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#61 taxi

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Posted 23 January 2013 - 03:56 PM

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?



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:

Posted Image

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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#62 Monty

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Posted 23 January 2013 - 03:58 PM

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.


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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Can you imagine drowning AT a KK Rev concert?

  


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#63 Heretic

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Posted 23 January 2013 - 04:02 PM

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.


Yeah...but after living there for 13 years, I could never get used to the weather.
-5, no problem.
-10 - sure.
-20 - okay...that's too cold for this BC boy and -38 is just insane...
Lucky to ride a motorcycle for 6 months there.
Probably the second rudest drivers in Canada.
Sea of Red goes without saying...
Cost of living there is no different anymore than being in BC (marginal).

Did I mention the Flamez? :)
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#64 ronthecivil

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Posted 23 January 2013 - 04:06 PM

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:

Posted Image

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.


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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#65 D-Money

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Posted 23 January 2013 - 04:15 PM

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.


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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#66 Heretic

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Posted 23 January 2013 - 04:21 PM

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.


Congrats Daddio!
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#67 D-Money

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Posted 23 January 2013 - 04:22 PM

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.


Yeah, I'm expecting some big drops across Canada, particularly in Vancouver. (Although, not nearly as much as you are projecting - more like 20-30%.) So many are just starting to realize the reality of the current worldwide economy, and how it will (and is) be affecting them.

I don't expect as much of a drop in Calgary and Edmonton though - and likely not as fast either - because the economy here has been significantly outpacing the rest of the country. Calgary keeps growing, the rents keep rising, and the housing prices seem to keep going up. And now with the proposed pipeline set to go, it's going to be even more defined.

Edited by D-Money, 23 January 2013 - 04:25 PM.

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#68 taxi

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Posted 23 January 2013 - 04:23 PM

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.


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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#69 D-Money

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Posted 23 January 2013 - 04:24 PM

Congrats Daddio!


Thank you!
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#70 Electro Rock

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Posted 23 January 2013 - 04:43 PM

I really wish I would had been able to buy a condo even 5 years earlier, I would have been able to swing a place anywhere other than West Van, Point Grey or Coal Harbor instead of having to settle for East Van.


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#71 J.R.

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Posted 23 January 2013 - 04:54 PM

Glad I bought in 2003 ::D
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#72 ronthecivil

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Posted 23 January 2013 - 04:54 PM

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.


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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#73 ronthecivil

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Posted 23 January 2013 - 04:58 PM

Glad I bought in 2003 ::D


You should be. But I doubt if you were starting right now from scratch you could buy the same place. Not a problem for you but if you had to sell makes you wonder what they would be doing for a living to be able to buy it eh?

But so long as you haven't run up HELOCs to buy toys and all the fancy renos and you have actually paid down a big chunck of equity in those ten years, and you don't really look at it as an investment but as a place to live, and as such you don't care about the value, then ya, it's not a big deal for you.

But for a lot of people that just got in the market and are highly leveraged even a ten percent drop will wind up being enough to make them loose sleep....
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#74 taxi

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Posted 23 January 2013 - 05:25 PM

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.....


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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#75 jmfaminoff

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Posted 23 January 2013 - 06:12 PM

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.

Edited by jmfaminoff, 23 January 2013 - 06:13 PM.

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#76 ronthecivil

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Posted 23 January 2013 - 06:31 PM

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..


Sure, but there's some similarities and a few differences as well...

1) We don't have high unemployment but if there's a housing slowdown that will have a knock on effect on the overall economy as the housing construction sector is a very large part of the economy. As well, with less money for HELOCS and what not that will hit the reno industry hard too. Will it be enough to make a negative spiral? No way to know for sure. But you know it's possible which is why when we had the 2008 downturn they put all kinds of stimulus into housing reno grants as an example.

Two I agree with.

3) To other countries! If the economy slows down wouldn't really need to have people leave in droves. Just enough doom and gloom to reduce the desire to come and that reduces demand even further.

4) Lending controls. Yep, not as bad as the states, but given the amount of time we had to work with our not quite as bad system we actually managed to rack up a higher per capita debt relative to income than the US did at it's peak. Sure, we might be more credit worthy, but we're just as leveraged and then some as they were before things went south.

Vancouver does have more in common with other cities and it's why I have no problem believing that prices will never get below say 5-7 times average income. But to even get there would require a significant drop in housing prices over a five year period combined with significant inflation over that time.
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#77 ronthecivil

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Posted 23 January 2013 - 06:33 PM

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.


