ann m

I watch many of those home reno shows on HGTV. Many are filmed fairly recently within Canada. I'm gobsmacked by house prices.

Now, I know there are all those silly memes going around that say "I crochet hats for lizards and my husband works part-time writing songs for toddlers and our budget is $950k" - but seriously how do people afford a first home in Toronto or Vancouver, let alone a second vacation home?

Those Love it or List it/Property Brothers type of shows present a very modest (and I mean very modest - small, old, and 4 inches from your neighbours) three bedroom semi with a current value of $800k. Then they tart it up and it's now $920k. It's an 1800 sq foot small semi-detached house. I mean, it looks better than it did, but $920K? Seriously? What starting family has this kind of cash?

Just watched another show where their budget for a second home (they wanted a cottage on the Kawartha Lakes) was $650k. That would be their second home?! Seriously - how? And that wasn't really enough to buy what they wanted.

When I think cottage, I think of a posh shed that might have running water if you're lucky and cost about $50k. I might consider $50k for a second home but it would have to be special!

I supposed I'm used to Calgary prices (which admittedly are believed to be high too) - a one bedroomed flat maybe $200k (which still sounds horrendous) up to as many millions as you want to spend, but your average family homes sit in the $400K to $600k bracket I would say. That's for a average cookie-cutter detached house in a burb. A goal for many, a nightmare for others - but to me there is enough variation in the prices for something to be affordable to most working persons/couple. There is still not anywhere enough affordable housing, and a large homeless population.

I can't believe that everyone in Vancouver or Toronto and the surrounding neighbourhoods are all dual-income homes with each party earning $150k+. Is there a huge amount of inherited wealth around? Did people 'make' huge gains in the past decade or so and that is what is fuelling the prices. Who are these $800-$900k buyers? Are the tv shows just steering me wrong? Are people signing up for $500k+ mortgages?

And then compare those silly prices to somewhere on the East Coast or just really off the beaten track (i.e., no jobs) and I get why those might be way, way less.

Do you own a home in these expensive cities? How did/do you do it? We were extremely lucky and brought money from the UK to buy an 'average' 2000 sq ft home. Originally, we had no mortgage, but have gained one in the ten years since we've been here.

scrubbedexpat091

Everyone we know rents in Vancouver. Haven't a clue how people own anything here.

Even condos at least newer ones cost a small fortune, a 1 bed/1bath in our building lists at 550,000, they seem to sell quickly. 3 year old building. 490sq feet for the micro 1 bed/1ba at that price.

geoff52

We stretched ourselves financially in 2002 and bought 4000 sq foot house in the GTA. Today we could not afford to buy the same house.
I learnt from my father that property is the best LONG TERM investment and timing is everything.
You live in the property and actually enjoy your investment.

scilly

Hi ann

Yes, we live in the high priced Vancouver. We bought our house in 1972, and still live in it ............. so no, we are not, and were not, among the very wealthy

In fact you could use the old phrase often used of British farmers .......... "property rich, cash poor"

How do people afford houses here today .................. they 1) have a very high salary or have made a fortune, 2) mortgage themselves up to the hilt and can't afford to do anything else, or c) buy elsewhere.

Even rents are very high ....... and they have the same choices as a wannabe buyer.

What would happen if we sold our house?

We'd make a big profit over the $27,000 we originally paid BUT ................ where do we buy, or rent? The "profit" would quickly be eaten up!

The trouble with Vancouver existed since at least the 1970s ......... houses costing more than in other parts of the country, and it comes down to the fact that Vancouver cannot expand, to develop new housing "estates" on the outskirts.

If you look at a map, you will see that Vancouver has water on 3 sides ........ English Bay and the harbour to the North, the Salish Sea to the west, and the Fraser River to the south. The east boundary butts right up against the western boundary of Burnaby.

So ..... no expansion of city boundary possible. The only land available for development is what exists already inside the city .... and that is the problem.

