BC has the highest personal debt loads

We’re number 1!

The province of British Columbia has the highest level of personal debt anywhere in Canada and it’s still growing.

With incomes low and house prices high, it’s not an entirely unexpected result.  But even if you remove house debt we have very high levels.  Not including mortgage debt, simple consumer debt averages $37,879 in BC.

And that of course has led to a rising number of bankruptcies. In the last four years bankruptcy rates across Canada have gone up 11%, here in BC the number is up 42%.

That Province article also talks about the ‘elation’ of declaring bankruptcy, but that usually only occurs after some one has used up all their other options and burnt up money they could have kept:

“People often come to see a trustee as a last resort, when credit is turned off and they can no longer borrow from one card to pay another,” Mantin says. “They come in and say ‘I regret that I didn’t know about these options sooner. All I’ve done over the last two years is tread water.'”

Frantic people make decisions that will compromise their future, Mantin says. One of the worst is cashing in RRSPs.

For one thing, only the last 12 months of RRSP contributions need be surrendered in a bankruptcy. And those who sacrifice an RRSP without learning to live within a budget are not facing the underlying issue, Mantin says.

“Unless they’re forced to make a behavioural change, I often find they’re in the same position a year or two later,” he says. “They’ve dealt with the short-term debt but haven’t solved the budget problem so they run their debts up again.”

Read the full article here.

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patriotz
Member

@patriotz:
“that way borrowers will be more careful about who they lend to.”

“that way LENDERS will be more careful”….. yawn. 🙂

patriotz
Member
@PCinWA: Making it harder to declare bankruptcy does not discourage people from going into debt. It is much harder to declare bankruptcy in Ireland than in Canada, for example. To go further, in Spain mortgage debt cannot be discharged in bankruptcy at all. Both countries had among the biggest housing bubbles and consumer debt crises on the planet. The reason is that borrowers are not rational. They don’t think they are going to get into the situation where they can’t repay the money – particularly when the money is borrowed to buy RE. Lenders are much more rational than borrowers. The way to discourage irresponsible borrowing is actually to make it easier to declare bankruptcy – that way borrowers will be more careful about who they lend to. Of course to make this work you have to make sure the… Read more »
Devore
Member
Devore

@More Data Please:

@patriotz: Presale Assignment = Option

A pre-sale is not an option. It’s a contract. If you don’t like the price upon delivery (ie, out of money) you don’t get to just walk away. With an option there’s a choice you get to exercise which is part of the option contract. Not so with pre-sales.

I_LOVE_ING
Guest
I_LOVE_ING
@More Data Please It is a different study but it doesn’t present a true average value like the study in the first article I posted. It is actually looking at 7000 people who had filed bankruptcy or a consumer proposal with Sands & Associates. The fault is with the journalist not the study as the study is very open with what they are looking at from the summary: “The 2012 BC Consumer Debt Study is the only B.C.specific study to survey nearly 7,000 debtors from the area and analyze key findings regarding debt levels, causes of insolvency and financial outlook after filing bankruptcy or a consumer proposal with Sands & Associates.” http://www.sands-trustee.com/wp-content/uploads/2012/11/SA_SandsSurvey_Report2.pdf It is actually interesting to see the results of this study, a few points that jump out: – 6.8% of respondents cashed in RRSPs before talking to the… Read more »
Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

@paulb: See you bears at the 17k party!

Anonymous
Guest
Anonymous

@data junkie: “there’s a voluntary EI for self-employed program that you can access by signing up and paying EI premiums for a year.”

EI for self employed only covers you for special benefits like maternity/paternity leave and leave due to sickness or compassionate care (sick family member). You are not eligible for regular benefits for layoffs or work shortages. It would be too easy to abuse otherwise. You only pay half the rate for this limited EI. Realtors are not covered for regular EI benefits if they enroll.

More Data Please
Guest
More Data Please
@I_LOVE_ING: Dueling Debt Surveys The reference provided at the beginning of this thread was conducted by a different firm than the study you are citing. It is also not clear that the exclusion of debt free subjects is the methodology used in this survey. The RBC study cited in the CBC story somehow provides a national average debt but only shows the debt for Ontario, Alberta, and Quebec. Figure that one out. I think it is a mistake to underestimate or dismiss debt based on your circle of friends. People reading this forum may also be a minority in BC, and so too your debt free friends. It is probably safe to assume that people reading this forum have significant net cash reserves and seek the answer to one simple question: When exactly are typical RE buyers going to finally… Read more »
Anonymous
Guest
Anonymous

@PCinWA:

The scary thing is that while on the face of it, and historically speaking, it’s ridiculous, in true contemporary epoch its perfectly rational. $2 million dollar hellfire missiles anyone?