They already have reigned it in a bit (they reduced the percentage of equity in your home available for HELOCS) but I hope that's just the first step to a serious reigning in of the much abused ability (try to drive home and not hear an ad for a home eqity line of credit commercial!) to turn their house into an ATM. I would suspect it's one of the main drivers behind the sad percentage of soon to be retirement age people that still carry large mortgages against their houses and have no other savings. Time to start investing in cat food companies.....
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#78 Imuzi

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Posted 23 January 2013 - 07:29 PM

There's always the lotto I guess.... Or rich parents (WTH mom and dad!)
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#79 GodzillaDeuce

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Posted 23 January 2013 - 08:05 PM

Well, not to call you a liar, but until this mystery article comes to light, I'm calling shenanigans on that.Winnipeg is far cheaper than Vancouver, but it's not 100 Mile House.


dat feel when you live in 100 mile
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well I'm sorry that gd is soo perfect


#80 Electro Rock

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Posted 24 January 2013 - 12:42 PM

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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#81 ronthecivil

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Posted 24 January 2013 - 12:51 PM

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.


The costs might be as expensive. If you are in Huntington beach ya it's housing starting at a million bucks.

But you can live in middle class neighborhoods for less. My old coworker had a nice place in Mountainview which is a nice town and it didn't cost him a million bucks.

But even if housing cost the exact same salaries are much, much lower here. Salaries (at least for people with degrees and good jobs) are higher in the states in general, and Vancouver has the lowest salaries in Canada (outside of the public sector).

So if you measure the cost to buy a place relative to income, the costs are much, much higher here.

Heck, in areas with a major downside (like North Surrey) prices aren't exactly affordable. Single family home 500k and up unless you want to live in a run down house on a very busy street, and even then you are looking at 400k for the lowest of the low. And for that to be affordable you would need to be pulling in 80-90k a year. (And that would be affordable in the "not severely unaffordable" kind of way).

So if someone making 90k a year is barely getting into the single family home in north surrey who the hell is buying the places even in supposedly blue collar Burnaby, Coquitlam, or New West, where just crossing the river adds 200k to the price!
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#82 Electro Rock

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Posted 24 January 2013 - 01:26 PM

The costs might be as expensive. If you are in Huntington beach ya it's housing starting at a million bucks.

But you can live in middle class neighborhoods for less. My old coworker had a nice place in Mountainview which is a nice town and it didn't cost him a million bucks.

But even if housing cost the exact same salaries are much, much lower here. Salaries (at least for people with degrees and good jobs) are higher in the states in general, and Vancouver has the lowest salaries in Canada (outside of the public sector).

So if you measure the cost to buy a place relative to income, the costs are much, much higher here.

Heck, in areas with a major downside (like North Surrey) prices aren't exactly affordable. Single family home 500k and up unless you want to live in a run down house on a very busy street, and even then you are looking at 400k for the lowest of the low. And for that to be affordable you would need to be pulling in 80-90k a year. (And that would be affordable in the "not severely unaffordable" kind of way).

So if someone making 90k a year is barely getting into the single family home in north surrey who the hell is buying the places even in supposedly blue collar Burnaby, Coquitlam, or New West, where just crossing the river adds 200k to the price!


I can't say many positive things about Surrey, but its not or even close to being a U.S. grade dangerous ghetto.

Good point about relative wage levels, but straight prices aren't all that much different, bearing in mind the tiny, tiny footprint of Canadian cities vs U.S. ones.

For example, my ex lives in the dumpy Hollywood area of L.A., in a decaying building that looks like it belongs in the DTES. She pays $1700 a month for that mess, next door you've got renovated suites going for $3000.

Living in a decent area where you don't have drunks, crazies and cholos roaming around will really cost you, unless you want to live so far away from everything you might as well not be in the metro at all.



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#83 ronthecivil

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Posted 24 January 2013 - 01:42 PM

I can't say many positive things about Surrey, but its not or even close to being a U.S. grade dangerous ghetto.

Good point about relative wage levels, but straight prices aren't all that much different, bearing in mind the tiny, tiny footprint of Canadian cities vs U.S. ones.

For example, my ex lives in the dumpy Hollywood area of L.A., in a decaying building that looks like it belongs in the DTES. She pays $1700 a month for that mess, next door you've got renovated suites going for $3000.

