Global Price to Rent Ratio

According to fundamentals, Canadian RE ownership continues to be significantly overvalued compared to rental cashflow. Even the bubbly Australian market has started to correct, but with interest rates low for at least 2 more years, who can predict how long the plates can continue spinning?

You can play with The Economist’s house prices chart yourself here:

http://www.economist.com/blogs/freeexchange/2011/03/global_house_prices

Sort by:   newest | oldest | most voted
Guest
Starving Artist
4 years 5 months ago

We're just like Singapore!

Guest
Keeping An Eye On Th
4 years 5 months ago

" The average family buying a house in the city would need to dedicate 92.5 percent of its income to own a bungalow.

"Vancouver's housing market is without a doubt the most stressed in Canada and is facing the highest risk of a downturn," Wright said."

http://www.bnn.ca/News/2011/8/22/Most-housing-rea

92.5% and that is with basically with 0% real interest rates.

No bubble, no trouble

Member
victoria
4 years 5 months ago

Now tell me how do people surivive? We are in Victoria – our family salary is above average – we have 4 kids that don't do a whole bunch of acivities. We don't travel , don't eat out. We just can't seem to make ends meet.

So, how do people in Vancouver do it I wonder if so much of their income is going to RE.

Guest
Flip Flop
4 years 5 months ago

My fiancee and I spend approximately 10% of our pre-tax income on rent. That probably grows to 15% when you account for utilities like hydro, cable, phones, etc. We live in a beautiful little north facing 1BR, 600 sq ft, apartment overlooking the city and mountains from the top of the hill in Kerrisdale. Once all the transfers happen (travel account, savings account, investments, rent, bills etc.) there's just enough left for a couple meals out and a little walking around cash. I can't imagine feeding 4 kids and paying a mortgage. The savings, travel and dinners out would certainly… Read more »

Guest
Anonymous
4 years 5 months ago

Victoria,

Few ways it's done:

Rent basement

Take on more boarders

Two or more jobs

Loans (gifts) from parents

Of course, the above all come with additional stress.

Guest
space889
4 years 5 months ago

Well as they say, if you can't afford to be in the city, move!

I guess this is just one more evidence of Vancouver bull market. Get in before it becomes 110% of your gross income to own a charming old timer with all original plumbing and electrical. Best place on Earth!

Guest
WFT?
4 years 5 months ago

@Victoria:

Drug dealing and tax evasion.

Member
Best place on meth
4 years 5 months ago

@Victoria:

So, how do people in Vancouver do it I wonder if so much of their income is going to RE.

It's a neat little trick called "negative savings".

Vancouver is the only place in the country where it's successfully practiced.

Guest
Escapee
4 years 5 months ago

@space889: I did move, even though my bills were a small part of my income (like flip flop). For me it was more about getting tired of the city and needing a change. After living in the city my whole life I was suprised to find the quality of life in a small town a lot higher and more affordable. I also find I don't miss the things I thought I'd miss in Vancouver, although I do miss family and friends. If I was still a teenager I wouldn't want to leave, but there are much better places in this… Read more »

Guest
N
4 years 5 months ago

@Victoria:

Personally, I rent. I think many people who own use HELOCs.I certainly know people who do. And, of course, most people who own bought before the bubble. I would be interested to know what the percentage of residents who actually pay large mortgages is. It might be much lower than we imagine.

Guest
WFT?
4 years 5 months ago

@N: Good points.

Guest
900kCrackHouse
4 years 5 months ago

12% of my household income goes to rent. 0% to property taxes, 0% to condo fees, 0% to repairs / maintenance, and 0.4% to utilities / energy. I heat my house using the gas fireplace which is on strata fees (landlord). And no, I'm not living in someones basement suite. Nice newer tower, lots of space, huge deck, great location. Twill be the envy of all the "owners" when this ship starts to sink.

