaining ways in which this bubble just possibly MAY continue ad infinitum, is in itself a sign of a top, in my humble contrarian opinion.
September 30th, 2009 at 8:35 am
@skiff:
That $5 bucks a month is already getting chewed up by the increase in the HELOC increase everyone got this past month from the friendly banksters. For sure when you have bidding wars in MetroTown you know the insanity has really taken over. I mean really, how can you say ‘investment’ and ‘Metro Town’ in the same sentence without laughing?
Meanwhile, economists are ‘shocked’ that the Canadian economy is stalled after the government announced an increase in June of a roaring .001%, that was supposed to have been the turning point, Bwahahahahahahahahahaha!
http://www.vancouversun.com/bu.....story.html
What part of the truth are people grasping for? Is it the part that makes them feel all better? Is it the part where the great leadership Mommy suurogate kisses the boo boos away and tell them that everything is fine? OMG, it’s just too funny. Or is it as simple as that?
A persistently ‘strong’ Canadian dollar has been publicly growled at the PTB in Finance for weeks now. Is this another shot at getting the $CDN to weaken again against the collapsing $USD in the apparent race to the bottom?
We all knew that the general economy wasn’t doing well. That fact has been explained away by the hypsters as ” well, it will be a jobless recovery”, and such BS. But the fact is that no private expansion has taken place and balance sheets are showing negative growth.
Thats why there is no job growth. It certainly hasn’t been growth in productivity. The ‘increase’ reported in Junes numbers were adjusted figures that represented a hypothetical ‘shot in the arm’ that showed up in ‘ghost jobs’ numbers created on the books by the stimulus money staining the books of government but not backed up by a flood on main street.
I am not shocked, are you? This shockingly poor economy has been written about on blogs like this extensivly , so give yourselves a pat on the back for not being entirely naive or stupid.
BTW, I got back from Europe yesterday so no more reports from that side of the pond.
September 30th, 2009 at 9:12 am
Thanks for the link, realpaul.
Love the article, file in the ‘Whocuddaknowed?’ folder.
Excerpts:
“Okay, this is a shocker,” said Douglas Porter, deputy chief economist at BMO Capital Markets. “We’re not talking about a shot across the bow of the optimists, this is more like a torpedo through the hull.
“It’s not just the consensus that will be surprised by this result — the Bank of Canada has been loudly proclaiming lately that growth would likely surprise to the high side of their July forecast in the second half of the year . . . .” Porter said.
..Wednesday’s surprisingly weak report was in stark contrast to recent data showing strong signs of economic recovery — especially in the retail and housing sectors.
September 30th, 2009 at 9:59 am
I’m someone who has been ready to buy a house in vancouver since 2007. I baulked at the prices and am waiting with a large downpayment.
However, reading these comments (and without getting into a is vancouver one of the best in the world or not discussion) I think people need to realise that prices in vancouver are likely to ALWAYS be higher – maybe considerably so – than the other Canadian cities just as prices can be considerably higher in desirable neighbourhoods of the same city. Whether some here agree or not, Vancouver is desirable – especially to people who might have just visited for a week and caught it during a sunny spell, or to our fellow Canadians who hate three months of snow.
I’ve travelled a lot and IMO Vancouver’s quality of life for people with stable jobs and a bit of cash is excellent, and there are plenty of people who will put up with the rain for what else is on offer here and the surrounding area.
However, it’s equally true that people don’t watch Olympics on TV and then buy a house. They might dream about it but I’ve fantasised about moving to a nice European city for years but haven’t done anything about it. It’s the same with people thinking of moving here.
I immigrated here from the UK. It took over a year and now takes longer. It took a lot longer to actually make the decision and even then I nearly didn’t come – and my then girlfriend/now wife is from here (she nearly came to the UK instead)! By the time anyone is old enough to consider moving to another country for lifestyle reasons, most people have a solid network of friends and family (including their own kids who have their friends, etc) and it can be hard to leave that to start completely from scratch when you are in or approaching middle-age (the only immigrants who can afford to buy real estate). Then there’s retirees but I simply don’t see Vancouver as a retirement hotspot – and again why leave your grandkids and lifelong friends for a drizzly climate?
