scliffe

Is buying a house that important
I watched a documentary recently in which a Times newspaper researcher argued that buying a house was a good investment 10 years ago but now renting is the future given the stupid overpriced houses. Crap extortionate mortgages and the utility taxes one has to spend.

I guess as well with the overpricing of homes and the continual nudge that houseprices are going up all the time ........Are we setting ourselves up for a colossal fall.

if we do the maths how can a house that was worth $50000 fifteen years ago now be worth over $500 000 now and in light of wages not going up.
Could the housing market crash and will this be the next sorry chapter in the global recession
We here in Vancouver talk of the recession I can't really see one other than a tightening in the labour markets but how long will this bubble last before it pops
The other factor that I predict in people emigrating especially to Vancouver is that it will slow right down. You do require anywhere up to $25 000 to set up camp here and if people are loosing money especially on their houses then are they going to come. Especially with places such as China that are seeing the greatest slowdown
Also our government here seems intent on imposing tax after tax that makes living here way to expensive. 84% of Vancouver is small business which has to take the brunt of these hikes. If business fails I feel that people will leave and the whole social fabric that holds Vancouver together could get back on an aeroplane and go home
I keep reading in England about Northern Rock which although bailed out by the government has still made a colossal loss in excess of billions of pounds
Everything looks way too shaky from where I am standing
What do you think

el_richo

Each to their own really.

I own because of the following examples

1, It's MY house
2, I can afford it
3, I don't have to worry about the owner wanting to sell it
4, I don't have to worry about point 3 when i'm 70 years old or have a family
5, I have something to pass down as inheritance
6, I don't have to worry about making rental payments for the rest of my life
7, History shows that prices will rise over the long term

ExKiwilass

I agree with el-richo. I think this city has grown enormously over the past 10 years and you can see that in the prices in certain areas...the average wage earner can no longer afford the west side or a house in east van, inner ring burbs, etc. A shift is going on. We couldn't afford a house when we bought - so we bought a condo in an 'up & coming' (read: shitty) area and started there. I know a lot of people still waiting for the crash. Some of them have been waiting since 2001.

dboy

I live in vancouver and think anyone buying now with 5 percent down or whatever is nuts. I think we are in for a huge correction. I don't think there is anything wrong with renting in this market. If you were to compare a one bed condo for 400,000 - vs renting the same unit:

to own:

mortgage around 2200 (nothing down) taxes around 140 per month, condo fee 250 total: 2600 and i didn't include upkeep and the fact that rates are going to go, way, way up.

to rent:

1500 - 1700

I don't think fundamentals can hold at the present levels. I agree that the nature of homeonwership will change.

dboy

Yes but we are at the tail end of a housing bubble and don't believe that those jumping in now as first timers in an over inflated market are making a wise decision. Everyone position is different, but first timers are potentially setting themselves up for serious failure.

Simon Legree

I agree. If I'd have rented for the past 40 years it would be a total write off. At least I have built up lots of equity, something that renting won't do.

JonboyE

In the great scheme of things, no. I agree with everything el_richo posted. It is a choice for both a place to live and/or as an investment vehicle. In Vancouver it is certainly cheaper to rent for many people.

I don't understand where the idea of extortionate mortgages comes from. Mortgages are dirt cheap at the moment.

Isn't this line of thought a couple of years out of date?

You ask what a house is worth, and in one sense there is nothing about a house in Vancouver that is intrinsically worth more than one in rural ON. On the other hand something is worth what someone else will pay for it. There is a lot of foreign ownership of real estate in the Vancouver area. Wealthy people from more unstable countries see Canada, and in particular Vancouver, as a safe haven to store part of their wealth.

The high-end market is therefore less sensitive to the normal economic cycles. This is not to say a prolonged worldwide recession will not impact it, and it is a risk that needs to be considered, but to my mind it is a small risk.