Guest
Anonymous
4 years 5 months ago

Another beautiful sunny summer day in Vancouver. Reminds me of the old joke:

Q: What do you call 100 lawyers at the bottom of the ocean?

A: Drier than Vancouver lawyers.

Guest
kansai92
4 years 5 months ago

Haha, Vancouver, sorry, you're not NUMBER ONE for once!

But just keep buying. We'll get there eventually.

Guest
paradox
4 years 5 months ago

"The average family buying a house in the city would need to dedicate 92.5 percent of its income to own a bungalow"

That is 92.5% of the pre-tax income.

Smth does not add up in this city, could it be underground economy, grow ops , or HAM money, I dont know but I am sure we are about to find out in not the too distant future.

jesse
Member
4 years 5 months ago

@paradox: "Smth does not add up in this city"

Marginal buyers ensure things will rarely "add up".

Guest
space889
4 years 5 months ago

@Escapee: How are the healthcare in small towns? I'm sure it's ok for day to day stuff, but what about emergencies? Small towns would not have the same access to specialist on a moment's notice as bigger cities? What about surgeries? Would you have to travel to say GVRD for major surgeries which I also imagine wouldn't be very convenient?

Member
Best place on meth
4 years 5 months ago

R.I.P. Jack. :(

Guest
Anonymouse
4 years 5 months ago

@paradox:

"That is 92.5% of the pre-tax income.

Smth does not add up in this city, could it be underground economy, grow ops , or HAM money, I dont know but I am sure we are about to find out in not the too distant future."

Or perhaps the average family isn't buying houses in the city?

jesse
Member
4 years 5 months ago

@Anonymouse: "Or perhaps the average family isn’t buying houses in the city"

No they use capital gains on condos, family financing, and rental of suites and rooms students to finance the costs. If you want to live in Vancouver and own a detached property there are ways.

If what you state is true the median income for the city should be increasing faster than it is.

Member
DaMann
4 years 5 months ago

@Anonymouse:

Bloody hell. When are people going to stop with saying that? We KNOW the average person with average income is not buying in the city. It's a metric used to show affordability, nothing more. 92.5% of pretax income pretty much states these people are not buying!

Guest
interesting numbers
4 years 5 months ago

10% of my pre-tax household income goes to rent. I do not pay for maintenance or for structural insurance. I also do not pay property taxes. I have an entire newly renovated house for my family.

My landlord would need to have made a 60% down payment to make this rental break even, even in this very low interest rate environment. Her purchase price was around 400 times monthly rent.

Guest
900kCrackHouse
4 years 5 months ago

@interesting numbers: I believe the appropriate metric for this indicator is post-tax income.

Member
/dev/null
4 years 5 months ago

Boomer Retirement: Headwinds for U.S. Equity Markets? http://www.frbsf.org/publications/economics/lette… So, not sure if I have this correct since investing isn't exactly a forte of mine. Lower P/E is bad for older people (Boomers) who have counted their eggs (capital-gains from stock price increases) before they're hatched (sold said stocks)? If so, it's a good thing that many boomers are counting on their home equity to fund their retirement. Oh, wait. But is it correct that a sustained period of lower P/E is more desirable if you're planning to buy stock and collect dividends? i.e. you're buying the same chunk of a… Read more »

Member
4 years 5 months ago

Zero Hedge – Article on Canadian Housing "Perhaps the most defining features of an asset bubble is a marked and persistent deviation from the underlying metrics that once determined fundamental value. We know how real estate in Canada stacks up when compared to GDP, personal disposable income (cities and provinces), rents (cities and provinces), and inflation. It's not pretty. As with any real estate bubble, the overvaluation is most extreme in a handful of cities. The regional data can be seen in the highlighted links. Certainly not all areas of the country have experienced a massive divergence from underlying fundamentals,… Read more »

Guest
Anonymouse
4 years 5 months ago

@DaMann:

"Bloody hell. When are people going to stop with saying that? We KNOW the average person with average income is not buying in the city. It’s a metric used to show affordability, nothing more. 92.5% of pretax income pretty much states these people are not buying!"

