How much lost on a 2009 condo purchase?

Previously we highlighted b5baxters comment on the 19 months that have elapsed since Vancouver home prices have peaked (according to the REBGV home price index)

Of course there are a lot of variables in the housing market, so lets look just at condos, which Crabman has ever so helpfully run the numbers on:

I calculated the bottom line if someone bought a benchmark condo 4 years ago with a 10% DP and a 4% 30-yr mortgage. I took into account all carrying costs, rent savings and principal pay down. I also assumed rent, prop tax and condo fees increased 4%/year.

Oct 2009:
Benchmark price: $380,975
Mortgage balance: $342,878
Equity: $38,098 (10%)
Est. Rent: $1,100
Mortgage: $1,637
Condo Fees: $200
Prop tax: $89
Monthly loss: $826 (extra costs of owning vs. renting)

Oct 2013:
Benchmark price: $365,600
Mortgage balance: $317,253
Equity: $48,347 (13.2%)
Est. Rent: $1,287
Mortgage: $1,637
Condo Fees: $234
Prop tax: $104
Monthly loss: $688

Over those 4 years, equity only increased $10,249. But the extra monthly costs of ownership over that same period were $45,498, so the owner would have saved $35,249 by renting.

So it looks like the current ‘ownership premium’ for someone who bought a Vancouver condo in 2009 is just over $35k.  Anybody see any problems with those numbers?

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[…] Yes, even Vancouver condo values, which have stagnated for years! […]

Jim
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Jim

Good try but I didn’t see the application of the equity increase of over $10000. This reduces the ownership premium to a little more than $500 per month.

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[…] But what do the rest of you think?  This site is getting long in the tooth and hey, there really has been no dramatic house price crash yet.  Does the current situation prove we’re wrong?  It’s only been 19 months since the peak of house prices here and the theoretical buyer of a 2009 condo has only lost $35k. […]

crabman
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crabman
@space889 If you decide to invest in US RE, you will need to consult a cross-border tax consultant. The don’t have an office in Vancouver, but Keats Connelly is pretty good. They have also written some good books, including one for Canadians buying US RE. http://cbta.net/canadians-buying-real-estate-in-the-us/ As far as the details of buying, refurbishing and rental management are concerned, Greg Swann is excellent. He knows what tenants in Phoenix are looking for (no pool, single story, close to good schools, north-south exposure, etc.) and will make sure you stay away from undesirable neighbourhoods. http://www.bloodhoundrealty.com/ The only caution I would give you is that investor activity has been crazy the last few years. As a result, inventory is low and vacancy rates have gone up. It’s probably still a good time to invest (much better than Vancouver) but not the slam-dunk… Read more »
Cuantovalemipiso
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Cuantovalemipiso

I wanted to say young people have not children, young people migrate to other european countries…
http://cuantovalemipiso.wordpress.com

Cuantovalemipiso
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Cuantovalemipiso

@C.Junta #30
Thanks for advertising my blog. In my blog I only tell the truth, the real estate agents and banks in Spain do not say the truth about the supposed homes of ‘chance’, now they try to sell them to britains, russians and chineses because the spanish don´t want them. Spain is depopulating, growing old, young children do not all migrate to other countries in Europe for the future. Sorry for my english…
You can see the ‘cheap’ houses that nobody wants and more in http://cuantovalemipiso.wordpress.com

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[…] -Rent Vs Buy in BC -Rent Vs Buy south of there -Blame Canadas Big Bubble -Toll the border? -Abandoned homes up for grabs? -Realtor Hunger Index -Sunshine Coast Stats -London asks UK for foreign buyer tax – […]

RealityCheck
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RealityCheck

Son of Ponzi:

Bingo!

They do see it as a character flaw. I’m of South Asian ancestry…family been in Canada for exactly 100 years…and newly arrived South Asians think I’m dumb when I do something altruistic. What’s even more striking is they try to take advantage of ME thinking I’m naive.

That is how most of the newly arrived treat Canada. These are economic immigrants who maintain residences back home. Our family sold everything and came on a one way ticket on a ship.

yvr2zrh
Member
Have to jump into the tax discussion for Astronaut families – – One thing I have seen here in Switzerland is how they treat non-resident income. . . It is very cleaver and they are used to it because of the numbers of people who are working here and crossing borders. I think there is some argument that a non-resident Father who has never settled in Canada but who has a wife and children would not be taxed in Canada. However – what the Swiss would do – would make you declare that income to determine if the spouse is eligible for certain social services. What I see is that Canada just is not keeping up with the changes that are resulting from a globally mobile population and with this – brings more complexity on how to treat things. I… Read more »
Son of Ponzi
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Son of Ponzi

#31
Too many Canadians believe in the old British tradition of fair play and compassion for the fellow man.
New immigrants from Asia see this as a character flaw.

RealityCheck
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RealityCheck

Love the misinformation spread by this blog. Armchair analysts.

Too many corrections to post but i’ll post one.

–> You can’t get social assistance if you/spouse has assets over a certain amount. Believe it is $10,000.

