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Vancouver housing ranked among world's least affordable


key2thecup

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We shall see. We have had an extended building boom in Vancouver (and especially one in Toronto) and many, many units are held by speculators.

I suspect condos will go down more than townhouse which will go down more than single family homes. But the prices are still far, faaaaaaaaaaaaar out of reach for people. And until that equalizes the housing market is very much a house of cards that could blow up in a slight breeze. Look how much things slowed just by the feds reducing the cheap money supply by limiting CMHC loans to 25 years and a maximum of 1 million dollars.

Let's see what happens if....

The federal government doesn't raise the (soon to be hit) CMHC lending limit and suddenly everyone needs 20% down to buy a place instead of the 5% (and formally 5% cash back) that helped prime the bubble up....

The US goes into a triple dip recession and that US sneeze turns into a Canadian flu.....

Interest rates rise on mortgages. FYI you don't need the bank of Canada to raise interest rates for that to happen.

And if all else fails......

Demographics, the elephant in the room, will eventually kick in, requiring more taxes just to maintain the same level of service. You know, the economic brake that is still biting Japan 20 years later?

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I miss breakfast at Café Zen. Best Eggs Benedict I've ever had - each and every time.

Used to live around the corner from it, and would go at least a couple times a month. Trevor Linden was two tables over once. Soooo good.

Restaurants and concerts are severely lacking in Calgary, compared to Vancouver. But at this point in my life, I don't have much money to spend on them anyways - and I'd have even LESS if I were still in Van.

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The prices in Vancouver are insane. And after growing up in the Valley, I wasn't about to pay a premium just to live a one-hour drive (if traffic is good...meaning 3:00am) from downtown Vancouver.

So I didn't bother. Instead moved to Calgary, a got a house on a double-lot (can be subdivided) in the inner-city for under 400K. Getting gas for under $1.00/L, single-malt scotches for under $50, and no HST/PST nonsense make it even more affordable.

Added bonus: Realized how much I like sunshine.

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Hmm...I actually disagree with you on what sectors will drop. Condos will hold their value. There are plenty of young peolpe willing to buy a condo for the 250-400k range, which is what most single bedroom and studio units in Vancouver proper go for. You might see a 5-10% in the 400k+ condos.

I think the big drop will come from the detached homes. I'm talking about the crack shacks selling for 1.5 million. Those will probably drop about 20% or more. You have the added pressure of baby boomers retiring and downgrading homes and moving into condos.

Like I said before, I think you might be looking at an overall drop in the 10% range. This is fairly supported by recent pricing trends as well:

2012-07-31-Average-Price.jpg

You can see that apartments (ie condo) prices have been relatviely stable since about 2007 or so. Hovering around that 400k price point. Meanwhile detached homes have risen, inexplicably, from 800k to 1.2 mil and no back down to just over 1 mil. I think what will see is things gradually creep back to the 2006/7 price range.

It really makes no sense for the price of a detached home to have risen so much since 2006. With condo sales, the product has gotten a lot better of the last 10 years. Things built prior to 2005 really had bad finishings and appliances, were leaky, etc.. Newer stuff is of much improved quality and you should expect it to sell for more.

Meanwhile, new detached homes are not being built on a large scale. Every year that passes results in a "Vancouver special" just getting on year older.

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We don't have a kid yet, so we can still go out for dinner, we just don't. I'd rather spend time making dinner myself and stay in for the evening.I noticed that when we lived in Vancouver, all we did was spend money. Now, when we can actually afford to go out a lot more, we just stay at home and enjoy the quiet.And if Calgary is lacking in concerts, I don't even know what to say about Winnipeg. The last good concert I went to was AC/DC, and the last terrific concert I went to was The Hives (5 years ago).One of the few good things about living in Winnipeg is that you can afford to leave it when you need to get away. The Jets have helped though.

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Agreed. Calgary is the same way.

There may not be much selection for concerts here, but when a band comes to town that I actually want to see, I generally have the money to go. Saw Vampire Weekend (were fantastic), Bon Iver (surprisingly one of the best concerts I've EVER seen), and 1 day of the Folk Festival (w/Iron & Wine) in the last year. For a couple of them, I shelled out extra fora 3rd ticket and took my nephew. Bought drinks, merch - it was no big deal, because I had money, and it was a special occasion. In Vancouver, there would be a lot more acts coming through, but I probably wouldn't be able to afford to go to many shows.