Sorry, perhaps I misinterpreted the post that started going on about underground economy and grow-ops.

Guest
Van MD
4 years 5 months ago

Last year it "only" took 72% of disposable income to carry a house in Vancouver. Affordability is seriously eroding.

http://www.vancouversun.com/story_print.html?id=4

jesse
Member
4 years 5 months ago

Leith Van Olsen Messages from the front line in Australia: Real estate agents’ income is dependent on turnover, regardless of whether prices are going up or down. According to Landgate, where all property transactions are registered, turnover has fallen by 40% over the past 5 years. You could say then that income in the industry as a whole has fallen by 40%… purchased for $470k in early 2008. Owner sunk more than $120K in renovations before listing in June 2010 at $600k. Sold in February 2011 for $430k and is currently rented for $450 per week (that's 5.4% yield at… Read more »

Guest
paulb.
4 years 5 months ago

New Listings 222

Price Changes 112

Sold Listings 138

TI:16385

http://www.laurenandpaul.ca

Guest
Keeping an eye on th
4 years 5 months ago

Fatty Deb and Chris were giddy again.

It will all be fine, the expert asserted….prices might drop…

Maybe 2 to 3%.

Guest
fixie guy
4 years 5 months ago

21 DaMann Says: ” We KNOW the average person with average income is not buying in the city. It’s a metric used to show affordability, nothing more.”

Isn't it based on local median income? Math is math, your options are the low neighbourhood household income stats imply purchase money came from another time/place, Vancouver is a city of tax cheats and crooks, or …?

jesse
Member
4 years 5 months ago

After 2/3rds of the month elapsed:

Average Sales 117

Total Sales 1636

Average Listings 233

Total Listings 3263

Average sell/list 50%

Days in month 22

Days elapsed 14

% days elapsed 64%

Expected sales 2,571

Expected listings 5,128

Previous sales volumes

2005 3649

2006 2998

2007 3384

2008 1550

2009 3500

2010 2202

Guest
Van MD
4 years 5 months ago

[China front Update: 8/23/11] China housing market rapidly deteriorating. One third to 40% of developers show declining profits and net losses in the face of government's tightened rules on house purchases and credit applications. Inventories are climbing and sales are dwindling. MOI approaches 10 months in major cities including Shanghai, Beijing, Shenjun, Guangzhou. "We cannot leverage as much as before. In the past, we can build 900M worth of project borrowing with 100M, now we can only get 300M credit" – said one developer. "In the past, we can secure a 500M loan withing 10 days, now it takes 3… Read more »

Member
Best place on meth
4 years 5 months ago

Update on the Kits house featured in a CBC puff piece last week.

http://vancouvercondo.info/2011/08/cbc-marketplac

It sold over the weekend as expected but not over asking as predicted.

Asking price $1.295 million, selling price $1.295 million.

Member
Best place on meth
4 years 5 months ago

@/dev/null:

That makes perfect sense and explains why stock market charts are showing long term bear market signals.

I just wish shorting the real estate market was as easy as shorting the stock market.

Member
nuxfan
4 years 5 months ago

@ 900kCrackHouse: "Twill be the envy of all the “owners” when this ship starts to sink."

I don't know – I'm an owner, I currently pay 0% of my income for housing, and 4% for taxes/ongoing maintenance/strata/utilities combined. I don't envy you.

Member
DaMann
4 years 5 months ago

@fixie guy: Well in my neighbourhood ( point Grey) I would say that most of the people I know have lived here a long time and bought a long time ago. So in a sense the prices are sky high because a few rich people, HAM, overextended hopefuls, very cheap money and what have you have pushed the average prices up. These people around me are NOT millionaires by income, they just happen to now own a home that is worth millions that they bought for a fraction of the cost back when. So what I'm saying is that the… Read more »

Member
DaMann
4 years 5 months ago

I should also add that in my area of Point Grey ( around Alma) is very English based. People talk about HAM but I see mostly English in the area. Some have been here for decades some are new. What does this mean? No idea, but a part of me would like to see foreign ownership laws. I simply can't see a case against it unless you are a home owner wanting to cash out!

