Limits to foreign ownership
Someone over at the Vancouver Courier is of the opinion that foreign buyers have driven up the cost of real estate in Vancouver.
Of course, capitalism requires competition, and free market principles should drive our housing market. But we no longer control that market. And despite growing evidence of market dysfunction, Premier Christy Clark, who could stiffen provincial regulation, and Mayor Gregor Robertson, who could increase taxes on foreign property owners, cede our land to foreign buyers.
Not so in Australia.
In recent years, Australian cities have experienced Vancouver-style real estate booms, with housing prices soaring from Sydney to Melbourne. Like here, buyers from China help drive Australia’s speculative real estate market. Faced with mounting public pressure, in 2010 the Kevin Rudd government introduced strict regulation aimed at foreign ownership. Under the new rules, the Foreign Investment Review Board (FIRB) screens foreigners (including temporary residents and students) to determine their land purchase eligibility. Foreigners can’t buy existing properties and must build on vacant land within two years of purchase or face government-ordered sale. Scofflaws face capital gains confiscation. Finally, before foreign homeowners leave Australia, they must sell. No more overseas landlords Down Under.
Full article here. Is it time for BC to start looking at regulating home ownership and foreign buying?
January 17th, 2012 at 5:03 pm
What really should happen is that foreign owners' tax rates should be much much higher than locals. I think this will eventually be coming everywere as its very good politically – its a vote getter from locals and those who will have to pay the higher tax (foreigners) can't vote.
January 17th, 2012 at 5:05 pm
Sorry, that was my comment above. I forgot to sign in before posting.
January 17th, 2012 at 6:39 pm
@Anonymous: BC is a big enough province that I see it unlikely that a province-wide solution will be popular. First there isn't much evidence, albeit limited to anecdotal, that foreign ownership is a problem outside a few select areas. Parts of the Okanagan would kill for some foreign $ injections right now. Second if foreign capital turns out to be as fleeting as in past bubbles there will be big pressure to attract direct investment once again if prices weaken. There are too many people sucking at the real estate teat to keep curbs in place under severely bearish market conditions.
In my view it's unlikely BC will issue a collective mea culpa regarding its addiction to property speculation, instead like any good addict doing anything and everything to get high again. A prolonged housing recession would humble a few people, though, and that may be enough to instill some tougher lending measures. If such a narrative reveals itself there will likely be more than a decade to debate.
Boromir says, "One does not simply rebound quickly from a once-in-century housing bubble."
January 17th, 2012 at 8:18 pm
"and Mayor Gregor Robertson, who could increase taxes on foreign property owners"
No he can't. Only the provincial government can. And it won't, because it's joined at the hip to the RE "industry", as Crusty herself effectively pointed out in a letter she wrote to one of our posters.
As for Oz, their token measures against foreign ownership are just a smokescreen against the real causes of the RE bubble there (and everywhere else), namely loose credit and speculation.
Here's a thought experiment for you: suppose the BC government brought in a 100% tax on RE capital gains, effective for any property sold after July 1, 2012. Owner-occupiers could be exempted. What would happen?
January 17th, 2012 at 8:30 pm
Canada’s cities score poorly on economic rankings
But we have a massive housing bubble, while Germany and Texas never did and the rest of the US no longer does. So much for the real economy.
January 17th, 2012 at 8:59 pm
These "new rules" were just going back to how things were up until 2008, and there's no data on how many foreigners actually purchased in the 15 month period when the relaxed rules were in place.
Funny that there's no mention of the fact that Australian cities starting booming in the late 1990s, long before Rudd & Co supposedly opened the door to the yellow hordes.
And the surging prices in 2009-10 certainly had nothing to do with the fact that the RBA had slashed the cash rate from 7.25% in Sep 2008 to 3.00% in Apr 2009 while at the same time state and federal governments were handing out all sorts of homeowner grants.
January 17th, 2012 at 10:40 pm
If wealthy Asians were driving up prices in Canada or Australia, then why have both countries seen a massive rise in debt?
Aussies are, like Canadians, at around 150% debt to disposable income.
January 17th, 2012 at 11:12 pm
Local buyers of all races and hues CANNOT compete with un-taxed, hot, maybe even stolen money coming out of Mainland Chinese.
The result is the locals provide all the services while these these parachute buyers own the city. Those that do buy have to go so far into debt to compete that their futures are put at risk just to own.
Of course there are winners. The sellers are hitting a bonanza. Huge tax-free profits from selling to the mainland Chinese. The sellers are often Baby-boomers like me.
They get to take a huge wad of cash away without paying tax on it, but are getting ready to use healthcare and pensions in a big way. Who pays for this? The same younger renters, salary earners who are getting hit twice.
the system is not working!
January 17th, 2012 at 11:20 pm
any article on high prices that does not at least mention boc/cmhc complicity misses the mark entirely. foreign owners are a convenient, visible target for all sorts of abuse – tax grabs included. but ask a simple question – why should outside sources putting money into the local community be a negative? in fact, why not blame those who sold to foreigners? that would make about as much sense.
January 17th, 2012 at 11:28 pm
@chubster:
You are right that the CHMC and banks have been enablers of this lunacy.
However when a resource is limited it must be protected for the locals (locals of all races- this is not a race issue)
We wouldn't just let anyone come and buy up our oil resources or our farmland, why is residential real estate any different?
Isn't the Government trying to encourage home ownership with the crazy antics of the CMHC?? Well by allowing someone with a wad of untaxed dough from a company they looted in Beijing to compete with that buyer- they are cutting the local buyer out.
The result is either the local buyer gives up or borrows even more to try and compete and in many case this risk is transferred via the CMHC to us all. Crazy!
January 18th, 2012 at 12:23 am
frank, I agree with your posts, except one point:
"We wouldn’t just let anyone come and buy up our oil resources or our farmland, why is residential real estate any different?"
We actually do, in Alberta (tar sands) and Quebec (farmland). More and more sold to foreign investors. See:
http://thinkprogress.org/green/2011/12/03/378752/…
January 18th, 2012 at 12:26 am
@frank:
"We wouldn’t just let anyone come and buy up our oil resources or our farmland, why is residential real estate any different?"
Residential RE doesn't produce tradable goods or services, only a local service at a terrible yield to current prices. I'm a lot more concerned about foreign ownership of productive resources which contrary to what you think there are few restrictions on.
As other posters have said foreign purchases of RE are actually an input to the economy, the damage comes when locals buy at inflated prices (whether actually caused by foreign ownership or not) with government assistance.
That said I think we ought to tax foreign owners of RE much more than locals simply because we can and they don't vote. But I don't think foreign ownership is really the problem.
January 18th, 2012 at 12:38 am
Frank is right.
January 18th, 2012 at 12:40 am
"We wouldn’t just let anyone come and buy up our oil resources or our farmland, why is residential real estate any different?"
