“I have some friends here who live in a nice, upper-class neighbourhood full of big houses. They are absolutely stretched to the limit. There’s no money for anything anymore. And unfortunately they aren’t the only ones I know who are basically counting down the days until there’s not a penny left on the line of credit to draw from (the credit cards are long maxed out). Next stop is cashing out their RRSPs, they tell me. Then that’s about it. End game. Why the mess? A bad investment in a condo that’s done nothing but depreciate in value since they bought it presale (flip gone wrong). Now it’s a losing rental property that is draining their every last resource. And these were people I looked up to financially, they were very conservative with their money for the past 20 years, even had their mortgage on their principal residence paid off by age 45! I can’t believe the risk they took. And if these people succumbed to the greed, I can just imagine how many more there are out there.”
- pricedoutfornow at VREAA 9 Aug 2011 8:53am
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- “My folks find themselves at 65 still owing half the value of their home and recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it.”
- “Rent for $2,200 a month or buy and have a mortgage of $4,310 per month. Why would anyone buy?”
- “They were talking about two couples they knew who had recently bought a lot and planned to each build a house on it and live as neighbours.”
- Greater Vancouver Home Builders’ Association Annual First-Time Buyer Seminar Attendance Plummets
- Mom and Pop Get It Wrong In All Markets, Time And Again
- The average British Columbian homeowner is not going to pay off their mortgage by the time they retire.
- “He’s sold all his properties except his current one, which is now for sale. He explained that the market’s currently in crash mode, worst that he’s ever seen.”
- “One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized after debt paid off $185K.”
- “I know someone who just declared bankruptcy because her condo was assessed at $150k and she bought it presale north of $250k in 2005 or 2006.”
- Sturdy, With Views – “Calling Froogle Scott!… Is Dr. Scott ‘In The House’?” [Not In This One, Certainly]
- “She said the market was dead in Victoria and that it would remain so for a very long time. I asked how she knew. Her answer was fascinating and should scare the pants off the real estate crowd.”
- Kits Notes – “I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen in the 5 years I’ve lived here that is priced below $700K.”
- “A beautiful Belfast home, in the equivalent of 1st Shaughnessy, bought at their RE peak in 2007 for £3.5 million, has now sold for £800K, almost 80%-off. The market didn’t suffer any significant economic shocks. Rates & unemployment didn’t skyrocket. They didn’t build more land. Sentiment just changed and the prices fell and fell.”
- “Two family members of hers are trapped, underwater, in condos on the East Side.”
- “Interprovincial migration is not saying good things about BC’s economy.”
- Vancouver RE: Not As Expensive Provided You Don’t Think – “It’s clear that our perception of affordability has been coloured by living on a continent where housing is unusually inexpensive.”
- More Undisclosed RE Industry Insiders Publicized As Clients – “In 1995, Allan and Karin Hoegg were mortgage-free. But no more. Today their Vancouver home is a valuable source of income as they plan for full retirement.”
- Rumor that some OV units will be reduced by 20%.
- Downside Weights On The Vancouver RE Market – “One of the older guys (over 60) mention to the guy beside him that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house.”
- “My buddy was looking to upgrade to a house in the Coquitlam area. With 200k extra for a home, that’s half of lifetime saving between him and his wife.”
- “I was walking in the Fraser neighborhood yesterday, I noticed that the population, on average, seem to be composed of workers. I belong to the top 5 percent in terms of income. Nevertheless, I cannot afford any of the houses for sale in that neighbourhood.”
- “Vancouver is an urban resort whose value mostly resides in its real estate and not much else.”
- “Rogers Communications is expanding into RE; aiming to relaunch website; providing critical data that can help potential buyers assess the value of a property from the comfort of their home computer.”
- I’m only 50 and I can just about retire if I want to, all because of a single simple decision – “When prices rebounded to their former highs, then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I sold my place.”
- The Vacant Lot of Versailles, Richmond.
- “I don’t think that most people think things are going to crash, just that there is going to be a slight correction, but it was amazing to me how sentiment has changed, and the fact Vancouver RE is too high was just understood.”
- “The ‘investor’ who purchased our house put it up for sale two months later, in January 1981, but the bubble had burst.”
- For A City To Have That Kind Of Vacancy, It’s Like Cancer – “Downtown, the vacant unit rate is so high that it’s as though there were 35 towers at 20 storeys apiece – all empty.”
