Canada's 'housing bubble' deemed close to bursting

[wave46]

Originally Posted by misher

One word, debt. Debt is by far outpacing wages.

No bank would ever loan me Vancouver money for a home, especially if I couldn't make the monthly payments.

Given the limitations on maximum amortization timelines, I don't see how making a buyer bankrupt in months would work.

I don't see how a $4,500/month mortgage is even something remotely affordable. A bank would be insane to loan out that money.

[lio45]

Originally Posted by wave46

I just don't get the 'Why?' part.

It's not like Vancouver is New York City. Or Tokyo. Or London.

It's an OK city, but not a million-dollar plus nice city. It's not some global mecca that pays top dollar for talent, either, like San Francisco. Why stay to be poor, unless you have a sweet deal or no care to own a home?

Regardless of what's driving housing prices, I still don't get how - absent an outside source of money - how can people afford to purchase a home in which the average income is nowhere near the cost of purchasing? I've noodled some numbers into an amortization schedule and the monthly costs of a mortgage are several times my income (and I'd like to think I do OK), even with assumptions of a 20% downpayment.

Canada's a big country. It's not like the rest of it is a destitute wasteland, so why not take a chance somewhere else, unless something absolutely makes one tied to Vancouver.

We might get contracts during the next few years that would almost require me moving here (Vancouver), so I am thinking I might bring up the idea to my gf and see what she thinks. I'm actually liking my somewhat gritty neighborhood - meanwhile I find most of the new condo buildings really ugly and sterile. On average, I find Vancouver disappointing architecturally. (Though Alberta and the BC Interior were even worse, by a lot.)

My baseline is Quebec, which is defined as "meh" / "nothing to write home about" (as the baseline - it's kinda part of the definition.) So far most of Western Canada is inferior, while lots of places in the Northeastern USA and Western Europe are superior.

[misher]

Originally Posted by wave46

No bank would ever loan me Vancouver money for a home, especially if I couldn't make the monthly payments.

Given the limitations on maximum amortization timelines, I don't see how making a buyer bankrupt in months would work.

I don't see how a $4,500/month mortgage is even something remotely affordable. A bank would be insane to loan out that money.

Yeah a 20% downpayment is taking me forever even when I'm looking at payments of $1152/month+$380 maint fees which is affordable for me.

Fixed rates should dip below 2% eventually.

I figured with the view and a renovation this place would be gorgeous and its across the street from Richmond centre.

$394 a sqft for a place with a 13th storey unobstructed view of a park thats across the street from the city centre.

If your ok with not living in a brand new building there's a lot of great deals out there as long as your careful to avoid leaky condos.

https://www.rew.ca/properties/2513524/13...d-richmond-bc?property_click=map_sidebar

[lio45]

Originally Posted by wave46

I just don't get the 'Why?' part.

It's not like Vancouver is New York City. Or Tokyo. Or London.

It's an OK city, but not a million-dollar plus nice city. It's not some global mecca that pays top dollar for talent, either, like San Francisco. Why stay to be poor, unless you have a sweet deal or no care to own a home?

Well, to be fair, the extreme southwestern corner of BC has arguably the second best (after Maple Creek) climate in the entire country so that's a factor that's going to drive local demand. (The main factor driving prices up isn't climate-related though, I'll grant you that.)

On the other side of the border, you can see a similar "climate premium effect" on all values in Coastal California.

If the USA and California lowered their anti-money-laundering standards and became equally welcoming of that conveyor belt of questionable Chinese capital as Canada is, it would greatly relieve the pressure on the Vancouver market as the Chinese billions would now be more diluted over the entire Pacific coast.

But right now Vancouver has a very special position. In a slightly alternate reality where Canada is still the most welcoming First World country on the planet to questionable foreign money and all the billionaires are in Ireland, you can be 100% certain that real estate values in St. John's, NL will be TOTALLY out of whack with local metrics.

[wave46]

Originally Posted by lio45

We might get contracts during the next few years that would almost require me moving here (Vancouver), so I am thinking I might bring up the idea to my gf and see what she thinks. I'm actually liking my somewhat gritty neighborhood - meanwhile I find most of the new condo buildings really ugly and sterile. On average, I find Vancouver disappointing architecturally. (Though Alberta and the BC Interior were even worse, by a lot.)

My baseline is Quebec, which is defined as "meh" / "nothing to write home about" (as the baseline - it's kinda part of the definition.) So far most of Western Canada is inferior, while lots of places in the Northeastern USA and Western Europe are superior.

