The following was posted by ‘Whistler or bust?‘ in the comments this weekend:
I will be the first to admit I have been very wrong about the direction of Van RE in the past 2-3 years. That disclaimer said, lets examine some facts to see if there is any upside left:
These are the incomes required to be in each % (Source CBC)
10% of income earners $80,400*
1% of income earners $191,100*
0.1% of income earners $685,000**
0.01% of income earners $2.57 million*
So with the average Vancouver detached home at $1,408,722 (Source Yatter Matters)
A DP of $281,744 is required to buy
PPT is $26,174
Misc Closing $2,000
Mortgage $1,126,978 @ 2.59 for 5 yrs = $66,072 Annually ( I will note these are record low rates)
Assume 1% Annual Maintenance (This is a standard benchmark over many years) $14,080
Property Taxes – These can vary but lets assume $7,000?
So Annual carrying costs total $87,152 AFTER TAX – I am excluding heating and hydro which vary but in no cases less than $3,000 annually for a detached home
Back to our chart above – Lets assume a 30% avg tax rate for the 10%, 35% for the 1% and 45% for the 0.1 and 0.01%.
10% of income earners $56,200* – This house would take up 155% of the after-tax income
1% of income earners $124,215* – This house would take up 70% of after-tax income
0.1% of income earners $376,750* – This house would take up 23% of after tax income
0.01% of income earners $1.413 mil – This house would take up 6% of after- tax income
This is assuming all of these people have $310K for closing. This is assuming they are buying the average house of $1.4 mil. I think we all know what kind of house $1.4 mil gets on the West Side and even on the East side nowadays.
So the conclusion – Even the 1%ers are realistically priced out of the average Van detached home. Only the 0.1% and and above can really afford to buy.
Put another way – 99% of people are priced out. As families combined lets assume 95% are priced out.
So to all you bulls out there, please answer the questions: Is this a healthy market? Is this a market with any upside left?
I think we all know the answer.