Restaurants were tough when I first moved here. Had some truly TERRIBLE meals. But after a while, you get a few favourites, and know where to look and who to ask to find a great meal. Like you, most of the time my wife and I would rather stay home and cook anyways. But when we do go out, we eat great food.

And of course, now that I have a newborn, there won't be many nights out anyways.

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Interesting points.

I wouldn't think a mere 10% drop (well maybe this year or so) will be it. It could be 5 years or more before a bottom hits.

Prices sure look like they have just stepped off a very steep cliff though. Looks like there's good price support for houses at 400k average and condos at 200k average. That's obviously a worst case scenario though.

Wouldn't shock me to see things get half way there though, which would be catastrophic on it's own.

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Interesting points.

I wouldn't think a mere 10% drop (well maybe this year or so) will be it. It could be 5 years or more before a bottom hits.

Prices sure look like they have just stepped off a very steep cliff though. Looks like there's good price support for houses at 400k average and condos at 200k average. That's obviously a worst case scenario though.

Wouldn't shock me to see things get half way there though, which would be catastrophic on it's own.

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Haha. You will not see houses drop to 400k. That was the price of a home in 1993. In a city with a growing population, 5% year over year prices are pretty normal, which leads to doubling every 15 years or so. This 5% growth rate is partially fueled by inflation of 2%, on average, per year, and by increased demand as density and population increase.

The Problem in Vancouver right now is that detached home prices doubled in the last 7-8 years. So there's an adjustment coming (and happening), but it won't bring prices anywhere near 400k. 800-900k is a better target. At 400k for detached homes, and 200k for condos, it wouldn't matter what interest rates were. Many people would be able to affford cash. You have to remember that the young generation is now dependent largely on the baby boomer generation financially. At 200k, baby boomers would be cashing their savings and buying condos without mortgages.

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Like I said, it would be a worst case scenario. Keep in mind that in many places in the US places crashed well below what would be considered affordable and many people rented despite it actually being far cheaper to pay a mortgage but they didn't want to because fear instead of greed took over the market. Not saying that kind of irrational pessimism will replace the irrational exuberance like it did in many places in the US but just saying it's possible.

I would say for average house price it would have a more likely bottom of 600k average and for condos 300k which works out to a 40% drop for houses and 25% for condos. Of course it's just a future guessing game and nobody knows for sure.

P.S. The baby boomers have no savings outside their homes (well, around half of them don't, literally). In fact a shocking number are approaching age 65 with mortgages. Many will be forced to sell them and downsize just to have enough money to eat.....

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Canadians need to stop refinancing their homes to use the equity to pay off credit cards. It artificially drives the prices higher, because the real value is artifical. And the government is too complicit in assessing at higher values which keeps the prices high because it means higher tax revenues.

What will happen when the market drops could be catastrophic for the government, sliding down a greasy hill. But I do not think things will change any time soon.

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The US system had a lot of other factors at play, that don't exist in Canada:

1) HIgh unemployment.

2) A large immigrant population that was migratory and poorly educated. In Canada, the immigrant population is highly educated and largely here for the long term.

3) Lots of other places to move. If the economy in Vancouver and Toronto collapses, you aren't going to see 30% of the population move to another city. Where would they go? In the USA people vacated cities like Phoenix, Las Vegas, etc.. and went elsewhere.

4) A total lack of controls for lending. Things are bad in Canada, but not nearly as bad they were in the USA pre-crash.

You also have to remember that the crash in the states varried wildly from city to city. Vancouver has much more in common with the cities that did not have significant crashes, such as San Francisco and Seattle, than it does with the cities that did have significant crashes such as Las Vegas and Pheonix.

Obviously, we're both just guessing here, but I see housing prices falling another 20%. Condo prices will fall 0-10% depending on location, current price, etc..

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Canadians need to stop refinancing their homes to use the equity to pay off credit cards. It artificially drives the prices higher, because the real value is artifical. And the government is too complicit in assessing at higher values which keeps the prices high because it means higher tax revenues.

What will happen when the market drops could be catastrophic for the government, sliding down a greasy hill. But I do not think things will change any time soon.

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I don't think Vancouver is any more expensive, cost of shelter wise at least, than Seattle and the big California cities once you factor out the ghetto warzone neighborhoods and the light-year-away incorporated sprawl.

Any area without a major downside to it, you pay big, same as here.

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