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

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[…] jobs Loans (gifts) from parents Of course, the above all come with additional stress.” [from Anonymous, at vancouvercondo.info 22 Aug 2011 8:21am] Share:TwitterFacebookRedditStumbleUponDiggLike this:LikeBe the first to like this post. This […]

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[…] “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 percentage of household income it takes to buy a property now is just the metric used. What is the % of all properties in Vancouver that is sold every year? 2-3%? I don’t know the exact numbers but there are a lot… Read more »

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[…] “In 2000 I got married, and my wife and I decided it was time to get something more than our apartment. We were making just under 100K combined back then, and bought what we could afford. In retrospect, very good timing, but I didn’t time the market in any way. Truthfully, I don’t care. I like my home, I like where it is, it suits me and my lifestyle – so yes, I guess you could say I’m attached to it. I’m 40 years old, so I’ll probably be here another 10 or 15 years until I stop working, and worry about the next phase of life then – maybe its here, maybe its not. While I don’t believe that housing will keep going up like it has – I’m pretty bearish on Vancouver real estate – I don’t… Read more »

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[…] “In 2000 I got married, and my wife and I decided it was time to get something more than our apartment. We were making just under 100K combined back then, and bought what we could afford. In retrospect, very good timing, but I didn’t time the market in any way. Truthfully, I don’t care. I like my home, I like where it is, it suits me and my lifestyle – so yes, I guess you could say I’m attached to it. I’m 40 years old, so I’ll probably be here another 10 or 15 years until I stop working, and worry about the next phase of life then – maybe its here, maybe its not. While I don’t believe that housing will keep going up like it has – I’m pretty bearish on Vancouver real estate – I don’t… Read more »

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[…] “In 2000 I got married, and my wife and I decided it was time to get something more than our apartment. We were making just under 100K combined back then, and bought what we could afford. In retrospect, very good timing, but I didn’t time the market in any way. Truthfully, I don’t care. I like my home, I like where it is, it suits me and my lifestyle – so yes, I guess you could say I’m attached to it. I’m 40 years old, so I’ll probably be here another 10 or 15 years until I stop working, and worry about the next phase of life then – maybe its here, maybe its not. While I don’t believe that housing will keep going up like it has – I’m pretty bearish on Vancouver real estate – I don’t… Read more »

Anonymous
Anonymous
9 years ago

@nuxfan: ……I don’t think it will go lower than what I paid for it either. I don’t really care until its time to sell it……

Oh, the irony!

nuxfan
nuxfan
9 years ago

@TNT: "Clearly you have a horseshoe up your ass or you are the best market timer ever….or a troll…"

I was clear that I didn't time the market for my home, I just bought when I could do so – the fact that it was just before the market rise is pure luck, and I don't deny it.

As for the market downturn in early 2009… I do know a thing or two about investing. It was a no-brainer to invest in prefs and common shares with dividends approaching 10% while borrowing costs were far from that. I took out another loan in early 2010 to load up on more.

Anonymous
Anonymous
9 years ago

"You can’t sell a fraction of a house in Vancouver."

Sure, tell them to buy you out at current market value.

Anonymous
Anonymous
9 years ago

@Best place on meth: I bought with my family which has traditional Chinese view about land. Add in the non-stop appreciation since we first came here, it's impossible to convince them to sell. You can't sell a fraction of a house in Vancouver.

TNT
TNT
9 years ago

Equity in a home can be utilized without getting rid of the home. In the last 3 years I have borrowed twice against my home to invest – had I not had that equity I would have had to liquidate something else in order to come up with that investment, and for my first loan in April 2009 that liquidation would have been at a substantial loss or would have had to use cash that I didn’t want to use.

_____________

Ahhh…not having to pay for a house because you bought just before the market took off and you invested in the stock market (April 2009) just before it took off as well…

Clearly you have a horseshoe up your ass or you are the best market timer ever….or a troll…

macho nacho
macho nacho
9 years ago

@vangrl: Adding to the vacancy woes are new supply and landlords with a high cost base, who try to pass higher rents down. For most of the 2000s, landlords could raise rents on renewals and be assured of a deal. These days, if the tenant's business is marginal, they will either fold or find cheaper digs on the other side of town, before paying a higher base rent.

nuxfan
nuxfan
9 years ago

@specialfx3000: "The point is, one can ‘cash’ in for huge gains and invest the winnings and rent an equivalent house for less and still call it a home." Sure – I've had homes that I've rented before. I like the home that I own now. The fact that its worth quite a bit more than it was 10 years ago is irrelevant to me – its a good place to be, it costs me nothing other than regular maintenance, taxes, and utilities to live there – all of which are more than covered by income I make from my other non-RE investments anyway. I don't fault anyone for renting or owning, both make sense to different people in different circumstances. To each their own. "There is a huge opportunity cost in sitting on hundreds of thousands of dollar paper gains.… Read more »

Best place on meth
Best place on meth
9 years ago

@specialfx3000:

So many accidental and potential millionaires in Vancouver and yet they don't know what to do next.