Um, actually we already let anyone buy up our oil resources. Canada's oil resources are almost all foreign owned. The government of China (Sinopec), for instance, is one of the foreign owners of the tarsands.
The government of Alberta has aligned itself with China to pipeline tarsand oil through British Columbia. There is nothing that foreign oil companies would enjoy more than the wholesale purchase of British Columbia by corrupt Chinese Communist Party cadres. That will put a stop to pipeline protestors.
Good luck getting the tarsand off your gumboots when you go for a stroll at Kits Beach.
January 18th, 2012 at 12:46 am
@Runawayscreaming:
One of the reasons why there is so much foreign capital going into buying our resources is the lack of domestic household savings due to the housing bubble. People are relying on selling their houses to fund their retirement rather than buying Canadian resource companies.
There is just so much damage from this idiocy and it's going to last a long time.
January 18th, 2012 at 12:58 am
It is not actual buying by foreigners, but rather the perception that there is buying by foreigners, that drives up prices. Unfortunately, hysteria and stupidity cannot be legislated away.
January 18th, 2012 at 1:25 am
nope – will not work. municipal regulations would have no effect as buyers merely would move to other regions in Metro Van. munis also do not have this taxation power
January 18th, 2012 at 1:28 am
@Runawayscreaming: Talking about tar sands and the planned pipeline through British Columbia, if you disagree with it, you can sign the petition against it here: http://dogwoodinitiative.org/no-tankers/petition
I've lived in an area hit 3 times by sinking tankers and I can tell you, it really sucks (the smell, the toxicity, the devastation of large chunk of coast line, etc…). Alaska knows too what an oil spill from a sinking tanker feels like. If it happened there, it will happen in BC as well. By building this pipeline, we'd be taking huge risks with very little economic benefits for BC…
Coming back to real estate, I agree that Vancouver has suffered like any other major Canadian city, from CMHC policies and the absurd amount of debt people have been willing to take on (and banks were willing to give). But Vancouver has also suffered from massive foreign investment as well. If foreign money had no effect on the Vancouver market, prices here would have moved along like all the rest of Canada. In fact, Vancouver prices have been totally out of whack. The best proof of that can be found on the IMF report, p7 – figure 3. http://www.imf.org/external/pubs/ft/scr/2011/cr11…
I personally think that excessive offshore demand for our local real estate has been damaging to our economy and I would favor any measure that would put some form of restrictions to it like in Australia or Singapore. In Bali, foreigners can't own real estate unless they share ownership with a local resident. Without that, Balinese would be priced out. The majority of wannabe first time buyers in Van are already priced out. I don't see how this can be a good thing.
January 18th, 2012 at 1:29 am
On the public MLS, VW SFH just jumped from 602 to 650 in one day. That is insane, yes?
January 18th, 2012 at 1:31 am
@patriotz
In addition to 100% capital gains tax on non-principal residences, they should add Germany-style clauses that you must live at a residence X years before it qualifies as your principal residence. This would squash the flippers, and make people think twice about long term purchases.
January 18th, 2012 at 1:35 am
11 chubster Says: "but ask a simple question – why should outside sources putting money into the local community be a negative?"
The Colombian cartels are reportedly moving into the area. Happy? Are sellers to blame for that too? Consistency counts. Maybe you can expand on how a home seller knows how the buyer earned the payment.
Highly rich, highly productive and highly motivated immigration still presents a challenge but it would be pure idiocy to shut them out. What they bring to the country ultimately benefits everyone. That's not the concern. It's the possibility people are moving to Canada to park their wealth and go into semi-retirement. It throws a monkey wrench into our from-many/to-many social welfare system. Higher taxes, reduced services and massive dislocation to families for people who never have, and in any significant sense likely never will, do anything to benefit the country is self-destructive.
I'll take the middle class and motivated any day of the week, but their bank accounts don't impress the fed as much.
January 18th, 2012 at 1:39 am
@N: Well, without hard data, it's impossible to prove whether you're right or wrong. However, there is sufficient anecdotal evidence to prove that off-shore buyers have indeed played an active role in our local real estate market, particularly in Van West and Richmond. I don't think the stupid bidding wars we saw last year in Richmond were entirely driven by locals…
January 18th, 2012 at 1:41 am
12 frank Says: "Isn’t the Government trying to encourage home ownership with the crazy antics of the CMHC??"
No, and it's finally starting to surface in their releases, they're trying to encourage expansion of the GDP by stimulating real estate and related industries. That it's the party of business pedal to the floor on this economic dead end road is just one of history's little jokes.
January 18th, 2012 at 1:46 am
Here is a graph of VW SFH inventory I put in the forum.
I don't even know how to extrapolate that trend. Stuff is vertical.
At 650 now. Serious possibility of hitting 1000 in close future. Last time that happened was October 2008.
January 18th, 2012 at 2:27 am
@patriotz: "foreign purchases of RE are actually an input to the economy, the damage comes when locals buy at inflated prices"
I know foreign investment is evil but I'm starting to think Canadians should take the money. It's not going to be there for much longer…
January 18th, 2012 at 2:28 am
@VHB: that's an awesome graph – but what's with the missing data?
January 18th, 2012 at 2:29 am
@crashcow: Thanks. Why missing data? Because I get bored sometimes; busy with other things. Stuff like that.
January 18th, 2012 at 2:35 am
another one hits the dust..
Ubisoft shuts down Vancouver video game studio
http://www.straight.com/article-585361/vancouver/…
January 18th, 2012 at 2:38 am
@VHB: way to early to comment, but looking at your graph, you can sort of group the years by the similarity of their listings curves:
'05-07: Boom
'08-11: Gradual topping process
'12-xx: Bust?
January 18th, 2012 at 2:41 am
@VHB: I think that's the first time I've heard someone say they were bored during Oct '08 – Mar '09.
January 18th, 2012 at 2:54 am
@crashcow: Actually, in Fall 2008 realtylink.org changed their search interface and I thought I couldn't continue my data series. In 2009 I realized I could. So I missed some of the fun action. Oh well. More fun to come, right?
January 18th, 2012 at 3:02 am
Strictly from the perspective of my little corner of the woods (West Pt Grey SFH), foreign RE ownership is a glaring reality for me. There is very little RE activity that is not HAM. I am bit by bit coming to live in a ghost town – yearly the number of unoccupied / intermittently occupied dwellings increases.
January 18th, 2012 at 3:15 am
baby boomers are home owners and they are getting rich. fuck the next generation.
it's the story of western civilization.
January 18th, 2012 at 3:49 am
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January 18th, 2012 at 3:51 am
@realist
I have heard the same story from other people.
Might be anecdotal evidence though.
Living in this part of town, I noticed a drastic change of population in the last 2 years.
I often noticed million$ HAM houses occupied by people who looked really poor. Is it their fashion style, or is HAM relying on housekeepers?