The high price is a reflection of the value of the LAND the house is built on ........ in the case you cite of the $800,000 house, without knowing exactly where it is, I would like to bet that the land was valued at minimum of around $750,000 and the house at $50,000 or less.

In our case, our house (a small 2 bedroom 2 bathroom bungalow with a basement, just over 1000 sq ft built in 1944/45) is valued at exactly what we paid for it back in 1972 ..... $27,000. The land alone is valued at close to $2 million for a 33' b 122' lot.

If we sell, it will be bought by a developer who will demolish the house, build a 2 storey and basement house with 4-6 bedrooms, 3-4 bathrooms, filling the lot to the maximum allowed, and a 2 car garage. He will spend about $300,000-500,000 putting in all the bells and whistles, then put it on the market for probably close to $3million. The lot value will possibly have increased to well over $2 mill in the intervening time.

It is not a good scene ........ but if I put it in a little perspective ...... there were many houses in Vancouver that we could not afford back in 1972, we instead looked at different areas in the city where houses were cheaper, and I didn't get the mountain view that I would have loved! The house we bought had actually increased in priced from $13,000 in 1967/8 to $27,00 in 1972 ... almost doubled in 4 years!


Secondly, your comment about second homes being expensive .......... the term "cabin" is generally used in BC instead of cottage, but both can cover everything from a 1 room shack to a 3 storey 6 bedroom house on the lake.

The one you mention could be that expensive for one major reason ..... it's a waterfront house with water access and possibly some land.

Other reasons for a "cottage" costing a lot of money include a) it's within an hour's reach of Vancouver, b) it's a big house with bells and whistles, d) it is on an acreage, c) it's close to both a lake AND skiing.

Again, you pays for what you get.

We sold a cabin on 20 acres of land with a permanent stream for $67,000 in 2014, and the guy has just sold it again for the same price .......... it was semi-remote, at the end of ca 12 km gravel road, and about 8 hours from Vancouver! That needs a special person!

Executive retreats are expensive.

As to how so many can afford to buy those houses without putting themselves into debt ........... Vancouver attracts wealthy people from overseas, and from within Canada, and there are some very high priced jobs around, not many but some.

Shard

In high growth cities (Vancouver, Toronto, London) it's basically down to the "property ladder". People mortgage to the hilt for whatever scrap of real estate they can inhabit, and then, like the "magic of compound interest" the magic of "leveraged investment" over TIME means they will build enough equity to eventually afford an expensive home. Nothing new. You just have to drink the Koolaid.

Shakyuk

This line made me laugh because it is so true. It's the same in the UK, I think it is inherited wealth and hand downs from wealthy parents.
In the UK it's like this:
'this is Pippa, 24 and Rory, 25 from Tunbridge Wells. Pippa has been a primary school teacher for 3 years, Rory is a quantity surveyor. They're looking for their first home in London, they just want a small detached 3 bed house with a garage, their modest budget is £700,000.'


WHAT? How does a primary school teacher and a QS get £700k practically straight out of Uni or ever... The programs annoy me because they can't actually be anywhere near representative of the reality. In the end Pippa and Rory bought for 850k because it was perfect, they have a 50% deposit and both drive high end cars. Meanwhile I scrapped together a deposit for about 10 years to buy an empty Clarks shoe box with a south facing barcode...
F* Pippa and Rory, they seem nice but I still hate them...

BristolUK

Who remembers NTNOCN doing Robert Robinson's Ask The Family then

Siouxie

That's why I like "Location, Location, Location" - real people, relevant budget.

Shard

It's amazing that show has been on the air for so long (but it is probably the best of the bunch).

withabix

I bought in Maple Ridge two years ago, moving in 2 years ago yesterday.

The house cost me a ridiculous $615,000 for 3000 square feet (my last UK house was 850 square feet!!)

It is now apparently 'worth' an even more ridiculous $1 million. This is probably the 'cheapest' place to live in Greater Vancouver.