This is why certain types of people are just not meant to have money.

Anonymouse
Anonymouse
9 years ago

@specialfx3000:

"Unbelievable how many lottery winners there are in Vancouver that refuses to cash in until they miss the expiry date on the ticket"

Some of them also won't care what the current value of their house is, as their sense of "home" is so strong that they won't consider selling. For example, the senior I mentioned who bought their bungalow for $10K – they could have sold it for $800K. Did they have any intention of doing so? No. Because it's where they live.

jesse
9 years ago

@Van MD: "ups variable mortgage rate"

Why are they doing this? Prime corporate paper hasn't budged relative to the overnight rate. Either the MBS market is starting to demand more risk from smaller mortgage originators or Ottawa is turning the screws.

specialfx3000
specialfx3000
9 years ago

@nuxfan:

Good for you for being attached to your 'house'. Make no mistake, owning or renting makes no difference in defining your 'home'.

The point is, one can 'cash' in for huge gains and invest the winnings and rent an equivalent house for less and still call it a home.

There is a huge opportunity cost in sitting on hundreds of thousands of dollar paper gains. (some even are sitting on millions)

Van MD
Van MD
9 years ago

Unsurprisingly, BMO follows suit, ups variable mortgage rate.

http://www.ctv.ca/CTVNews/Canada/20110823/royal-b

nuxfan
nuxfan
9 years ago

@BPOM: "You honestly don’t care if a big chunk of your gains are wiped out? Too lazy? Too attached to a bunch of plywood and dirt because it’s “home”?" I didn't time the market in any way – in 2000 I got married, and my wife and I decided it was time to get something more than our apartment. We were making just under 100K combined back then, and bought what we could afford. In retrospect, very good timing, but timing the market, never. Truthfully, I don't care. I like my home, I like where it is, it suits me and my lifestyle – so yes, I guess you could say I'm attached to it. I'm 40 years old, so I'll probably be here another 10 or 15 years until I stop working, and worry about the next phase of… Read more »

specialfx3000
specialfx3000
9 years ago

@Best place on meth:

The 'own now or be priced out forever' plagues both potential buyers and existing owners. They fear that prices will go to the moon and if they don't have ownership now, they can never do so tomorrow.

Unbelievable how many lottery winners there are in Vancouver that refuses to cash in until they miss the expiry date on the ticket… coming up soon

Best place on meth
Best place on meth
9 years ago

@vangrl:

I’ve lived in Kits for over 20 years and I’ve never seen so many for lease signs….sad really.

Get used to it, what used to be abnormal is becoming commonplace. It used to be unheard of to have retail vacancies in places like Kits, Chinatown and Robson St. but now they're rampant.

Around this time last year I saved a snapshot of commercial/retail space from the MLS website and there were 252 vacancies in the greater Vancouver area http://www.icx.ca/map.aspx?vs=VERetail&veZoom

Today there are 285.

As you can see the economy is recovering.

Best place on meth
Best place on meth
9 years ago

@nuxfan:

I bought my place about 10 years ago, and its worth nearly 3x now

@space889:

I bought my house 10 years ago too and I only need to put aside 10% of my income for it per month.

I'm wondering why neither of you are smart enough to take advantage of these huge profits, dump an incredibly overpriced asset and rent considering how lucky you were to time the real estate market oh so perfectly.

You honestly don't care if a big chunk of your gains are wiped out? Too lazy? Too attached to a bunch of plywood and dirt because it's "home"?

Seriously, I'm stupefied. Please explain.

jesse
9 years ago

Anyone catch the CBC Radio 1 On The Coast interview with prof Pavlov on renting versus owning?

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[…] “Tell me, how do people survive? We are in Victoria – our family salary is above average – we have 4 kids that don’t do a whole bunch of activities. 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?” – Victoria at vancouvercondo.info 22 Aug 2011 7:42am […]

Anonymouse
Anonymouse
9 years ago

Vancouver to China by rail?

http://www.worldarchitecturenews.com/index.php?fu

"It was first mooted as long ago 1905 by Tsar Nicholas 11, but this week the Kremlin finally gave the green light for a 65 mile (106 km) tunnel linking Asia and North America, taking the epic project a step nearer reality. "

Anonymouse
Anonymouse
9 years ago

@nuxfan:

"this was actually my original point – there are a lot of owners out there that actually own their homes"

Yup, I once met a senior who owned a nice bungalow on the Westside, where they'd live all their life. They paid less than $10K for it. You'd hope that many people who bought their homes over 20 years ago will be close to having it paid off in full by now.