January 18th, 2012 at 3:53 am
@VHB: That's amazing.
January 18th, 2012 at 4:10 am
@Makaya:
"…there is sufficient anecdotal evidence to prove…"
This statement can never be true (see the definition of "prove") but anecdotal evidence certainly shapes perception.
January 18th, 2012 at 4:12 am
@Runawayscreaming: …Good luck getting the tarsand off your gumboots when you go for a stroll at Kits Beach….
Yes and be sure to get a nice tinfoil hat to protect you from the crop circles at Vanier park..
January 18th, 2012 at 4:22 am
Must read – "China's Great Swindle: How Public Officials Stole $120 Billion and Fled the Country"
http://www.time.com/time/world/article/0,8599,207…
Shame on you Canada. Isn't is time that Canada get tough about illegal money from China.
January 18th, 2012 at 4:32 am
@frank:
"Local buyers of all races and hues CANNOT compete with un-taxed, hot, maybe even stolen money coming out of Mainland Chinese."
They can, and they do. Foreign sales form an insignificant proportion of all transactions.
January 18th, 2012 at 4:36 am
@MadasHell: "Isn’t is time that Canada get tough about illegal money from China."
What century are you living in? Stephen Harper is PM now, and there is no such thing as a dollar too dirty for him. If it means money coming into Canada (preferably lining the pockets of his benefactors and NOT ordinary Canadians) he'll do just about anything, so long as it only involves selling out 'ordinary' people.
January 18th, 2012 at 4:36 am
@MadasHell: "Isn’t is time that Canada get tough about illegal money from China."
What century are you living in? Stephen Harper is PM now, and there is no such thing as a dollar too dirty for him. If it means money coming into Canada (preferably lining the pockets of his benefactors and NOT ordinary Canadians) he'll do just about anything, so long as it only involves selling out 'ordinary' people.
On that note, guess who owns the largest share of the Oilpatch? Can ya guess?
January 18th, 2012 at 5:01 am
….On that note, guess who owns the largest share of the Oilpatch? Can ya guess? ..
Stephen Harper owns the oil patch? Well, you learn something new every day.
January 18th, 2012 at 5:02 am
@DEFAULT NAME: That's very reassuring. It makes us a whore to the HAM that's coming from China.
January 18th, 2012 at 5:22 am
To me Vancouver has definitely turned into a whore city.
This is the main reason why I don't feel I belong here.
To be frank, I had a completely different perception of what defines Canada a few years ago.
I am still wondering how far we can go for $$$.
January 18th, 2012 at 5:23 am
"That’s very reassuring. It makes us a whore to the HAM that’s coming from China."
I sold my Kerrisdale inflated character bungalow to HAM in 2008. Should I feel dirty now!! fuck it. I don't give a shit when i am counting my dineros every night.
January 18th, 2012 at 5:38 am
@DEFAULT NAMEe: "Foreign sales form an insignificant proportion of all transactions." How do you know? Did you just make that up or do you have data to back-up your claim?
January 18th, 2012 at 6:16 am
@N: "This statement can never be true (see the definition of “prove”) but anecdotal evidence certainly shapes perception."
Definition of "To Prove": To establish the truth or validity of by presentation of argument or evidence.
There has been countless of anecdotal evidence to substantiate that HAM had an effect on the local RE market. The only thing we don't know is what is the extent of that influence on the current RE valuation. Here are just a few of the evidences that help understand how it all works:
- Vreaa: "Some feel that the Chinese are to blame for the hefty price tags on Vancouver homes. Recent economic prosperity in China has led to the emergence of a huge class of ‘new rich’ and they are buying up Canadian real estate" – Cam Good
- Time Magazine: "How Public Officials Stole $120 Billion and Fled the Country": "China has not signed extradition treaties with the U.S. or Canada, the two most used destinations, so once the official has run away, the chance of catching him and putting him on trial is close to zero."
- The Economist: "A window on China": "But it is not just a passion for cards that brought more than 13.2m mainlanders to Macau in the first ten months of this year. Many come to elude China’s strict limits on the amount of yuan people can take out of the country. (…)According to the Hurun Report, a wealth researcher, some 14% of rich Chinese say they have already left the country or are filling out paperwork to obtain a foreign passport. Another 46% are considering one of these steps. A recent report by Bank of America Merrill Lynch warned about the destabilising effects of “hot money” speeding out of China this year."
No exoplanet has ever been seen directly by a telescope, but there is enough evidence to prove that they exist. Would you deny it?
January 18th, 2012 at 6:21 am
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January 18th, 2012 at 6:21 am
You might want to start by defining 'foreign'. Does it include price pressure from immigration?
January 18th, 2012 at 6:26 am
@Makaya: She is referring to stats that reference the addresses buyers register with the land title office. But as the article says, "foreigners often use local addresses (their lawyer’s office, for example) when registering with the provincial land title office". So it is not a reliable metric. I trust the anecdotal evidence from people who actually live in the affected neighbourhoods more.
Also, "foreign ownership" is a fuzzy term. Strictly speaking, it refers to non-citizens. But surely a large part of the problem are passport-of-convenience astronaut families as well.
January 18th, 2012 at 6:30 am
Our usually bearish friend Nouriel Roubini doesn't see any bubble trouble here apparently:
http://www.huffingtonpost.ca/2012/01/17/nouriel-r…
I'm quite surprised by this, I have always found his analysis bang on…
January 18th, 2012 at 6:38 am
@Congo:
He apparently doesn't see any prices, rents, or incomes, either. Or at least the article doesn't mention them. No objective metrics at all.
I would expect better from Roubini.
January 18th, 2012 at 7:01 am
HAM was good to me. They gave me financial freedom after I sold by bungalow. HAM was more generous then my greedy employer where I did not see the raise in 5 years. I don't give a shit that astronaut father and knock of Louis Vutton mother live in prime Kerrisdale location. All the white neighbors cashed in as well. With one of them I bought condo in Boca Raton, Florida at the bottom price. Thanks HAM.
January 18th, 2012 at 7:02 am
@Makaya:
It's been posted on here many many times.
January 18th, 2012 at 7:16 am
"I sold my Kerrisdale inflated character bungalow to HAM in 2008. Should I feel dirty now!! fuck it. I don’t give a shit when i am counting my dineros every night."
The problem is that the government is corrupt and has vested interest in real estate.
The government being elected, it is everyone's responsibility.
We are all responsible for worshipping $$$.
January 18th, 2012 at 7:18 am
@DEFAULT NAMEe: So you just made that up… the data doesn't really exist since, as fixie guy and silverfish city said, foreign investor is not clearly defined and a lot of people buying from overseas use the address of their lawyer.
The truth is, we don't (and probably will never) know exactly how many people are buying RE here directly or indirectly from overseas. As I said in previous posts, there is however sufficient anecdotal evidence to substantiate that the effect of foreign money (regardless of how you define it exactly) has had a significant influence on the market, especially in areas such as Richmond and Vancouver West.