House prices aren't going down, as there is no supply - too may people moved in 2015/16.

The Realtors seem to decide what the price is based solely on the $$$ per square foot (which seems to work for SF house/townhouse/condo), which in Maple Ridge works like this currently:

Is it brand new: If so it is $325 per square foot.
If not new, but in good condition: $300 per square foot
Needs a full reno: $280 per square foot
Has a good view: Extra $20 per square foot
Is a tear down: Land @ $150 per square foot, House at $50 per square foot

The same seems to go for everywhere else (each 'town' has it's own basic $/square foot price), except in Vancouver you start at $1000 per square foot in the cheap areas and go up from there...

Atlantic Xpat

Apropos to silly house prices, the results of this survey might be of interest. https://www.theglobeandmail.com/real...click=sf_globe

The level of debt that people are taking on and the mistaken belief that some have that prices can only rise and interest rates can only stay low, is going to come to a head regionally or nationally at some point.

dave_j

I'm afraid it's very difficult to protect people from themselves. The feeling, with house prices rising quickly, that it's now or never developes a form of hysteria that distorts decision making. When I was younger and probably just as stupid I was subject to a similar hysteria and meeting the subsequent mortgage payments when interest rates hit 15% taught me a hard lesson.

The events of 2008 should have forced people to think hard about debt but time passes and memories fade. Interest rates have been so low for so long that there will be those who view the prospect of higher interest rates as out of the question. If this changes, only marginally for many with high mortgages, this misconception will come as a very unwelcome shock.

But people have to live somewhere, but do we all need to live in the new mansions being thrown up? and do we all need to live in fashionable areas? You pays your money and takes your choice and tries to sleep at nights.

Shard

That's the rub.

Given the enormous personal debt and high mortgage levels, BOC isn't going to raise interest rates sharply whether they need to or not. They have a tiger by the tail, in the parlance.

Siouxie

That's what makes me very pleased that I bought a smaller house with a low mortgage; as I bought it with my son - and he qualified for a 30 year mortgage - our payments are under $600 a month (less than a 1 bedroom apartment costs to rent!). Despite the fact that it's a smaller house, the value of it has increased to almost double in 6 years.

The trouble is, if we sell it what do we buy instead? House prices around the area have increased dramatically.

sharkus

Umm it *is* ROYAL Tunbridge Wells (the ROYAL part is important), so of course they'll have oodles of money to buy something, and 700k is pocket change

For some in RTW, sure, it would be the case, as there is a fair bit of wealth there, but for the most part, totally unrealistic, and I speak from personal experience, having lived in RTW for most (bar a short time in Tonbridge as a baby, but we won't mention that ) of my life before I moved to Canada.

I also have no idea how people are able to afford the current house prices. Sometimes you DO have to live in a specific area due to various reasons, and thus moving to somewhere more affordable isn't really possible. At that point you are a bit stuck. Yes, one doesn't need a mansion, but when a three bedroom townhouse starts at 670k, it's a little upsetting (especially when you know that similar places sold for 340 in 2008, and 500 in late 2014).

When you start looking at downpayments, you see 5% will be 33500, 10% 67000, and then 20% is 134000. Unless I'm mistaken here 33.5 grand isn't exactly pocket change, so where do you come up with that, let alone 10 and 20%!

Saying things like "oh, well, you should have saved harder before" doesn't do anything but annoy.

Use a line of credit? Nope, likely you'd find the total debt ratio would be against you and a lender would not allow you to do that. The thing being that you could pay the mortgage and the LOC back, with comfort, so it's just getting over that hurdle.

Have someone gift you the money (and then potentially pay them right back from a LOC, once the sale has closed), yeah sure. I've got people lining up to give me 35k!

I will say that I have seen prices dropping a bit since the new rules for GTHA came into being. a couple of places dropping from 799 to 750 within a week, likely due to no offers coming in.