Housing Affordability deteriorates to new low

Thank goodness we don’t have a housing bubble in Vancouver!

Otherwise one might start to worry about these latest numbers on housing affordability.

The housing affordability index takes local family income and then looks at what percent of it would would be required to service the debt on an average benchmark bungalow.

The entire province of BC is at 69.7% and blows away the rest of Canada for overpriced houses. Only Ontario starts to come close with an affordability index of 43.9%. Even Toronto can’t compete in the overvalued housing arena, coming in at 54.5%.


According to RBC Vancouver is the champion of overpriced houses. To buy the benchmark bungalow here it would take 91% of a local families pre-tax income to service the debt.

From Macleans magazine:

Nothing, of course, could persuade condo king Bob Rennie that the Vancouver housing market is in a bubble (or, worse yet, a bubble that’s starting to let the air out).

For everyone else, take a look at this chart RBC put out today with its latest survey of housing affordability in Canada (which is deteriorating in most provinces, by the way)

No problem, just arbitrarily knock 20% off those Vancouver numbers and we’re not much worse than Toronto.

If you look around the world, you may be able to find a few markets that have an even worse affordability index than Vancouver, with lower incomes or higher house prices. But for some reason, most of those places seem to be able to pull in higher rents than Vancouver.

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jesse
Member

Check out the graphs. There’s one for Canada and Canada without including Vancouver. lolz

Anonymous
Guest
Anonymous

where are all the parties with high MOI and 50% crash, stupid bears?

Clockbike
Member
Clockbike
southseacompany
Member
southseacompany

Ian Watt “The New 2012 Prices of Vancouver”

http://www.youtube.com/watch?v=Anf9cP6CDhA&list=UUkYIS_mGGEioAF_nv1BINcw&index=1&feature=plcp

“A lot of people don’t understand that prices have started to come down and they’re still trying to get those huge numbers.”

“When you’re doing a price reduction make sure you go way below what you think it is in a declining market because you want to catch those numbers.”

N
Guest
N
SunBlaster
Guest
SunBlaster

@#5 So they book $2bil in increased revenue and $670mil of it was from sale of their HQ?! Its sort of like me saying i got 1million dollars and $990k of it is the value of my primary residence.

Anyone know why they sold their main building?

watcher
Guest
watcher

Sunblaster- the banks sold their commercial buildings because it was not part of their core business, and the market was exceptionally strong for trophy buildings in Toronto office space. If I understand correctly, Scotia was the last of the big banks to own its main headquarters. Other banks sold their buildings years ago. It frees up capital for other investments, and the reality is that commercial real estate companies like Bentall Kennedy, Cadillac etc do a better job of running these things (it is their business)

Patiently Waiting
Member
Patiently Waiting

@Clockbike: That’s a huge project in an area already saturated with recent condo towers. Will be interesting to see the pre-sale demand in this declining real estate market.

Brentwood Mall itself is a relic of the past, but I’m sure some locals will miss hanging out in the food court. That’s the only really busy part of that mall, or seemed so in my last visit there. I counted at least ten empty storefronts.

watcher
Guest
watcher

@patiently
the brentwood project is huge, but the plan is to develop it over a 10-15 year period

Anonymous
Guest
Anonymous

@southseacompany: I don’t get it! He says prices are stabilizing, but you should reduce your price to way below to catch it in freefall! Which is it, Mr. Watts … stable or free-falling?

patriotz
Member
Sheesh
Guest
Sheesh

Interesting interview on CBC’s Early Edition this morning–I tuned in late but I believe it was tied to the RBC affordability report.

The interview was with a man from the Personal Finance Institute (or Financial Planning Institute? something like that) on how people afford to live in Vancouver. He said he sees a lot of people just load on the credit card and LOC debt. They look like everything’s great from the outside but it’s all financed with a house of cards. Also, they’re willing to give up vacations but not eating out.

Anyway, worth a listen. The podcast isn’t up yet but will be at:
http://www.cbc.ca/earlyedition/

YLTNboomerang
Member

Ahh forget houses, that is so last year, HAM is going for walnuts:

http://business.financialpost.com/2012/08/28/chinese-turn-backs-on-stock-market-invest-in-walnuts-instead/

You can’t make this stuff up…

boogeybear
Guest
boogeybear

Ian Watts wants to become the King of Trough Pricing.

Move over Bob, someone else wants to get into bed.

Anonymous
Guest
Anonymous

@Sheesh: My wife is an accountant and sees the same thing. Things aren’t as rosy as some make it out to be.

mattymatt123
Guest

@YLTNboomerang: time to plant a walnut tree in my back yard! money money money!

rp1
Guest
rp1

#13 @YLTNboomerang: walnuts…

I’m hoping for a suicide craze to put an end to all this.

900kCrackHouse
Guest
900kCrackHouse

If Rennie is going to knock off the top 20% he better knock off the bottom 20% as well to be fair. Then we are getting more towards the median house price. So why doesn’t Rennie just quote the median house price rather than lob off the top 20% so one is comparing Apples to Oranges. Dr. Spin. I’m surprised no one in the media calls him on this.

patriotz
Member

@900kCrackHouse:
Reposted from the last thread:
Rennie:

“When people are buying in [the city of] Vancouver as passive investors, you have to put 35, 40 per cent down to have the rent cover the mortgage and one of your maintenance fees or your taxes, so it is longer term.”

“… Everybody’s buying for long-term capital appreciation.”

Rennie came right out and said there’s a bubble by the standard financial definition.

So what is anyone paying attention to the other things he’s saying?

VMD
Member

@southseacompany:
new thread in Chinese RE forum now up: “Legendary realtor Ian Watt teaches you how to sell your house in today’s market” (together with youtube video)

that should keep the bulls there occupied for days.

Achilles HELOC
Guest
Achilles HELOC

http://www.ritholtz.com/blog/2012/08/hanson-on-case-shiller/

US analyst Mark Hanson (former California mortgage broker, called the bubble correctly all the way from 2005), on why the current US housing rebound is built on ‘hopium.’

asalvari1
Guest
asalvari1

@mattymatt123:

plant a walnut tree.. make money…

You don’t understand! they have to be OLD, and well worn!

.. and I though that nothing can beat the dutch tulip-mania.. but whatdoIknow…

They managed to pick easy to produce, in big quantities, relatively long lasting item (walnut) and spin it.

Devore
Member
Devore

@Patiently Waiting: It’s not about the mall, it’s about the transit! transit! transit!

Devore
Member
Devore

@YLTNboomerang:

Ahh forget houses, that is so last year, HAM is going for walnuts:

http://business.financialpost.com/2012/08/28/chinese-turn-backs-on-stock-market-invest-in-walnuts-instead/

Oh, the wine investing craze didn’t pan out?

http://www.decanter.com/news/wine-news/529468/chinese-government-approves-wine-investment-fund

What will they think of next?

Devore
Member
Devore

@YLTNboomerang:

Ahh forget houses, that is so last year, HAM is going for walnuts:

Oh, the wine investing craze didn’t pan out?

http://www.decanter.com/news/wine-news/529468/chinese-government-approves-wine-investment-fund

What will they think of next?

(bah extra links removed for moderation, double post incoming)

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