The middle of the market will likely be more volatile. I can see the Bank of Canada interest rate being in the 5% region in two or three years. This will mean variable rate mortgages around 7% and it will be an unpleasant shock to people currently locked in at 3.5% to 4.5%. There will be pressure for people to downsize (or not move up). Short-term, a big family house in the suburbs may not be a great investment.

There certainly seems to be a slowdown in Brits immigrating if these forums are in any way representative. But then, the material standard of life is not that different in our countries so a housing downturn in the UK and a strong Canadian dollar significantly impacts people's decisions. I think it has very little impact on the immigrants from the Asia-Pacific region, and these, with Canadians moving west, are by far the majority of newcomers to Vancouver.

I think you are a little guilty of taking the NDP's economic analysis too seriously. The harmonization of the sales taxes is going to make BC a much more attractive place to do business and it will now be able to compete directly with AB.

dboy

Yes but you didn't buy in an overinflated, speculation based market. People buying today in Canada are in a very different position than you were (and I was - till I got hosed in a divorce). It now takes something like 70 percent of family income to buy a home in vancouver. More and more people are avoiding rrsp contributions etc, gambling on the fact that their home will finance their retirement. Never have so many been putting so many eggs in one basket.

Houses have become more about investments than shelter and that is the real issue. I don't need home ownership to force me to save for the future. Only reason the market has picked up is due to the low interest rates which improved affordability.

Has everyone forgot we are in a recession and jobs are vanishing at an alarming rate. Our biggest trading partner is in the crapper and we are facing a deficit? Higher taxes and higher interest rates are certain.

ExKiwilass

Bingo.

Other provinces have already moved to the HST, and the danger is that BC businesses will have to pay more for goods from other provinces than other provinces who've signed up to the HST do, which leaves BC at a competitive disadvantage. HST will be good for small business imo.

And yeah, to the other point. The city is growing...maybe not where dboy lives but I def. see it where I live in North Burnaby.

ExKiwilass

I do agree about the interest rates having an affect....but to the other...

Really? Cos that's not what I see at all. If we're talking anecdotally, the people I know who are buying houses, not condos, in Van, are buying with family members or friends and splitting the mortgage, which means their mortgage actually isn't all that bad. I'm talking local vancouverites here not immigrants. The other thing is the basement suite. If you buy a house with 2 incomes (most families are 2 income now) and then rent out the basement suite, it becomes more affordable.

dboy

But listen to what you are saying. Shared mortgages, basement suites, family bail outs, does that sound like a sustainable market? Does it sound normal? Those suites are illegal - are we destined to be illegal landlords to own a piece of real estate in vancouver?

Don't get me wrong in a normal, balanced market, home ownership is a sensible decision. If time tells and this is how the market is destined to be then so be it (I highly doubt it). But I don't think we are there yet and it could well be the biggest and most destructive gamble of someone's life.

I was mortgage free prior to my marriage falling apart and i daresay that for my ex, home ownership was a very sound decision. We bought in 1996 for 180,000 one in the building is now up for 590,000 (although I think he is dreaming) - where is the normalcy in that? It is about speculation and greed. There will always be a premium for owning but you should 't have to sell your soul.

Alan2005

Buying a house at the right time is a good investment however buying a house at the peak of the market in the middle of a recession is idiocy.

Alan2005

These people are potentially commiting financial suicide. What happens when the friends family want go their separate ways etc. All these shared ownership, mortgage split schemes that are designed to 'help' first time buyers are stupid. What would help first time buyers is lower prices - eventually they will come.

This guy talks a lot of sense
http://housing-analysis.blogspot.com...ying-home.html

dboy

Very clearly and logically written article, i too know far too many jenny and johns.

Things could get real ugly for a lot of people. I hope I'm wrong, but i doubt it.

Alan2005

If london is anything to go by, then the exchange rate is actually more of a factor for foreign investment in property. Prime london had a bit of an uptick when GBP fell last year.

I agree with this analysis 100%. I would add that the thing that some people don't realize is that interest rate rises from a low base are more painful than from a high base (3% to 4% is a 25% increase in cost, where as 6% to 7% is a lot less)