"on ne peut faire boire un âne qui n'a pas soif"
January 18th, 2012 at 7:27 am
Ok, here's my tiny anecdote since I read this thread daily for Paulb's numbers out of personal interest (Not a home owner and not wanting to be any time soon).
I went to TD today to transfer from RRSP's from another institution. While making small-talk with the FSM, I said "Must be busy season for you guys with RRSP deadlines approaching."
"Yes, very busy. Also since TFSA limits increased on Jan 1 (as they do every year), and also because we are having a 'special promotion' on mortgage rates at 2.99%.
'Oh, lots of people looking to buy houses with the even lower rates?'
'yes, A LOT of people buying…(then she paused)… still'
Its not showing in the numbers right now, but maybe we'll see an up-tick in sales once these mortgages get approved
January 18th, 2012 at 7:33 am
@Congo:
Roubini is right. Though, there is no "national housing market" per se.
He admits there is some "frothiness" which he's probably referring to Vancouver, Toronto and a few other major cities across the country.
A few city bubbles burst – it's not going to impact the National average that drastically due to the size of the sample.
January 18th, 2012 at 7:39 am
@Kaidub:
I've a similar anecdote, people that were waiting are waiting no longer and are looking to take advantage of the low rate offers of the big banks.
Again, I'd be happy to be wrong but I can't see any bubble bursting this year. Rates will remain low til next year at the earliest.
January 18th, 2012 at 7:45 am
poor guy..
http://vancouver.en.craigslist.ca/van/reo/2806472…
January 18th, 2012 at 8:03 am
@Makaya: "So you just made that up"
No, the data has been posted here before, and I can't be bothered to find it again just because you're too lazy to look for yourself. Check for links to Landcor data from last year.
January 18th, 2012 at 8:09 am
@Vansanity:
that's why Flaherty is "keeping a close eye on Greater Toronto and Greater Vancouver market", and is "ready to intervene" (with mortgage rule tightening) if things heats up too much.
January 18th, 2012 at 8:13 am
@DEFAULT NAMEe: You make a claim without backing it up, so I call that a made-up argument. Call me lazy if that makes you feel better, but that doesn't prove you didn't make it up.
January 18th, 2012 at 8:23 am
@Vansanity:
"Though, there is no “national housing market” per se."
This isn't a "national housing market" per se in the US, either.
"He admits there is some “frothiness” which he’s probably referring to Vancouver, Toronto and a few other major cities across the country."
You mean like Alan Greenspan in 2005?
"A few city bubbles burst – it’s not going to impact the National average that drastically due to the size of the sample."
Yes it is because the five million+ metros outside Quebec account for more than half the total RE valuation in the country.
January 18th, 2012 at 8:30 am
[Canadian Government: We'll Intervene If Housing Market Softens]
- umm…..who's writing these articles at mortgageorb.com ?
http://www.mortgageorb.com/e107_plugins/content/c…
January 18th, 2012 at 8:47 am
@Makaya:
Look, anyone who has been here for a while has seen the data. On VCI this is accepted, just as in a room of scientists it's accepted that the earth is flat. Go search VCI or look it up yourself. DNe is just stating a well accepted fact. I can't blame him for not digging up the data to satisfy some guy who showed up yesterday.
Stick around. Sooner or later we'll go over it again.
January 18th, 2012 at 8:54 am
@VMD:
I'm "glad" Flaherty is "on it" ready to make a change if the local market "heats up too much". Some might say it's been too hot for 3 years and counting…
@patriotz:
"This isn’t a “national housing market” per se in the US, either."
I'm not sure what that means. But no, I shy away from thinking of real estate on such macro scale.
"You mean like Alan Greenspan in 2005?"
Sure, if you say so.
"Yes it is because the five million+ metros outside Quebec account for more than half the total RE valuation in the country."
The larger the sample, the less impact one part of the same has, n'est pas? ie. if Vancouver RE crashed by 50% and the rest of Canada stayed flat, the impact on "Canada's real estate market" would be less then 50%.
January 18th, 2012 at 9:05 am
All the 2.99 mortgages are going to do is steal existing mortgage customers from other banks, this is not enough to stimulate new buyers IMO.
January 18th, 2012 at 9:15 am
@fixie guy: "You might want to start by defining ‘foreign’. Does it include price pressure from immigration?"
That is what seems to confuse people. When ever a Chinese person buys a place everyone assumes this is "foreign ownership" when it is not in almost all cases. Most are citizens and landed immigrants. They are not "foreign" by the true definition (as would qualify as foreign in Australia). My guess is very few houses are actually bought by true Chinese foreign owners. I bet less than 1% in Richmond, Van West and West Van and almost non existent in other areas. I also bet there are way more American foreign owners than Chinese in BC.
But hey it was a great real estate marketing ploy that even sucked in many around here.
January 18th, 2012 at 9:18 am
All the 2.99s are on 25 year amorts. It’s logical to think that those that are stretching to get into the market (which I’d bet most locals are) typically are going for the 30 year amorts. If you do the math and take a 50 bps reduction on your interest rate (banks were roughly 3.5% before) but find that you now need to amortize over 25 years, you’ll see that the total mortgage you can afford is roughly the same or even less
This 2.99% deal isn’t going to move the needle on home prices with the current offer.
January 18th, 2012 at 9:21 am
@crashcow:
Boom: I buy 3 husba buy 3
Topping Process: I buy 3, husba sell 3 (I tell husba he stupid)
Bust: I sell 3 husba sell 3
January 18th, 2012 at 9:23 am
@DEFAULT NAME: "When ever a Chinese person buys a place everyone assumes this is “foreign ownership” when it is not in almost all cases. Most are citizens and landed immigrants."
I agree with you and this is why it is confusing. I actually have a great example that shows how difficult it is to make the difference.
A friend of mine, from mainland China, came here to to get her Master Degree at UBC a few years ago. Once she got her PR, she sponsored her parents to join her here. They'd never been in Canada before, they literally don't speak a word of english. Once the parents got here, with all the immigration paper done properly, they bought a $3 million house in Dunbar for them and their daughter's family. They now live permanently here.
Question: is this foreign money or not?
January 18th, 2012 at 9:30 am
What about PR who buy a home to launder mainland money transiting through Macau?
Is this foreign ownership?
January 18th, 2012 at 9:36 am
@YLTN @ Work:
Also, the 2.99 mortgages have several limiting factors.
one being it's fixed (so more penalty for breaking it)
another being it's 25 years max amortization
I believe there are a couple other limiting qualification criteria.
My understanding is, short-term flippers/speckers would prefer variable over fixed, if the rates are similar. Is that correct?
January 18th, 2012 at 9:43 am
@Makaya:
"Question: is this foreign money or not?"