PCinWA
Member
PCinWA
I personally think that it is far too easy and convenient (and socially acceptable) for people to declare personal bankruptcy these days. Call me old fashioned, but I think about folks from my grandparents’ generation, and how the idea of them taking on debts and then using some court-sanctioned mechanism to allow them to not pay them back would be completely unthinkable and shameful. I think that everyone who declares personal bankruptcy should have to wear a scarlet letter, and should feel shame and scorn. I was once in debt to the tune of 50% of my annual income, and I worked my a$$ off for 5 years, saved money by not spending a penny on stuff that I didn’t absolutely need, and finally paid off my debts. I then promised myself never to stupidly allow myself to get in… Read more »
VMD
Member

Battle of Vancouver: Condo Front
Now with Tanks
(each tank = 1% YoY change)

I_LOVE_ING
Guest
I_LOVE_ING

So I read this stat and thought it was too bad to be true. I mean most people I know have no debt so how can the average be 38k. So I did a bit more research and the stat isn’t quite what is sounds like. 38k is the average debt held by people who have debt. It excludes the majority of people that have zero debt. If you include those people the average Canadian has ~13k in debt. Still a ton but at least the stat starts to make sense. This article provides more details

http://www.cbc.ca/news/business/story/2012/10/10/personal-debt-poll.html

midnite toker
Member
midnite toker

@kenny: re: Winnipeg

Don’t forget HIM ( hot indian money )

VHB
Member
VHB
Total days	21
Days elapsed so far	3
Weekends / holidays	2
Days missing	0
Days remaining	18
7 Calendar Day Moving Average: Sales	79
7 Calendar Day Moving Average: Listings	148
SALES	
Sales so far	244
Projection for rest of month (using 7day MA)	1426
Projected month end total	1670
NEW LISTINGS	
Listings so far	469
Projection for rest of month (using 7day MA)	2671
Projected month end total	3140
Sell-list so far	52.0%
Projected month-end sell-list	53.2%
MONTHS OF INVENTORY	
Inventory as of November 5, 2012	17666
Current MoI at this sales pace	10.58

Bearish start to November. Listings are right at the Nov 10-yr average, but sales are off by a third.

Waiting to exhale
Guest
Waiting to exhale

From the Financial Post article:

“The last round of mortgage rule changes took effect in July, forcing home buyers to cut back on their budget and pushing many prospective first-time buyers out of the market entirely.

Economists and REAL ESTATE AGENTS alike applauded the move.”

Are you kidding me!? Do reporters proof read what they are spewing off anymore? It is like saying NHL players applaude Gary Bettman’s negotiating tactics during the lockout. A few bone-headed sentences in a fairly bearish article.

paulb
Member
rp1
Guest
rp1

#65 @Mars: This is entirely consistent with the view that people simply do not know how to value housing. They will pay any $x so long as the monthly payment is “affordable”. They will stretch the meaning of “affordable” into “possible”. And even when valuations and monthly payments become extreme, they will continue to buy based on psychological factors and any and all math goes out the window. I am sure there are plenty of people who “risked it all” on that million dollar crack shack. I’m sure there are far more who settled for something and they won’t be happy to see it was all a scam.

kansai92
Guest
kansai92

Does the $37,879 include HELOC balance outstanding as well?

More Data Please
Guest
More Data Please

@gokou3: re: seller recourse vs option

INDEED! That is remarkable about far “over the barrel” RE buyers really are when they sign these pre-sales contracts. From media reports and movies you’d think the financial markets are a bigger rip off, but clearly real estate is unbelievably more disadvantageous to consumers by comparison.

Thank you for pointing that out. There are few consumer protection regulations about non-standard private contracts.

Rusty's revenge
Guest
Rusty's revenge

@N:

I don’t think one should trust her as far as you could throw her – she looks pretty thin, so halve te trust by distance ratio.

gokou3
Guest
gokou3

@patriotz: Who would truely believe these kinds of guarantees? I guess many, judging by the number of speculators (still) in this RE market.

There are just so many ways for the developers to not fulfill their guarantees. For one, they can just use a shell company. If things indeed go wrong, this shell company will go bankrupt and the buyers are left with an empty guarantee.

gokou3
Guest
gokou3

@More Data Please: But if the buyer bails, the developer can pursue the buyer for the potential shortfall. Thus, it’s not exactly an one-way ticket per the definition of Option.

Mars
Guest
Mars

from today article i find this piece of info hardly believable . How com only 0,9 think that mortgage over-extension cause of debt in BC? it is pure BS.

“The Sands study delivers one of its most surprising results by asking why people sink into debt. Almost 45 per cent of those questioned cited over-extension of credit, financial mismanagement and unexpected expenses for getting into a financial jam.

About 24 per cent said it was job-related and 18 per cent cited marital or relationship breakdown.

Only 0.9 per cent blamed their predicament on mortgage over-extension.”

More Data Please
Guest
More Data Please
@patriotz: Presale Assignment = Option A futures contract is a contract for delivery. Delivery (or cash settlement) is absolutely certain and the clearinghouse WILL “send a hit man”, as Bud Fox would say, to make sure you are good for the physical or equivalent cash at the current price. Presale assignments more closely resemble option contracts or warrants. You have the right to exersize the option at the strike price but the premium payed for the option is never refunded. Most options typically expire “out of the money”, away from the strike price and worthless. I must say however, that the pre-sale assignment part of the real estate market is working properly compared to the taxpayer guaranteed loan default part. We can say for certain that at least a handful of people are finally becoming acquainted with market forces first… Read more »
kenny
Guest
kenny

Makaya “It’s only in Winnipeg that you can, without question, see the true effect of cheap money and easy credit on the housing market. It’s not like Winnipeg can claim all the BS Vancouver or other cities do (lack of land, BPOE, HAM, massive immigration, weather, etc.).”

It can’t be all Coc’s in Peg? that is a shame.

patriotz
Member

@Anonymous:
” I see very little difference between assignments and stock. ”

There’s loads of difference. Owning a stock means you own part of an enterprise that produces things. Many stocks pay out all or part of profits in the form of dividends. You don’t have to sell them to get a return.

A presale is just a futures contract and is a pure gamble on prices.