C.Junta
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C.Junta

@4SlicesofCheese #27

Thanks for the link. One of the first comments promotes a site which is the Spanish version of VCI:

http://cuantovalemipiso.wordpress.com/

It has some numbers and pics. Vancouver, fast forward to 2018? We’ll see:

“Spain in general is depopulating, and this is one of the main reasons why prices will fall, because there are already a lot of empty houses, and there will be more empty houses in the next years with no youngs, low birth rate , immigrants returning to their countries and spanish citizens emigrating in search of a better future”

Son of Ponzi
Guest
Son of Ponzi

Remember,
Canada has no exit or entry stamps in the passports.
Who knows who’s coming or going.

Son of Ponzi
Guest
Son of Ponzi

#24
You gotta understand that not everyone plays by the rule book.
Particularly the ones that have money.

4SlicesofCheese
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4SlicesofCheese
I was watching some streaming news from Taiwan this morning, they had a whole panel discussing bubbles in their local market, specifically Taipei, with charts and graphs discussing out of whack price rent ratios, price to income etc. With reference to low interest rates etc. They even showed how prices have eclipsed Tokyo for price/sq ft. It was all pretty obvious with some numbers approaching Vancouver-like insanity. Unlike Vancouver, they did not have on a vested interest from the RE side saying everything is fine, although I would have liked to see that as they would have been ripped to shreds by the panel. They were all in agreement the existence of a bubble, and did not have a vested interest The whole discussion was based off the link below on the new report from Roubini. Canada is one of… Read more »
Newcomer
Member
Newcomer

“This is 100% legitimate.”

If you are sure, you won’t mind me writing to the CRA about your particular case and confirming it. Just let me know your details. 🙂

C.Junta
Guest
C.Junta

@patriots #24

” All permanent residents (as opposed to citizens) are automatically deemed resident for tax purposes”

Sorry, this is not true. Being an immigrant myself, I know it damn well. I personally know a few folks who kept living abroad for a few years after landing in Canada. Not paying taxes in BC, not applying for SIN or MSP. When they finally settled in BC, they had no problems with CRA although they explicitly followed all rules. And after spending some time on immigration forums years ago, I have an impression there is not just a handful of people who do that. This is 100% legitimate.

patriotz
Member

@19: ” My understanding this clause (if there is one) may come into effect when the astronaut finally decides to settle in BC.”

The astronaut settles in BC as soon as he lands in Canada and becomes a permanent resident. All permanent residents (as opposed to citizens) are automatically deemed resident for tax purposes. It’s possible for a citizen to become non-resident but this is not allowed if the person has dependent family remaining in Canada or other ties such as owning a personal residence.

Newcomer
Member
Newcomer

@Space898

It’s not rocket science:
http://bit.ly/IuW7i5

space889
Member
space889
With regard to astronaut families, remember this trend started with the Hongers back in the early 90s, followed by the Taiwanese immigrants in the late 90s. It is not an exclusive mainlander thing. Anyways, in a lot of the cases, it is only the wife and kids that apply for Canadian residency/citizenship and have no income, which allwos them to qualified for so many social services while living in multi-million $$ houses and drive their ultra luxury cars. The husband never applied for Canadian residency and only comes here as a tourist visitor. So I don’t think Canada can tax you based only on the fact that your family is here while you have never ever applied for residency. Now, I do remember years ago that I read in some income tax form/publication that significant large and/or regular cash gifts… Read more »
space889
Member
space889

@crabman – regarding your purchase in Phoenix, I’m just curious about the process and taxation? I heard many potential issues with buying in US ranging from hiring people to do everything which means you are open to fraud and abuse by realtors and property managers, as well issues with having to pay taxes in US, and potentially be considered by IRS as US resident and having to pay US tax on your worldwide income.

Just curious what your experience is like and what realtor, proprety management firm, and tax accountant and lawyer you used? Did you purchase the SFH in your name directly or used a corporation instead??

The US housing market is definitely extremely tempting!!!

Newcomer
Member
Newcomer

@ C. Junta

It’s not rocket science:
http://bit.ly/IuW7i5

Skook
Member
Skook

The Sunshine Coast November sales data has now been posted at VanPeak.

November sales were down -9.5% from November 2012. Compared to October’s sales, the drop is -29.6%.

The November SDH benchmark price ($338,800) is down -26.0% from the July 2010 peak ($457,777). That 2010 peak was +60.4% above the January 2005 HPI baseline benchmark ($285,482). Last month’s benchmark price is only +18.7% above that HPI reference point. Yep, looks like the SC is experiencing a nice “soft landing” as it goes through its market “correction”.

Here the link to the post: http://vancouverpeak.com/showthread.php?tid=530&pid=5822#pid5822

Son of Ponzi
Guest
Son of Ponzi

#17
that’s why they choose Canada.
And complementary health benefits and education.

C.Junta
Guest
C.Junta
@enigma #16 “You can confirm this with CRA or someone more knowledgeable” I confirmed that with a CRA guy (I wrote about that discussion on this site a while ago). He said there was not much they (CRA) could do with those families. Now I would like to hear patriotz’ explanation. “if your spouse is living in Canada, you may be deemed to be a resident for income tax purpose” This is exactly the missing piece. My understanding this clause (if there is one) may come into effect when the astronaut finally decides to settle in BC. In this case, his “non-BC-resident” tax status may be revised by CRA (because during his absence he kept some “ties” and so on). But: – this is a somewhat gray area and investigated by CRA on a case-by-case basis; – this can be… Read more »