Sure it's foreign money. But everyone who takes out a mortgage to buy a house today in Canada is using foreign money, because (as the media have been pointing out) a lot of foreign money is coming into the Canadian bond market and driving rates down. In fact the country is running a current account deficit, which is unprecedented at a time of high commodity prices (in other words, the country is living beyond its means at a time when it has no excuse to).
So talking about "foreign money" is essentially a waste of time, and the only quantifiable statistic is foreign ownership, i.e. ownership by someone not legally resident in Canada.
January 18th, 2012 at 9:51 am
New Listings 273
Price Changes 44
Sold Listings 57
TI:12570
http://www.laurenandpaul.ca
January 18th, 2012 at 9:54 am
@paulb.: keep that s/l near 20%!
January 18th, 2012 at 10:03 am
@Makaya:
Interesting anecdote. While I applaud your friend for her masters degree and, personally, would do as she has for her family, it's worth mentioning the expected cost of providing healthcare for her parents.
In 2008, the govt was spending about $11,000 a year per senior over the age of 65, rising to $20,000 for those 80 and over. Today, it is significantly more.
So, assuming two parents reside in Canada from the age of 65 and live for 20 years, the combined cost to the taxpayer will be well over half a million dollars.
I don't know how old your friend is but assuming she makes an average of $100,000 a year for the next 20 years, her total tax paid would be about, well, half a million.
So she has the health costs for her parents about covered, but everything else from the healthcare of herself and her children to various infrastructure is basically a subsidy — a subsidy from resident Canadians to non-Canadians.
And this is for a masters grad from UBC. How many immigrants are earning a 100 grand?
January 18th, 2012 at 10:06 am
How many years of underperforming a bank savings account does it take for the pure speculative component in the RE market to lose interest and dry up? 4 years is an awful long time…
January 18th, 2012 at 10:09 am
@Makaya:
"You make a claim without backing it up, so I call that a made-up argument"
https://www.landcor.com/market/reports/Metro_Vanc…
Page 20
January 18th, 2012 at 10:38 am
@chip: "assuming she makes an average of $100,000 a year for the next 20 years"
Well, it turns out that she's not working, she's now a stay at home mum and her husband works in China and travels back and forth. so they don't really pay income taxes here…
My point is, I doubt she's the only one to have adopted that strategy to immigrate to Canada. This is just one alternative way to immigrate here and I bet there are other creative way of doing it. And while not considered as foreign money in the stats, these people have had an impact on the local RE market. How much impact? Impossible to know. But denying it is, in my opinion, refusing to see the reality for what it is.
January 18th, 2012 at 10:41 am
You know, we really should have some specialty inventory parties this year just for fun. Some suggestions:
west side SFH – 1000
Richmond SFH – 1000
REBGV+FV – 30,000
Any other suggestions?
January 18th, 2012 at 10:57 am
@Makaya: "Question: is this foreign money or not?"
There is a difference between foreign money used to buy a house and foreign ownership. If you want to restrict foreign money you may as well move to a place like Cuba or North Korea. They would be the only places left with anything close to those restrictions. Yes you can buy a cheap house in either of those places but there are a few other negatives that go with it.
January 18th, 2012 at 11:08 am
@crashcow:
Looking back at same time last January (12th business day)
Sales: 129
Lists: 257
S/L: 50%
…Today we're at 21% S/L
January 18th, 2012 at 11:12 am
@Makaya: "these people have had an impact on the local RE market"
Yes Immigration will have an impact. We have had immigration coming into BC for a long time. Even in the busts. The impact is minimal and has been part of the price structure for decades.
If an immigrant comes here you have to assume they will need a place to live. What will impact the average person here more:
1. Immigrant rents a condo
2. Immigrant buys a modest house in the suburbs
3. Immigrant buys a 3M house on the west side
1 and 2 would have a bigger impact on the average person because that is the type of house the average person is looking for. The 3M house makes the news but most people would not be in the market for this type of house even if the price were cut in half.
January 18th, 2012 at 11:32 am
I believe a lot of what we're perceiving as HAM activity is really collusion by real estate industry insiders. I've seen one example of this, personally.
January 18th, 2012 at 11:52 am
@DEFAULT NAME: "1. Immigrant rents a condo" (…) "1 and 2 would have a bigger impact on the average person because that is the type of house the average person is looking for."
So would you say that an immigrant that rent a condo in the lower mainland has had more impact on the RE market that an immigrant that won a bidding war in Richmond or Van West?
"There is a difference between foreign money used to buy a house and foreign ownership." That I agree, but how do you differentiate someone that got a passport "for convenience" and that does not really live locally from someone that is a "pure" foreign investor?
"If you want to restrict foreign money you may as well move to a place like Cuba or North Korea." I think countries like Singapore and Australia have put in place some form of foreign restrictions and they are not communist dictatorship as far as I know…
Apart from controlling a bit better the origin of the funds in order to make sure that the local RE market is not used as a laundering machine, I think a possible measure for ownership could be a simple residency requirement for immigrants, the same way it is for citizenship. If you're a PR and want to become a Canadian citizen, you have to be physically in Canada for 3 out of the past 5 years. A similar measure for home ownership would be fair in my opinion. Do you have any suggestion?
January 18th, 2012 at 12:09 pm
And here is another US blog worried for us…
Canada Home Prices: What, Me Worry?
"They still seem pretty sanguine about home prices north of the border, but, if the country I lived in appeared in the far right position of a chart like this one from a recent IMF survey on global home prices, I’d be a little concerned about not overdoing it on credit and maybe selling an investment property rather than buying another one."
(…)
"Investor owned condos… You don’t hear too much about that in the U.S. these days, but they were a hot topic in places like Miami and Las Vegas in 2005…"
January 18th, 2012 at 12:22 pm
@Patiently Waiting: "HAM activity is really collusion by real estate industry insiders."
Being the devil advocate here… If that's the case, does this mean that the RE industry in the other major cities (including Victoria)is not as "smart" or efficient in driving the prices up than in Vancouver?
January 18th, 2012 at 12:33 pm
My 2 cents: Discussing anti-immigration legislation in this country is futile and it will never happen. Nor should it. Instead, some legislation focussing on weeding out criminals and thieves who stole their money from China would be more effective and have a higher chance of being approved. Canada needs the entrepreneurial energy of its immigrants – from China or elsewhere. We don't need tax dodgers and thieves who steal money from their home country to hide here (especially when they also avoid every possible tax in this country as well).
January 18th, 2012 at 12:36 pm
west side SFH – 1000
Richmond SFH – 1000
REBGV+FV – 30,000
Any other suggestions?"