Living in a decent area where you don't have drunks, crazies and cholos roaming around will really cost you, unless you want to live so far away from everything you might as well not be in the metro at all.


Sure but that's downtown in a region of what 15 million people?

Go out into the suburbs and the prices come way down. And I don't mean way out.

Prices could come way, way down and still be outrageously high. I don't expect them to stop being outrageously high.

But they don't need to come down much. Even a 10-20% drop is going to hit a lot of people, and hard.
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#84 Electro Rock

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Posted 24 January 2013 - 02:30 PM

Sure but that's downtown in a region of what 15 million people?

Go out into the suburbs and the prices come way down. And I don't mean way out.

Prices could come way, way down and still be outrageously high. I don't expect them to stop being outrageously high.

But they don't need to come down much. Even a 10-20% drop is going to hit a lot of people, and hard.


The suburbs are way out there though, it may not seem like it because its usually easier to travel a given distance in L.A. compared to Vancouver, but the nice suburbs are far.

There's the inner burbs of course, they're very affordable, but unless living in a place like Compton or East L.A. is appealing, you'll have to look elsewhere.

San Francisco and San Diego are even worse.

One of the issues clouding price comparisons is that U.S. cities are so much larger in area, to the point where even Seattle is the size of the 5 largest Canadian cities combined, and those huge footprints bring down the average statistical housing price.

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#85 ronthecivil

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Posted 24 January 2013 - 04:14 PM

The suburbs are way out there though, it may not seem like it because its usually easier to travel a given distance in L.A. compared to Vancouver, but the nice suburbs are far.

There's the inner burbs of course, they're very affordable, but unless living in a place like Compton or East L.A. is appealing, you'll have to look elsewhere.

San Francisco and San Diego are even worse.

One of the issues clouding price comparisons is that U.S. cities are so much larger in area, to the point where even Seattle is the size of the 5 largest Canadian cities combined, and those huge footprints bring down the average statistical housing price.


I have no doubts that the constraints on the footprint of Vancouver to move as out or as up as US cities is partially to blame which is why I have little faith that the median price to income ratio will ever fall into the "affordable" range.

But it's not just Vancouver the entire country that's seen a run up in prices. The common factor is the cheap and easy to obtain, government backed (via CMHC) loans the banks have been giving out to anyone that was breathing. As a result we have record levels of ownership and record levels of personal debt (160% of average income or so as of last check) which has plummeted the Canadian savings rate (very few actually save anymore). Shocking numbers of people would not be able to meet their monthly bills with even a modest increase in interest rates. Something along the lines of a third of the coming wave of retirees coming as the boomer retire en masse will be carrying mortgages into retirement, and a startlingly high number have no savings whatsoever outside the family home.

Nowhere in the country are these situations more pronounced than right here in the lower mainland.

These conditions are not sustainable. Eventually, something has to give.

No matter what houses cost in comparable cities.
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#86 taxi

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Posted 24 January 2013 - 05:50 PM

Sure, but there's some similarities and a few differences as well...

1) We don't have high unemployment but if there's a housing slowdown that will have a knock on effect on the overall economy as the housing construction sector is a very large part of the economy. As well, with less money for HELOCS and what not that will hit the reno industry hard too. Will it be enough to make a negative spiral? No way to know for sure. But you know it's possible which is why when we had the 2008 downturn they put all kinds of stimulus into housing reno grants as an example.

Two I agree with.

3) To other countries! If the economy slows down wouldn't really need to have people leave in droves. Just enough doom and gloom to reduce the desire to come and that reduces demand even further.

4) Lending controls. Yep, not as bad as the states, but given the amount of time we had to work with our not quite as bad system we actually managed to rack up a higher per capita debt relative to income than the US did at it's peak. Sure, we might be more credit worthy, but we're just as leveraged and then some as they were before things went south.

Vancouver does have more in common with other cities and it's why I have no problem believing that prices will never get below say 5-7 times average income. But to even get there would require a significant drop in housing prices over a five year period combined with significant inflation over that time.


This issue with income to debt ratio is a red herring. Firstly, yes the UK and the USA had high income to debt ratios, but that doesn't necessarily relate to a crash. There are plenty of European nations with much higher ratios that did not experience a crash, and plenty of nations with lower ratios that did experience a crash:

http://epp.eurostat....&pcode=tec00104

In order to judge whether the ratio is important you have to look at both the quality of the debt and the quality of the jobs. Are the jobs temporary? Are they in sustainable industries? Is the debt consumer debt or is it debt that has been leveraged for solid
investments. What is the ratio of debt to equity in the home etc...