I don't know your business or personal situation, so I can't say whether it's a good move for you. I'm mostly coming at it from the context of me, who is making far less than six figures per year and who I'd like to think is more representative of the average person.

All the wonderful things about Vancouver are fine (weather, big-city stuff, mountains), but I still struggle to imagine a long-term life in a place where I could barely afford to tread water. A couple of years, maybe, but the 'nicest' stuff wears thin after a bit, especially if one is working insane hours to keep up the facade. I'd probably be thinking about somewhere else to try my luck (and Canada is pretty blessed in that regard) where I could actually get ahead and enjoy my money.

Maybe I'm wrong though.

[lio45]

Originally Posted by wave46

All the wonderful things about Vancouver are fine (weather, big-city stuff, mountains)

Vancouver would be a major downgrade for me in terms of weather. (My current standard is summers in Quebec and winters in Florida.)

But I don't care that much about these things - I'd be fine with Vancouver's 🞵🞵🞵🞵🞵🞵 weather and Vancouver's 🞵🞵🞵🞵🞵🞵 beaches, if I needed to be here.

(April was pretty damn great though - for Canada; still not as sunny or warm as average winter weather in my area of FL.)

While the climate 🞵🞵🞵🞵🞵, I really love the people (we hired about ~50 people - man, they are really awesome on average) and also the more relaxed West Coast vibe.

[lio45]

Originally Posted by wave46

I don't know your business or personal situation, so I can't say whether it's a good move for you. I'm mostly coming at it from the context of me, who is making far less than six figures per year and who I'd like to think is more representative of the average person.

All the wonderful things about Vancouver are fine (weather, big-city stuff, mountains), but I still struggle to imagine a long-term life in a place where I could barely afford to tread water. A couple of years, maybe, but the 'nicest' stuff wears thin after a bit, especially if one is working insane hours to keep up the facade. I'd probably be thinking about somewhere else to try my luck (and Canada is pretty blessed in that regard) where I could actually get ahead and enjoy my money.

Maybe I'm wrong though.

You are definitely correct, in your case. Doesn't really apply to me though. (I'm aware this might come off as arrogant, and I apologize...... though I've seen much worse, like our famous $40,000 couch SSPer for one!)

Honestly though, Vancouver doesn't offer good bang for the buck at all. Regardless of one's situation, it's pretty much guaranteed they'd be better off in at least one (or more, but at the very least, one) of the following: Paris, France; London, England; North Bay, Ontario; Sudbury; Manhattan; San Diego; Denver.

[someone123]

Originally Posted by lio45

While the climate 🞵🞵🞵🞵🞵, I really love the people (we hired about ~50 people - man, they are really awesome on average) and also the more relaxed West Coast vibe.

There's a lot of intangible stuff here that is nice. For example when it's warmer and if things are semi-normal I recommend checking out Wreck Beach. While many places have warmer water, few of them have a setting like that, either in terms of the natural environment or the culture of the people who go there. I also recommend doing some big mountain hikes (e.g. Garibaldi), go to some gulf islands, etc.

Vancouver is a bit of a playground for rich kids even though it may not be advertised that way. I feel kinda bad sometimes when I see working class individuals try to emulate rich bohemian 20-somethings here and find out their life is miserable. I had some neighbours here for a bit who were from the Prairies and thought they would have kids and the guy would be a DJ. They were very nice but they did not last long. There is a wider phenomenon of fake jobs (community organizer or activist, DJ, many UN workers, etc.) that are potentially just semi-unpaid activities for rich kids. I think Justin Trudeau lived in a house here for a while when he was a trust-funded teacher or snowboard instructor or something. People see the apartment/house, party lifestyle, and job but they don't know about the trust fund or help from the parents.

I find the summer here superior to Quebec summers. You might find you like them too if you stay. It's November/December that are often bad here.

[misher]

Originally Posted by lio45

Well, to be fair, the extreme southwestern corner of BC has arguably the second best (after Maple Creek) climate in the entire country so that's a factor that's going to drive local demand. (The main factor driving prices up isn't climate-related though, I'll grant you that.)

On the other side of the border, you can see a similar "climate premium effect" on all values in Coastal California.

If the USA and California lowered their anti-money-laundering standards and became equally welcoming of that conveyor belt of questionable Chinese capital as Canada is, it would greatly relieve the pressure on the Vancouver market as the Chinese billions would now be more diluted over the entire Pacific coast.

