Atlantic Xpat

I'd say. In 22 years working in various industries, I've never seen a payrise, not linked to a promotion, that was anywhere near 10%. Inflation or thereabouts yes, below inflation and zero, certainly, but 10%? No.

Almost Canadian

But ...

Does it really matter whether the rise was because of promotion or an inflationary one? More money is more money is it not?

FlyingDutchman6666

What do you think consumers prefer:
- A $500 bells-and-whistles flat screen TV which has a reasonable chance of expiring after 18 months, or
- A $1500 bells-and-whistles flat screen TV guaranteed to keep on rocking for 20 years, but which will be old fashioned, in terms of technology, in a year or two. (No high-definition or 3D if you bought 4 years ago, no flat screen if you bought 6 years ago !)

fletcher m

I bought my 1st house in 1993. 4 Bed Det quite new, quite nice. I earned £21k a year and all I could get was 3x salary £63k. I got it for £71250 and obviously paid the difference as a cash deposit. Interest rate fixed @ 6.99% for 3 years, I was stone broke every day for 3 years, it then went up to 8%, I had been promoted and 3 reasonable pay rises, still stony broke. I really didn't eat well and I had forgotten how hard it was in those early years, i suppose it boils down to the young expecting so much more and have no idea how bloody hard it was for us. 20/25 years time, they won't have a mortgage and their kids will be moaning at them about how difficult it is for them. Perhaps they just have to take the pain and get bank of mum and dad to help when they get into difficulty.

not that I got any help!

Former Lancastrian

Whats a pay raise again Im expecting zero raises over the next 3 years just like they did with us in the 90s.
Im sure there will be a correction on housing prices in most places but a major crash I dont know. As long as people keep moving to places like Vancouver, Toronto and Calgary and now Fort Mac then if they want to own a home then they better be prepared to spend big dollars to own one.

jericho

Funny how everyone keeps blaming the "young", and how the "young" want all the toys etc etc etc.

It's not the young who have $600k mortgages, a boat, a cottage, 3 cars, all the household electronics you can shake a stick at, and the holidays in Mexico every winter etc. It's middle aged families with teenage kids. They're the ones who are gonna be forced to walk away from their homes/mortgage when the shit hits the fan.

And then we'll really see a property crash.

Former Lancastrian

But will there be a big crash?
What intrigues me is if there is a crash what will happen to those who walk away but still have jobs? My city has a rental vacancy rate of just over 1%.
Where will these people live. Do the banks really want to own these homes?
Landlords will be able to increase rental rates knowing there is a limited supply and not too many affordable rental units being built.
If the house was bought for say 600 grand but there is 400 grand left on the mortgage then the bank will only be interested on getting the 400 grand and not can they sell it at 600 grand.
Interesting times lay ahead and thankfully I dont owe 400 grand on a mortgage.

jericho

Yes of course. As soon as interest rates make the re-payments unaffordable and people start to default.

We're talking about this as if it's never happened before. It's just happened in the US (admittedly not due to interest rates per se, but people defaulted and left their homes).
Yes it will happen. When? Who knows, but it will.

fletcher m

The house i bought was a Repo, the previous owners had bought it just 4 years before for six figures, Bank wanted £90k, I offered 71250 and got it! i had a choice of repo's, it will be back.

There will be a crash, I suspect it will happen in UK once the public servants lose their jobs, they are a stabilizing factor in places like york, same job, pays the mortgage, same place for 20 years. When those jobs go, it will be gloves off, just add higher interest rates and BINGO!

Canada? I just don't know. What I do know is that to buy a house in UK, you need a big deposit, that tells me the bank are already factoring in a slump. While you can get a huge mortgage guaranteed by the Govt in Canada on $54k, you are headed into oblivion.

jericho

Not long ago, you could get 125% mortgages in the UK too.... and the predominant bank had to be bought out by the Government.

You can get them here too- they just call it a line of credit, but it's basically the same thing.

Souvy

Prices in Ottawa-Gatineau are probably going to take a hit soon. The public service is getting hammered, as are the people working for the government on contract. The housing market is bound to cool.

Former Lancastrian

Very true but what about house prices in St Johns, Moncton, Halifax, Winnipeg, Regina, Saskatoon etc etc.
I agree there will be corrections but will it be a crash as some suggest and to what extent.

Souvy

I don't really expect a crash in my area. Prices are not that high in the first place. What is more likely is that prices stall because people stop moving. There has been an awful lot of new-build the last few years. This puts pressure on the older houses.

I do envisage that Rona and Home Depot will make more money. Folk will upgrade their houses, instead of moving up the ladder. The same thing happened after the last economic crash.

Atlantic Xpat

St. John's isn't sustainable in the longer term IMHO. It's a petro-economy and is booming at present and likely to continue for another 4-5 years until the Hebron project is up and running. After then, who knows? In the 7 years we've owned our house, it's pretty near doubled in value. Entry level 3 bedroom sub-division land is $350k and houses of $500k+ are normal, not the rarity they were when I moved here.

FlyingDutchman6666

I ran a little comparison of rents vs. mortgages in my area, Mississauga.

Looked on mls.ca for semi-detached 3 bedroom houses north of Streetsville.

Most asking prices are around $500k-$550k. A 25-year mortgage @ 4.5% fixed is then just over $3000/month. Add the property taxes on top - an additional few hundred a month?

Equivalent properties in that area can be rented for $1800-$2000 per month. No property tax payable.

So is property overvalued?