Guest
lol cats
4 years 5 months ago

what do meteorologist and bears have in common? both can go on being wrong for long periods of time without perceivably losing face.

now i know what some bears are thinking… you only have to be right once …. (bears feels free to finish this narrow minded statement).

i'm guessing your folks never taught you about money, keep smoking hippies.

Guest
Frank
4 years 5 months ago

Larry just posted on Kitz

Only three sales in the last month, so no-one is buying not even the HAM

jesse
Member
4 years 5 months ago

@DaMann: OK so your neighbourhood is overwhelmingly Caucasian but you want foreign ownership restrictions?

Guest
N
4 years 5 months ago

@DaMann:

The case against ownership restrictions is the case for the free market. People can come here and buy stuff (postcards, restaurant meals, houses, businesses, etc.) and we can go other places and buy stuff. I suppose you could make a case for limiting it to countries that offer reciprocity (US: thumbs up; China: thumbs down) the same way we do with driver licences, but with a few exceptions (like nuclear bombs) I don't think we need the government deciding who can own what.

Guest
Van MD
4 years 5 months ago

[Aug 15 StatsCan update] BC new car sales lags Alberta by >6000 units in June 2011 (the gap was 4000 units back in April 2011).

Year-over-year growth of new car sales in BC (5%) lags Alberta (17.1%), Sask (13.2%), Manitoba (5.9%), Ontario (11.3%), NB (13.6%), and Canadian average (8.4%)

http://www40.statcan.ca/l01/cst01/econ58a-eng.htm

Guest
Van MD
4 years 5 months ago

[StatsCan update – mid July]

Retail trade in BC lags Alberta by $330M in May/11 (widened from $285M in Apr/11)

YOY growth of retail trade in:

BC = 1.4% , which lags

Alberta = 7.8%

Sask = 7.6%

Manitoba = 5.1%

Ontario = 4.1%

Quebec = 2.4%

NB = 3.8%

NS = 2.3%

PEI = 6.0%

NFL = 6.3%

Canadian avg = 4.0%

In fact, BC's retail sales growth from May/10 to May/11 was the second worst in the country, only better than NWT (-2.7%)

http://www40.statcan.ca/l01/cst01/trad43a-eng.htm

Guest
fixie guy
4 years 5 months ago

42 N Says: "The case against ownership restrictions is the case for the free market."

It's a myth, unless you're arguing for the removal of the Western pollution, safety and worker standards enslaving North American business owners from competing 'freely' with the bulk of foreign money. Kudos then for having the intestinal fortitude to sacrifice your descendants for property values and principle. Though it does raise the question why foreigners would still want to come here once that process is complete.

Guest
logic
4 years 5 months ago

And how much in opportunity cost?

———————————–

nuxfan Says:

I don’t know – I’m an owner, I currently pay 0% of my income for housing, and 4% for taxes/ongoing maintenance/strata/utilities combined. I don’t envy you.

Guest
Strataman
4 years 5 months ago

@nuxfan: I don't know; seeem's like a lot (4%) for a pad in a mobile home park?

jesse
Member
4 years 5 months ago

@Van MD: I think part of this dropoff in retail/car sales is due to a decline in in-migration from the past few quarters.

Guest
Anonymous
4 years 5 months ago

@DaMann

Kits/West Point Grey – no HAM? Too English? Too White maybe?

Well, Herr Professurr Henry Yu thinks so too!

http://henryyu.blogspot.com/2010/09/whats-wrong-w

jesse
Member
4 years 5 months ago

So what has done better over various time horizons, Dow, gold, or real estate? See my analysis in the forum

The results are interesting.

wpDiscuz