Cam Good has no sales in a month
January 18th, 2012 at 12:46 pm
@Makaya:
No I am saying it would have a bigger impact on the average person. The average person is more likley to be competing to rent the condo over bidding on the 3M house. How many friends do you have that a) recently rented a condo B) recently bid on a 3M house
To get a passport you have to go through an immigration process. Big difference. Maybe the immigration process needs to weed out people who will not help our economy, but either way the immigrant will need housing. If you want to see what a country looks like with no immigration look at Japan. Not pretty.
Some form yes. It wouldn't impact 99% of the foreigners you are referring to. It would not apply to the person with a passport for example.
How is it a laundering machine? Do you know what laundering money is?
Restrictions on who can leave and for how long? Sounds like North Korea to me.
January 18th, 2012 at 12:47 pm
Testing a new function on the new forum:
Questions and Answers
Including functionality to vote up or down questions and answers.
If you have a question about Vancouver real estate, rent prices, etc..
Try it out, your VCI log in information will work there:
http://vancouverpeak.com/questions/
January 18th, 2012 at 12:54 pm
@Makaya: "If that’s the case, does this mean that the RE industry in the other major cities (including Victoria)is not as “smart” or efficient in driving the prices up than in Vancouver?"
Every real estate marketer in every city tries the foreign buyer, running out of land, priced out forever stuff. Just not everyone falls for it. The bubble wasn't created by the real estate industry. The bubble is a symptom of easy and cheap credit. Victoria is in a bubble too. How much HAM do you see in Victoria?
January 18th, 2012 at 12:59 pm
Something to consider for the first 12 business days of 2012.
Last year inventory increased by 1100 over the first 12 days.
This year, 2000.
January 18th, 2012 at 1:12 pm
@Best place on meth:
"Last year inventory increased by 1100 over the first 12 days. This year, 2000."
How do actual sales compare?
January 18th, 2012 at 1:12 pm
@Makaya: Well, I've lived in a few Canadian cities and am familiar with others, and Vancouver has more real estate hype than anywhere. As has been often mentioned here, real estate is a huge part of this city's economy. Probably more than anywhere else in Canada. In that sense, we are different.
January 18th, 2012 at 1:14 pm
@DEFAULT NAME: "No I am saying it would have a bigger impact on the average person."
Then how do you explain that rents in Vancouver have not been increasing faster or at least as fast as house prices?
"Maybe the immigration process needs to weed out people who will not help our economy"
Indeed…
"How is it a laundering machine? Do you know what laundering money is?"
Well, you just have to read the newspaper to understand how it works. For the corrupt money coming from China, it's pretty simple: it's stolen, then converted in Macau and then invested in RE overseas. Refer to that message I wrote earlier for references. RE is indeed used to launder money, nothing new here (ask the Bacon brothers how they were doing it).
"Sounds like North Korea to me." Really? I guess you've lived there to say so…
January 18th, 2012 at 1:18 pm
[...] The Pope for Vancouver Condo Info, 2012. | Permalink | 42 comments | Add to del.icio.us Post [...]
January 18th, 2012 at 1:20 pm
@DEFAULT NAME: "Every real estate marketer in every city tries the foreign buyer, running out of land, priced out forever stuff. Just not everyone falls for it." So does that mean that Vancouverites are dumber (or greedier) that the other Canadians?
January 18th, 2012 at 1:35 pm
@Makaya: "So does that mean that Vancouverites are dumber (or greedier) that the other Canadians?"
Maybe you have not been paying attention but the whole of Canada is in a bubble.
January 18th, 2012 at 1:38 pm
@Patiently Waiting: "Vancouver has more real estate hype than anywhere. As has been often mentioned here, real estate is a huge part of this city’s economy. Probably more than anywhere else in Canada. In that sense, we are different."
I agree with you. I read that article today: Land of Destiny: a history of Vancouver Real Estate. It's funny how, 100 years ago, the behaviors, trends, patterns were exactly the same as today.
It's a very good read. Speculation in Vancouver RE has always been a combination of local craziness and foreign investor. Nothing new today. We all know about the craziness of the locals, we just want to refuse to admit that there is a foreign component to it…
January 18th, 2012 at 1:40 pm
@Anonymous:
It was (is) easy to create HAM hype with so many local Chinese driving leased cars and hardly speaking English. Perception is a miracle.
January 18th, 2012 at 1:42 pm
@DEFAULT NAME: "Maybe you have not been paying attention but the whole of Canada is in a bubble."
Yes, but not every places have been as insane as Vancouver… In Montreal, Halifax, etc. you can still "afford" a place with an average income.
January 18th, 2012 at 1:42 pm
@Makaya:
Vancouver certainly has more Chinese speaking (and Chinese looking) people buying houses than other Canadian cities, and that makes it easier for people to attribute sales to Canadian residents as (foreign). It's also true that quite a few houses are being bought with money from China. But that does not mean that prices are being driven up by these purchases.
Consider the price of hotel rooms in Vancouver. They fluctuate with demand, and some hotel rooms here are no doubt occupied by people from China. In fact, it's a reasonable guess that more hotel rooms are occupied by Chinese nationals in Vancouver than any other Canadian city. But no one says the Chinese are driving up the prices of hotel rooms in Vancouver.
January 18th, 2012 at 1:46 pm
@Makaya: And from the same article, this great lesson from the past. Maybe that's what awaiting us again, History repeats itself, unfortunately:
January 18th, 2012 at 2:05 pm
it's just meant that Makaya is dumber than the rest of the world.
January 18th, 2012 at 2:32 pm
@Anonymous: ….r is PM now, and there is no such thing as a dollar too dirty for him. …
Is it any wonder the Liberals want to legalize pot – so nuts like you can join the party.
January 18th, 2012 at 7:37 pm
@Makaya:
"So does that mean that Vancouverites are dumber (or greedier) that the other Canadians?"
Of course that's what it means. Or as Robert Shiller put it more politely, "Vancouver is the most bubbly city in the world".
Sorry if this comes off sounding rude or arrogant, but get some exposure to the rest of Canada (or the US today) and you'll see clearly what a bunch of greedy fools the city is.
January 18th, 2012 at 8:42 pm
@Makaya: There was high immigration 100 years ago too; it's harder to have a property bubble with a declining population.
Stories from prairie towns of that era were equally as speculative.
January 18th, 2012 at 9:46 pm
77 patriotz Says: "So talking about “foreign money” is essentially a waste of time…"
It makes about as much sense as saying it's all the same because the money is printed in the same mint. If the fed is using immigration quotas to sustain operating expenses – I posted a back-of-napkin calculation here before suggesting the yearly intake from the Investor program alone approached the Canadian federal deficit – and bolster GDP, and not doing due diligence on the source of incoming wealth, that's a world away from the 'same money' earned from the internal generation of goods and services. In that respect it doesn't significantly matter in the short term if the source immigrates here to retire or remains abroad.
Foreign earned money is foreign money, citizen or not, and far from a waste of time.