So I’ve never believed the Olympics hype or any of the immigrant stuff. The people buying houses in Vancouver are mainly Canadian. People who think our high prices are caused by non-Vancouverites should be far more worried about Torontonians and Albertans as it’s a lot easier, quicker and less risky for them to make the move. And they are likely to have just as much money as foreign immigrants.
I have come to the conclusion that Vancouver may well end up like Manhatten, central London and indeed most European city centres with lots of people renting – often for their entire lives. My only doubt here is that these other cities are generally bigger with better job prospects and higher wages. So it’s a strange one – I genuinely think Vancouver is quite unique and trying to predict what will happen is impossible. Let’s face it – it’s one of the youngest cities in one of the youngest countries in the world so comparisons are difficult.
I now intend to stop watching the market and reading these blogs and just buy when we are sure we can afford it, and without comparing the price to other cities or countries as it seems increasingly fruitless to do that. At the end of the day, there may well be a premium to pay to live here – and whether or not you think the premium is worth it would depend on just how much you like the city balanced against how much you want to own a home. The good thing about Canada is if you are prepared to move, Montreal Ottawa and Toronto, and even farther East are damn fine places as well – just with more snow. Calgary not so much. I’ve been reading these blogs for coming on 3 years now and I’ve decided it’s unhealthy.
September 30th, 2009 at 10:11 am
@phoey: Thanks for sharing your thoughts.
Two things:
1. Yes, but then why aren’t rents higher?
2. Your post has a ‘top of the bubble’ flavour to it, you are foregoing fundamental analysis:
–”I have come to the conclusion that Vancouver may well end up like Manhattan, central London”..
–”I now intend to stop watching the market and reading these blogs and just buy when we are sure we can afford it, and without comparing the price to other cities or countries as it seems increasingly fruitless to do that.”
September 30th, 2009 at 10:26 am
rentah – I agree about rents and the main reason we haven’t bought is the rents are generally affordable (or where if you got in somewhere 3 or 4 years ago) so the sums have never added up. If by “top of the bubble flavour” you mean I think prices have to come down – yes definitely. I expect/hope to buy sometime in 2011 – you can only take so much pressure from your better half!
I think my point is mainly that I have been looking at vancouver in comparison to other places for a while and I think that’s pointless now as it really does seem there is a different mentality that goes against what should be happening. The media for a start is outright dishonest in its attempts to pump real estate in a way I haven’t seen elsewhere – in Europe anyhow, not sure about USA.
September 30th, 2009 at 12:04 pm
phoey,
Its not just dishonesty in our media. They are just part of our real estate cult. They are owners too. So if they honestly believe what they are saying, its not really dishonest (or at least, not entirely).
The Vancouver real estate cult must be baffling to outsiders. You can’t go to a party without people chatting up real estate purchases or their latest home renovation. They’ll even talk like they got a great deal when they massively overpaid.
When the housing bubble pops here, it will be more than an economic phenomena. It will be interesting to watch how our local culture reacts.
September 30th, 2009 at 1:27 pm
phoey:
Sorry, I may have been a little obscure earlier.
What I meant was that your comments had a bit of the tone of a formerly-sensible bear who is now capitulating…starting to give-up on fundamental analysis and common sense, akin to saying “Perhaps it IS different here/this time”.
As you no doubt know, from a contrarian perspective, when bears capitulate, the top is ‘in’.
—-
PS: I’m writing this as a bear who has been having very similar feelings myself. But I have to remind myself that this is, very obviously, a bubble (see my post near beginning of thread for summary!).
PPS: All the best. I also hope to be buying (at better valuations) in 2011.
September 30th, 2009 at 7:35 pm
I have come to the conclusion that Vancouver may well end up like Manhatten, central London …
======================================
Sure, just give it 200-300 years.
March 26th, 2010 at 4:36 pm
Vancouver detached home prices are not much higher than Toronto or even Montreal in the nice areas near downtown. There’s a bit of a premium but the real estate inflation is in all major Canadian cities. Cheap mortgage rates, extended amortizations, combined with boomers at around age 49, which is the peak purchasing age on average, creates a home pricing peak. What’s the future? Probably like past peaks. A correction followed by a long sideways consolidation. Toronto from 1988 to 2003 is a good example. It corrected 50% when rates went up dramatically then gradually recovered. If they can manage to keep rates low then prices will move sideways for a long time.