But right now Vancouver has a very special position. In a slightly alternate reality where Canada is still the most welcoming First World country on the planet to questionable foreign money and all the billionaires are in Ireland, you can be 100% certain that real estate values in St. John's, NL will be TOTALLY out of whack with local metrics.

I know you have no sources for this as it’s complete 🞵🞵🞵🞵🞵🞵🞵🞵 lol.

Seattle and LA have expensive real estate too. West Coast cities generally are quite expensive. Even Mexican ones.

[goodgrowth]

But look at the zoning map for Vancouver so much of it still designated for SFH.

I think people start saying "X thing is this way" (ie Vancouver is expensive) and and then just repeat it so much it becomes ingrained that it's almost like it's just naturally that way and therefore nothing can done about it.

Yeah it's expensive because you're in denial about what's required.

The longer Vancouver holds on to the SFH neighborhood dream the more expensive it's gonna get.

You think if Vancouver was built the way Montreal was prices would be the same? They have 2M+ on an island and it's been one of the most affordable cities in Canada.

[milomilo]

Originally Posted by goodgrowth

But look at the zoning map for Vancouver so much of it still designated for SFH.

I think people start saying "X thing is this way" (ie Vancouver is expensive) and and then just repeat it so much it becomes ingrained that it's almost like it's just naturally that way and therefore nothing can done about it.

Yeah it's expensive because you're in denial about what's required.

The longer Vancouver holds on to the SFH neighborhood dream the more expensive it's gonna get.

You think if Vancouver was built the way Montreal was prices would be the same? They have 2M+ on an island and it's been one of the most affordable cities in Canada.

Or just build Vancouver the way Vancouver is built, but everywhere rather than just as it is downtown and near skytrain stations. If you ask a foreigner that has some knowledge of the city to describe it, they'd probably describe it as a very dense city full of skyscrapers. That's what I thought until learning more. Little did I know that only a small portion of the city is zoned properly, and the rest is a policy failure.

[Acajack]

Originally Posted by goodgrowth

You think if Vancouver was built the way Montreal was prices would be the same? They have 2M+ on an island and it's been one of the most affordable cities in Canada.

Montreal is not an affordable city in the Canadian context because of the way it's built.

It's affordable because the main language is French and that it is located in the politically uppity province of Quebec.

[misher]

Originally Posted by Acajack

Montreal is not an affordable city in the Canadian context because of the way it's built.

It's affordable because the main language is French and that it is located in the politically uppity province of Quebec.

It does have a lot of foreign students and immigrants though. Besides France, Quebec is probably the #2 most attractive place to immigrate for french speakers in Africa/Asia.



What makes Montreal unique is that it’s population growth shrunk for years unlike Toronto and Vancouver where it’s always steadily risen. This hindered price growth in Montreal once its population started growing again. Montreal will likely resemble Toronto & Vancouver in about 10-20 years.

[Acajack]

Originally Posted by misher

It does have a lot of foreign students and immigrants though. Besides France, Quebec is probably the #2 most attractive place to immigrate for french speakers in Africa/Asia.

Correct. But that's a relatively recent phenomenon. And as a result Montreal is no longer the bargain it used to be.

[goodgrowth]

Originally Posted by milomilo

Or just build Vancouver the way Vancouver is built, but everywhere rather than just as it is downtown and near skytrain stations. If you ask a foreigner that has some knowledge of the city to describe it, they'd probably describe it as a very dense city full of skyscrapers. That's what I thought until learning more. Little did I know that only a small portion of the city is zoned properly, and the rest is a policy failure.

It's trying to mimic most North American cities where there is relatively small urban area with skyscrapers and then vast suburban areas and I think that's a failure.

[milomilo]

Originally Posted by goodgrowth

It's trying to mimic most North American cities where there is relatively small urban area with skyscrapers and then vast suburban areas and I think that's a failure.

Vancouver is pretty unique, so I don't think it's fair to say they are copying anyone. And there are lots of things which they have done well. But the continued resistance to not extending the areas of success outwards into the vast sea of SFHs is a massive failure, and I doubt there will be much improvement until that failure is fixed.