January 18th, 2012 at 9:54 pm
106 N Says: "Vancouver certainly has more Chinese speaking (and Chinese looking) people buying houses than other Canadian cities…"
Only per-capita, and slightly at that. In absolute numbers more settle in the Toronto area by far. Ironically, I was driving through Markham recently just after dusk on a Sunday and was surprised to see how few SFH's at the north end of the newest 'Chinatown' we lit. Block after block was dark. That's not typical of homes in the Toronto core.
January 18th, 2012 at 10:14 pm
@fixie guy: If you want an idea of who's around, break out the thermal camera on a day like today's.
January 18th, 2012 at 10:48 pm
If this market was driven by foreign demand, than why all the local hype?
In what other city would the media send reporters to cover some slimeball and a bunch of realtards flying around in a helicopter and call it "news"?
Anyhow, this crap has gone on far too long. If we are "different" or if the bubble burst, it doesn't matter now, this city is ruined for years…decades really.
January 18th, 2012 at 11:15 pm
@Patiently Waiting:
If the market were driven by foreign buying, only foreigners would be buying. As you say, the amount of money and effort spent to market to locals speaks for itself.
January 18th, 2012 at 11:48 pm
House ‘A’ and House ‘B’
Each of these houses is not like the other:
http://wp.me/pcq1o-3za
January 19th, 2012 at 12:07 am
@MadasHell: 'Each escaped official stole, on average, $7 million
Read more: http://www.time.com/time/world/article/0,8599,207…
January 19th, 2012 at 12:34 am
Vancouver can evaporate 7 mil, not very fast but eventially it will turn into smoke. Especially when everybody understand RE here doesn't worth asking price and there is no jobs and no world class city entertainment.
HAM and everybody RE addicted will suffer in so many ways…
Master, Master, where's the dreams that I've been after?
Master, Master, you promised only lies
Laughter, laughter, all I hear or see is laughter
Laughter, laughter, laughing at my cries
January 19th, 2012 at 1:10 am
West Van realtor makes some compelling arguments for elderly homeowners to downsize and turn equity into cash:
"People try to convince their friends and neighbours they're moving for lifestyle reasons. They want to be able to close the door and go travelling, that sort of thing. But the fact is they're house-poor – they have no cash, and they need the capital from their house."
Usually they get it – most reinvest only about 70 per cent of the selling price in a new place to live. With seven-figure values common in West Vancouver, the 30-per-cent remainder adds up to a lot of cash.
Read more: http://www.vancouversun.com/business/savings+Home…
He also points out how elderly get isolated in SFH and live in neighbourhoods that lack the vibrancy you get from young families.
January 19th, 2012 at 1:15 am
@Patiently Waiting: "Anyhow, this crap has gone on far too long. If we are “different” or if the bubble burst, it doesn’t matter now, this city is ruined for years…decades really."
Sad but true. This bubble has been damaging for most people, and will be nasty for pretty much everybody once it bursts.
January 19th, 2012 at 1:24 am
@Makaya:
"nasty for pretty much everybody once it bursts."
Isn't it bursting now? What does a bursting bubble look like in the early stages? I wonder if anyone konws. Can we compare the dramatic data we are now seeing to the bursting of the bubble in other markets?
If someone has th day off today, perhaps they can put together a statistical picture of a bubble starting to burst.
January 19th, 2012 at 1:24 am
@patriotz: "If the market were driven by foreign buying, only foreigners would be buying. As you say, the amount of money and effort spent to market to locals speaks for itself."
Let's just say that there has been more than one driver behind this bubble. In addition to the main factors (CMHC and dirt cheap money), I would say (in order of importance):
- local craziness (i.e. local speculation as per Vreaa's definition)
- immigration (genuine and not so genuine)
- foreign speculation
January 19th, 2012 at 1:32 am
@WFT?: "Isn’t it bursting now? What does a bursting bubble look like in the early stages?"
I would love to believe so, but it's still a bit early to call it a burst (remember 2008/2009). I guess by the end of the summer, we'll have a better idea whether the early signs of weakness we're witnessing now are the "beginning of the end" of this bubble or just "noise". We'll see.
January 19th, 2012 at 1:45 am
I've had two friends buy their first homes in the past two weeks (Vancouver-born WASPS), both their first purchases, both SFHs on the East Side, both with at least $200K in inherited money, and both of whom are aware of the bubble potential but are so desperate to own their own detached property. Both paid in the $700-$800K range for houses that probably require a shitload of work.
I'm 38 and make $100K/yr (2 kids wife not working) and could probably over-leverage myself, spend the next 5 years on reno's, cut my lviing space in half by having to get basement suite tenants… but we're still content (just barely) to sit on the sidelines like we have been since 2007. But the persistence of this f#@!ing bubble is really starting to get to me.
January 19th, 2012 at 2:00 am
222 years of interest rates!
http://www.ritholtz.com/blog/wp-content/uploads/2…
January 19th, 2012 at 2:02 am
@crashcow: 30-yr us treasury bond yield
January 19th, 2012 at 2:07 am
@Makaya: Agree, it's too early to make a call (like CBC with "calling" elections) of another severe housing market recession.
In 2008 weakness first appeared in March and really became evident in June/July that things weren't all peachy. That said, 2010 exhibited all the signs of 2008 for the first 5 months of the year but sales recovered in the second half of the year and we all know about 2011's craziness in the first few months (especially March).
See here: http://housing-analysis.blogspot.com/2012/01/grea…
Look how closely 2008 and 2010 inventory and sales tracked each other through the first few months, only for 2010 to get another jolt of energy from July onward.
One thing I can say is that, so far, 2012 is different, and not in a good way if you want higher prices.
January 19th, 2012 at 2:15 am
Rob Carrick on Facebook put up a crazy graph of Canadian real estate. Realtors trying to talk down the obvious concern….pretty funny
http://www.facebook.com/robcarrickfinance
January 19th, 2012 at 2:17 am
@Makaya: The other thing I should note is that the aggregate numbers hide that not all parts of REBGV have been doing as well as the areas most concentrated on by this and other blogs. That is, while foreign capital flows were almost assuredly positive into neighbourhoods like Van West, West Van, Richmond, and potentially Burnaby and North Van in the first half of 2011, other regions were not doing so well. Fraser Valley, while not crashing, has been struggling since 2009. This is the so-called "bifurcation" mohican has highlighted before.
Prices in Vancouver and surrounds are certainly high but I don't think the market has gone from "nutzoid" to "ludicrous" in many areas; it's just been in a holding pattern. A shift of 10% lower sales and 10% higher inventory (say) would see some retrenchment of prices in these areas; in my view we could see something approaching sanity within about 5-6 years with such conditions. In terms of housing busts that's not an unreasonable time scale, though for many families waiting that long puts their children half way through grade school.
As for the near-burbs and Vancouver proper, something more dramatic would be necessary.