You'll also notice from the chart, debt to income ratio equivalent to Canada's (160%) or higher are normal for strong economies. Nations like Sweden, Germany, Norway, the Netherlands, and Denmark, which have the highest income to debt ratios in the EU are also doing the best. They have sustainable economies that support investment.

The problem with debt to income ratio as a measure is that it does not take into account equity. I could have $1 million of equity in $1.2 million dollar home, and earn 50k a year. This would put my income to debt ratio at 4, yet I would be a millionaire in an exellent economic position.
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#87 ronthecivil

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Posted 24 January 2013 - 06:54 PM

This issue with income to debt ratio is a red herring. Firstly, yes the UK and the USA had high income to debt ratios, but that doesn't necessarily relate to a crash. There are plenty of European nations with much higher ratios that did not experience a crash, and plenty of nations with lower ratios that did experience a crash:

http://epp.eurostat....&pcode=tec00104

In order to judge whether the ratio is important you have to look at both the quality of the debt and the quality of the jobs. Are the jobs temporary? Are they in sustainable industries? Is the debt consumer debt or is it debt that has been leveraged for solid
investments. What is the ratio of debt to equity in the home etc...

You'll also notice from the chart, debt to income ratio equivalent to Canada's (160%) or higher are normal for strong economies. Nations like Sweden, Germany, Norway, the Netherlands, and Denmark, which have the highest income to debt ratios in the EU are also doing the best. They have sustainable economies that support investment.

The problem with debt to income ratio as a measure is that it does not take into account equity. I could have $1 million of equity in $1.2 million dollar home, and earn 50k a year. This would put my income to debt ratio at 4, yet I would be a millionaire in an exellent economic position.


You would also be leveraged to the teeth (in one non diversified asset no less). I wouldn't call that an excellent economic position.

You would be better off taking the 200k and putting it on roulette. At least then you can only go down to zero.

A 20% decline in value and your almost a years salary in the red.

A 30% decline in value and your almost four years salary in the red.

With that much at stake I would be ****ing the bed with so much as a hint of declining values.

Especially if I saw that graph and noticed that the first ten percent has already arrived......

Edited by ronthecivil, 24 January 2013 - 06:56 PM.

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#88 Grapefruits

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Posted 24 January 2013 - 07:54 PM

All the hate for Surrey and yet the property values there continue to rise. Surrey is definitely expanding at a large rate and parts of it are far nicer than Vancouver.
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#89 jmfaminoff

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Posted 24 January 2013 - 08:42 PM

You would also be leveraged to the teeth (in one non diversified asset no less). I wouldn't call that an excellent economic position.

You would be better off taking the 200k and putting it on roulette. At least then you can only go down to zero.

A 20% decline in value and your almost a years salary in the red.

A 30% decline in value and your almost four years salary in the red.

With that much at stake I would be ****ing the bed with so much as a hint of declining values.

Especially if I saw that graph and noticed that the first ten percent has already arrived......

Just because it is Vancouver does not mean it is a safe market. The housing market can head south really quick, just by some minor changes.

For example, a lot of people do not realize that for the first two years on a $200,000 mortgage you only pay off about $200 in principle. So, like you outlined, the market drops 20%. You owe $199,800 but your house is now worth $160,000. No bank is going to loan you $198,000. What are you going to do?

Further, say you had an adjustable rate mortgage when you first bought it. Your monthly payment was about $1,100 a month. Now, two years later the rates have risen and you are facing a higher payment of $1,400 a month for a house that has lost value. The thing is you need to come up with $40,000 cash and another $300 a month just to qualify for a new mortgage.

What do you do? Like a lot of people, you have to walk away.
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#90 Dion Phaneuf

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Posted 24 January 2013 - 09:40 PM

All the hate for Surrey and yet the property values there continue to rise. Surrey is definitely expanding at a large rate and parts of it are far nicer than Vancouver.


Yup. Surrey's changed a lot since the '90s.

All the newer single family homes are going for 550k+ in Newton, Fleetwood, Clayton, etc. The monster homes are going for 750k+

Also, more or less any home in Panorama Ridge (basically Newton), Elgin, Morgan Creek, Grandview, Hazelmere, etc. are 1M+

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Vancouver is expensive but it really comes down to proximity and ego.

Edited by The Phaneuf Train, 24 January 2013 - 09:40 PM.

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