[whatnext]

Moody's gloomy report on Canadian housing:

Canada’s housing market vigor will fade as the COVID-19 pandemic will hurt economic growth in 2020. Housing data from February painted a rosy picture for the Canadian housing market, but that was before COVID-19 fears settled in. Shelter-in-place orders and social distancing have brought house hunting to a virtual halt while layoffs, the collapse in oil prices, and the plunge in equity prices have kept prospective buyers at bay.

The fallout from the COVID-19 pandemic is evident in the Conference Board of Canada’s latest survey of consumer confidence, which plummeted in March. The worst effects will be felt in regions that rely disproportionately on the leisure/hospitality, trade and energy industries. British Columbia is most exposed in terms of leisure/hospitality and trade, while the Prairie provinces—which were already dealing with softening demand for energy—are most vulnerable to the collapse in oil prices....

...Summing up all of the components, baseline GDP is expected to contract by an annualized 15% in the second quarter while the unemployment rate peaks at 10%. All provincial economies will contract substantially this year. The outbreak’s negative effect will be felt acutely in western Canada, which is already suffering from the U.S.-China trade war, while incomes in the
Prairie provinces will take another hit as commodity prices sink...

https://www.moodysanalytics.com/-/media/article/2020/april-canada-housing-outlook.pdf

[lio45]

Originally Posted by misher

I know you have no sources for this as it’s complete 🞵🞵🞵🞵🞵🞵🞵🞵 lol.

Seattle and LA have expensive real estate too.

lol. THAT is what's 🞵🞵🞵🞵🞵🞵🞵🞵.

Seattle and LA have:

1) higher rents than Vancouver;
(indicating demand for real estate as housing and not merely as an investment vehicle)

2) higher incomes than Vancouver;
(raising the level of what "normal" prices of real estate should be there)

and despite that, 3) prices are STILL lower than in Vancouver! (or were, last I checked.)

Combine that together and it's inevitable: there is SOMETHING driving real estate prices to levels that are completely out of whack with local rents, local wages, local cost of living. And that something obviously is real estate speculation driven by a flow of foreign money that's completely uncoupled from local metrics.

[lio45]

Originally Posted by someone123

There's a lot of intangible stuff here that is nice. For example when it's warmer and if things are semi-normal I recommend checking out Wreck Beach.

I've been there, but it was in winter and about a decade ago.

Just out of curiosity, I had tried to get into the water in Tofino slightly earlier (Christmas time), couldn't get more than my feet in, and for a few seconds. (Speaking of it, I'd be curious to see this little town at peak vacation season; it was pretty dead in winter.)

While many places have warmer water, few of them have a setting like that, either in terms of the natural environment or the culture of the people who go there. I also recommend doing some big mountain hikes (e.g. Garibaldi), go to some gulf islands, etc.

Vancouver is a bit of a playground for rich kids even though it may not be advertised that way. I feel kinda bad sometimes when I see working class individuals try to emulate rich bohemian 20-somethings here and find out their life is miserable. I had some neighbours here for a bit who were from the Prairies and thought they would have kids and the guy would be a DJ. They were very nice but they did not last long. There is a wider phenomenon of fake jobs (community organizer or activist, DJ, many UN workers, etc.) that are potentially just semi-unpaid activities for rich kids. I think Justin Trudeau lived in a house here for a while when he was a trust-funded teacher or snowboard instructor or something. People see the apartment/house, party lifestyle, and job but they don't know about the trust fund or help from the parents.

Agreed. I've been to California a few times (lived there for 6 months, did part of my B.Sc. there) so I think familiarity with the CA cities has lowered Vancouver's appeal to me at least a bit. My sis loved Vancouver but had never been to CA; my ex had a Pacific Coast roadtrip spending a while in each city and liked Van originally but then updated that to "meh" after checking out Seattle and SF. So it seems I'm not alone there.

But in a Canadian context, sure, Vancouver has several qualities. It's a nice city.

I find the summer here superior to Quebec summers. You might find you like them too if you stay. It's November/December that are often bad here.

Well, I'm not here for the weather at all. I'm here for business, and make sure I do what's needed because there's even more promising future long-term business if this one project goes right. It could be like November/December year-round here and I'd still be here and happy to be here

[goodgrowth]

Looking at other west coast NA cities and saying "look see they're expensive too" isn't really a good excuse because many of those cities are also restrictive when it comes to building density. San Francisco in particular has height restrictions and a lot of NIMBYism. LA is just endless low-rise sprawl...

If anything Vancouver should reject other NA cities and look to Asia in terms of zoning and planning.