January 19th, 2012 at 2:17 am
@DEFAULT NAMEe:
"Patience serves as a protection against wrongs as clothes do against cold. For if you put on more clothes as the cold increases, it will have no power to hurt you. So in like manner you must grow in patience when you meet with great wrongs, and they will then be powerless to vex your mind."
Leonardo da Vinci (1452 – 1519)
January 19th, 2012 at 2:50 am
@Makaya:
"Let’s just say that there has been more than one driver behind this bubble…
- immigration (genuine and not so genuine)"
Immigration (or domestic migration) does not and cannot cause bubbles. If the demand for shelter grows faster than supply you will see increasing real rents (we haven't even seen that in Vancouver, rather real rents have been declining). But prices out of proportion to rents (i.e. a bubble) are a result solely of buyers willing and able to pay such prices.
Now immigration may lead to misconceptions which result in people paying inflated prices, but that doesn't make it a functional cause.
January 19th, 2012 at 3:14 am
@130 jesse: Fraser Valley benchmark prices have risen as 'nutzoid' as the rest, 240% from 2000 values in a decade. Quick Google result:
http://www.fvreb.bc.ca/statistics/Package%2020111…
Perspectives may have morphed since the days when all BC was on fire and 3/4 mill was asking for a 700 sq. ft. leaning old timer with granite counter tops in Revelstoke but there's little value gained in downplaying the situation in the Lower Mainland. In any long term historical sense, it's still toon town.
January 19th, 2012 at 3:15 am
Uh oh, Scotiabank is selling its Bay St. tower
http://www.theglobeandmail.com/globe-investor/sco…
Last time banks did that was just before another bubble burst:
"Royal Bank of Canada (RY-T52.990.541.03%) sold its head office and portfolio of more than 30 buildings in the late 1990s. In 2000, Canadian Imperial Bank of Commerce (CM-T76.341.111.48%) sold its Commerce Court complex of four buildings, including a tower right across the street from Scotia Plaza, for $618-million. That’s the current record for a single sale of an office complex in Canada."
January 19th, 2012 at 3:22 am
And another MSM article pointing to the danger of Real Estate!
Our love affair with home ownership might be doomed
January 19th, 2012 at 3:51 am
@patriotz: “If the market were driven by foreign buying, only foreigners would be buying. As you say, the amount of money and effort spent to market to locals speaks for itself.”
Not so. The banks don't do valuations based on rent, they do them based on comps. Access to leverage and credit is determined by how much the last HAM spent on the house down the street. Even if only 1/5 of the sales were HAM, the taps on the bank vault still open wider for all and sundry.
In cali it was often pump and dump schemes by realtors selling to one another that set the comps. Same results. It opens the taps at the banks based on a transient situation. When the comp setter vanishes so do the comps and then the music has stopped.
January 19th, 2012 at 3:56 am
@jesse:
>>>A shift of 10% lower sales and 10% higher inventory (say) would see some retrenchment of prices in these areas; in my view we could see something approaching sanity within about 5-6 years with such conditions. In terms of housing busts that’s not an unreasonable time scale, though for many families waiting that long puts their children half way through grade school.<<<
If they buy a $500K house now and it falls by $50K per year then they're not doing their children any favours by losing patience and jumping in.
Better to rent and wait.
January 19th, 2012 at 4:11 am
@Best place on meth: "Better to rent and wait."
A family who made that call in 2005 will likely have waited about a decade for real prices to retrench. Hopefully over that time they will have saved above what they would have by owning.
January 19th, 2012 at 4:25 am
@emmi:
Do you understand what marginal buyer means? Market prices are determined by the buyers who are least willing and able to pay, not the ones who are most willing and able. The richest buyer on the block does not determine the market price, the poorest buyer does.
January 19th, 2012 at 4:30 am
Two million Canadian households would be in trouble if rates went up only 2 points.
http://www.theglobeandmail.com/report-on-business…
January 19th, 2012 at 4:30 am
@jesse:
"Hopefully over that time they will have saved above what they would have by owning."
Someone who bought in 2005 would have paid way more in expenses than rental value at least until 2009. That is money thrown away.
That means that someone who didn't buy in 2005 does not have to wait for the return of 2005 prices to break even with someone who bought then.
Before someone chimes in "that's only if they invested the difference", not it's not, it's up to the consumer to decide when and how to spend their money. Someone who spends less for the same accommodation is ahead on that criterion alone.
January 19th, 2012 at 4:38 am
so you are way too ahead by running all the way to ottawa? the public sector needs quite a bit of arm-chair economists.
January 19th, 2012 at 4:48 am
@WFT?: From that article:
January 19th, 2012 at 7:17 am
@patriotz: Totally agree that it really isn't just about whether or not we've saved equivalent.
I started looking at the housing market in 2002, when our first child was born. We weren't in any position to buy – I was just out of school and there were loans, we'd just had a baby, and we were starting RESP investment – but I thought I'd start learning about the market, start a down payment savings plan, etc. Already it was pretty clear that we would take a "lifestyle hit" to buy, but there were some places that I knew with concerted saving for downpayment, we could reach. In 2003, I started asking other people their experiences. I was raised by a single parent in a rental, so I wanted some sense of what ownership might be like.
First person I talked to was someone looking to sell his SFH and downsize to a condo. He was going to buy first, and then sell – had enough money to do so and wanted to be "good and lazy" about moving: but he kept seeing price wars and lack of inspection in the condos he was looking at, and it irritated him. He said he wasn't going to buy a house like it was grab-and-go at a Boxing Day Sale and that he'd wait until the market cooled down and his home inspector had a chance to get in there and look around. He's still living in his SFH, because he doesn't like being pushed.
In 2005, we had enough of a downpayment to start thinking about buying. I know if we'd bought then and cashed out, we'd be ahead – and from the alternate universe where there could be a permanent bear run, or even just a mild cooling of the market, we'd be behind forever. My investments and my family's income have certainly not tripled since 2005.
Even still, I don't really care.
There's location and space on our side – we would only have been able to buy a suburban condo in 2005 – and in the meantime, life's been pretty good and our commutes have been reasonable. Plus, we had our second child, and we wouldn't have if we were both needing full time work. In very sentimental terms, my second child was worth it, as was the fact that I could take the time. Plus, I've had a career shift. I've had that luxury.
But the truth is that I also don't like being pushed around. I'm stubborn. I didn't buy because I'm of the same mind as that first person I spoke to: I buy nothing on a pressure sale – not phone contracts, not extended warranty plans, and *especially* not a place to live. Since 2005, it's looked like a Roman orgy in Real Estate… Only those Romans enjoyed vomiting and beheadings and that's not really my sort of party.
January 19th, 2012 at 11:19 am
@WFT?: …Two million Canadian households would be in trouble if rates went up only 2 points…
And 85% of those live between Comosun St. and 176 St. God I love this place!