- “What’s the worst that can happen? You can’t pay your mortgage, so sell your house! No fear.”
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Whatever they do, they shouldn’t draw on their RRSPs. As I understand it, any amounts contributed to their RRSPs more than 2 years ago are protected in the event of bankruptcy. So if going BK is the end game, it’s probably best to do it with your retirement savings intact…
Sage advice but see vreaa’s Australian anecdote a few days ago. Families get so emotionally tied to providing stability for raising their children they will make bad decisions to keep it a reality. Madness!
Somehow I don’t think they will get that important piece of legal advice or pressured not to take advantage of it.
Either way I find it hard to believe people in a nice neighborhood with a paid off house can run into these much money trouble, maxed out CC, almost no LOC room left? Just how much can a relatively new condo bleed that makes it this bad? There must have been a LOT of large spending/over spending going on as well.
Yes, there’s more to the story than just the condo-I don’t want to post too much information about these people. Let’s just say the other debt also went to some sort of property-related purchases.
Another landlord buying an “investment” that doesn’t pay. I hear this story at least once a week.
That’s why I get so mad when I hear Don Campbell and his ilk talking about great investment properties. They actually ran on BNN. He did a segment on Surrey & one on Hamilton. Both using unrealistic numbers.
I did this post about it http://landlordrescue.ca/how-to-analyse-property-cash-flow/
To be clear, they didn’t plan on becoming landlords-this was to be a flip, pure and simple. Unfortunately it didn’t work out that way and now they’re stuck as accidental landlords.
Thanks Rachelle.
That post of yours you link is a good read. Good analysis.
Have you done any similar analysis for Vancouver recently? (Even just for a laugh?)
Thanks Rachelle. I second what would surely be a hilarious Vancouver example.
I have no idea how the idea got started that you can strike it rich as a landlord with one Condo. MDUs, sure, but a single unit?
I very very briefly a few years back considered this as well but after looking at the rental market and calculating costs I realized I’d lose money every month.
The most bizarre thing was a chit-chat with a guy who worked with me. He told me wanted to buy a condo, rent it out while he still lived in a rental unit in the Westend. The argument he made for it was that because it was rented out he didn’t rely on appreciation. When I pointed out to him that he would lose money every month on it he actually IS looking for appreciation he “covered his ears” and started singing “nanananana I can’t hear you” very loudly.
I really don’t get it. Even when they do their own math they see something else than what stares at them from the paper.
Well, looks like the bubble might get even bigger before it gets smaller:
‘”To raise interest rates would drive up the Canadian dollar, making our exports that much less competitive. Now it seems almost inevitable that the next move for our benchmark interest rates will be down.”
But that could push the country into a deep and prolonged recession with record levels of private debt, according to Hlinka.
Cutting interest rates could further overheat the housing market and encourage people to spend beyond their limits, creating a bubble that will soon burst, predicts Hlinka.
He points to Vancouver, a city whose housing market has cooled considerably this summer, as a harbinger of things to come for Toronto and other Canadian cities.’
Source:
http://www.cbc.ca/news/canada/story/2011/08/10/canada-interest-rates.html
“housing market has cooled considerably this summer”
Um no… It’s like saying things are cooler after a street performer blows a giant ball of fire. Vancouver housing is cold only relative to the springtime insanity of March.
But there is a point here, that with lower long rates, beyond the direct control of central bankers via the overnight rate, we must turn to fiscal policy to control asset bubbles. I wouldn’t hold up much hope of anything significant but I think banks will be given their marching orders.
On a completely unrelated note, public sector layoffs are starting to percolate through the Conservative Party policy sausagemaker. http://www.cbc.ca/news/canada/north/story/2011/08/04/pol-environment-job-cuts.html
More “public sector” layoffs:
http://www.cbc.ca/news/canada/british-columbia/story/2011/08/11/bc-hydro-jobs-rate-hike.html
I have nine friends, family, co-workers in that boat. They used their principle residence as a bank machine to do renos, buy investment properties, travel, buy new cars. Everyone almost said the same thing: “Money is so cheap to borrow and everyone else does it”
He, funny. For me having cheap(er) debt meant I could pay it off quicker, not loading up on more.
I really am a contrarian it seems.
Prolonged low interest rates = no rush to buy now. People waiting to see what happens knowing rates not going anywhere will cause stagnation which could spur flippers to pull the cord and get out thus initiating the fall. I’d prefer rates going up but certainty is good too.