dboy

3 x the average vancouver family salary is around 60 -70 k a year (45 k for an individual) - so using your formula 3 x 70 is 210 k or 135 k for an individual. It takes about 8 x the average wage to buy an average home in Vancouver.

You being up there in Ottawa have no concept of the nature of the market here. 300 k is still out of reach for a lot of people. I don't buy the argument that you have to accept living in substandard housing or bad areas just to own.

There is nothing wrong with renting in this market and i dare say much right. There is not one single bubble in real estate anywhere in the world that has not deflated - I don't see how Vancouver can be any different.

northeast canuck

That's not Vancouver. Its Richmond. Very different, and there is a reason for the price difference. I'd rather live in England to be honest.

And I am NOT looking for a starter home, as I have already owned 3 houses in my lifetime, I am hardly new to this. Unless you have either the deposit or income I mentioned above, you cannot buy a home in Vancouver unless you use a 5x multiple or 35 year amortisation. This is not sustainable.

dboy

No it's not sustainable you are right. RE in vancouver hit critical mass at the end of last year and people simply stopped buying. It was only low rates and 15 - 20 percent price drops that got the market moving. What has been interesting is that despite the active market, prices have not dramatically increased. And I daresay that it's been the bottom end of the market that has seen the most activity.

I fear that we are setting first timers up for failure. What is now happening in this latest bubblette is similar to the sub-primes with teaser rates. Where are they going to be when rates go up? And equity vanished (underwater):

el_richo

It really is a fine balance and like I've said before, all very subjective based upon individual circumstances.

If you afforded the purchase of a property you envisage spending the rest of your life in, then fluctuations in price / bubbles will make no difference.

If you can afford a property in a less desirable area yet decide to rent in the area you love then that's great. Short term you live where you want and in a bear market the prices keep moving in your direction. Longer term, if the market changes to a bull you risk playing catch-up until the next correction as the % increase on property value may be more than you can potentially save.

If you can afford a property in a less desirable area and do so to get on the ladder, in a Bear market you may be stuck there for the unforeseeable future. In a bull market you get a leg up the ladder with increasing equity YoY.

By afford, i mean can pay mortgage, bills, and save money each month as well as day to day living.

So the bottom line is you roll the dice and you take your (calculated) risks and an owner will generally always want price increases whereas renters will often want decreases.

dboy

I don't think anyone disagrees with you. I don't think buying as a first time buyer with little or no down payment, however, is a calculated risk in this market . More like playing Russian roulette than rolling the dice.

el_richo

I wholeheartedly agree with you.

northeast canuck

It's also worth mentioning that the average homeowner only stays in the house for an average of 3-5 years. Most housing cycles take place over 8 years or more. So while the price of real estate has always gone up long-term, if you're the "average" homeowner then you have a great deal of risk.

Not to mention the risk of being trapped. The removals guys that packed our stuff up said that there were currently around 15 families in our immediate area that are trying to emigrate but can't because they can't sell their houses, and can't easily rent because they would have to remortgage to a buy-to-let and the mortgage lenders won't let them because they don't have 25% equity and in some cases negative equity.

Sucks to be them!

dboy

The other thing that amazes me these days is how easy it is to get a mortgage. My first one took weeks and weeks of endless interviews with lenders, filing numerous applications, getting copies of tax returns etc. We had to put down 20 percent to get a decent rate (around 8 percent at the time).

Now I can get one over the phone in about 10 minutes - no need to provide anything. I think this is part of the problem and the reason why prices have gone skyward - there are a lot of people getting mortgages who have no business having them.

Keith

I'm fully aware of the BC market. When I retired 17 years ago I did contemplate buying a Condo in Victoria and even placed a deposit on a 2 bed condo close to The Bay in downtown. At the time it was $134,000 and now I believe would sell for around $275,000. Instead I bought our present condo in Ottawa for $130,000 which now lists at $225,000.

Back in the UK where I lived (Borehamwood 12 miles from centre London) house prices are even more ridiculous. In 1963 I sold a 3 bed detached house for 3500 pounds and today it lists at 300,000, almost 100x original cost. Here in Ottawa in that same time span properties have gone up about 18X.

Deva

This is one reason why I am renting. We bought a place in NS before we emigrated and sold it for a loss when we moved on two years later. It was an expensive lesson. I'd love to think I'm going to be in Ottawa for many years but until I am more certain I'm happy to keep renting.

That may be true for Ottawa as a whole but there are areas of the city (like Westboro where I am renting) that exhibit the same characteristics of the UK property bubble.

Alan2005

The typical housing market cycle is between 14 and 18 years or so. This credit collapse has been faster than most and it remains to be seen how it will end - however if they keep interest rates this low whilst also borrowing to provide 'stimulus' too long then we will be looking at a currency collapse (a hyper inflationary spiral is my biggest fear and not real estate prices getting away from me)

People who buy property as in investment because 'it always goes up' are not really thinking long term at all. Japanese property still hasn't recovered from the early 90's nearly 2 decades after the bubble collapsed there. If you are planning on buying condo's to let at the top of the market using leverage because you think this then you need your head examining.

When I buy it will probably be the last property purchase I make in my life and I want it to be the right one. I want somewhere with land, not because it's an 'investment', but because of it's utility value as I think that food and energy are going to get very very expensive over the next 20 years. In fact I expect that we will look back on this decade and think that we never had it so good in terms of wealth and assets; it won't be as good again in our lifetimes without viable alternatives to oil.

ExKiwilass

Hmm. Sometimes I think "bubble" means "I can't buy in an area that's too expensive for me but I want to". I think Keith has a point. There are affordable condos out there - we started in one. I personally don't believe the west side is going to become affordable for the average wage earner again, or that working class peeps can afford bungalows in Kerrisdale. East side maybe...

As to dboy's point about 100% mortgages at this point in the market, I agree, only, I also agree with El Richo that if you know you're going to stay 10 years then it's still worth buying.

dbd33

Isn't this rather contradictory? If you more to "somewhere with land" then you become more dependent on oil prices staying managable as you have to operate lots of machines. If you want to be less dependent on the price of energy move next to work.

Alan2005

I guess it depends on what you mean by "somewhere with land" - i'm not talking 100's acres - just a few, no more than five. I don't want to be driving a tractor to get to the front gate.

Edit to add: I already do live near work (10 mins walk), but my assumption is that I won't be working forever

Keith

I have been in Ottawa since 1963 and I don't think any properties have increased 100X since 1963. Places such as shown in this MLS listing sold for around $22,000 in 1963 and have risen about 20X.
http://orebweb1.oreb.ca/mlssearch/fr...mls_num=734895