Tanja Beja, Global TV Reporter: “Vancouverites already have the highest debt levels in the country. Average Vancouver Income is $45K, but it takes almost $72K to qualify for a standard condo. So how are first time buyers getting in? This mortgage broker says that about half are turning to ‘the Bank of Mom and Dad’.”
Ryan McKinley, Vancity Mortgage Broker – “It seems there has been more of an increase… as property values have risen.. parents are definitely involved in helping their kids out in any way they can.”
Beja: “That’s how bartender Jenny Fong got her place. Lacking the savings she needed Jenny’s parents bought her this condo. She now pays them monthly rent.”
Jenny Fong: “I don’t have a lot of lee-way… a lot of friends are like: “you’re just paying your parents back”.. I’m like, “No it’s not that simple, they are pretty strict”. You know, they’re just like a bank.”
VO: The difference is there is no interest, which can add hundreds of thousands of dollars.
- Anecdote extracted from ‘Generation How?’ clip on Global TV, 4 Oct 2011 (3:00 onwards). [Thanks to Greenhorn, for the video archive]
Let’s hope that Jenny’s parents aren’t overextended. It would be interesting to know their ages and their total net-worth:RE ratio. – vreaa
They are just like a Bank that makes subprime loans.
While we’re on the parents-buy-or-help-buy-starter-condo meme, what’s the right way to structure the financing? Do the parents have equity participation if say the deal is profitable, or not? Are they no-interest subordinated debt holders? Do you tell the bank about them or do you get off on the right foot for a lifetime of debt by lying to the creditors? If you are paying rent to the parents is that paying back the principal or just carrying costs? What are carrying costs anyway? Who pays for maintenance? If you get a HELOC do you have to tell the parents? Should you?
It’s important to note that this is the same station that broadcasts condo lineups as “news.” It is the same station that gave Cam Good in excess of two prime time minutes for his utterly slimy rented helicopter stunt. Its anchors, to this day (I’m looking at you Chris G), orgasm on air over trumped-up crap that stoke buyers’ fires, and then look positively forlorn/bewildered when they’re forced to introduce a story that’s even mildly RE realistic. Its news segments are sponsored by Re/Max, its mid-day program has long worshipped at the feet of Ozzie “It’s always a good time to buy real estate” Jurock, and it may well have been the chief puryeyor of housing mis-perception during this entire insane run-up. And it likely will continue to be that even as the bottom falls completely out. I can see it now: “Prices have now dropped 20%! It’s a buyer’s market like we’ve never seen!! Buy now, you fools!!”
I have no idea how this series got its start, and it certainly isn’t perfect. But damn, it’s far, far better than nothing. Congrats to whoever had a hand in putting it together. And congrats to Tanya. She’s no dummy.
I’m angered by the odd normal MSM bias but any look back at media in Vancouver in the past 100 years reveals a long history of biased stories. Read Berton’s autobiography for a perspective on this.
Blogs remind me of that scene from the Life of Brian where Brian starts giving a speech in the square to avoid capture. Lots of crazies and unreviewed content but there are some good sites out there that should be getting more press than they are.
Asian parents act like a bank. Actually the concept in Asian families is that everyone’s wealth is interconnected, so is everyone’s debt. In essence, you can look at any one member of the families’ debt as backed by the entire family’s income. That’s what makes this whole price to income ratio so tricky hence sometimse you simply look at price to rent ratios instead. When you look at households, you have to consider the parents as well. It’s the same thing with Indian Canadians, so debt to income ratios on the primary owner of a house is sometimes misleading in Indian families as there is often 4 to 5 incomes to support the debt.
This is true to a degree, where parents will instigate personal poverty to capitalize future generations.
Nonetheless check those rental yields; somebody’s been speculating with my multigenerational wealth… and they’ve eaten it all up!
I am unsure about the personal poverty part. Asian parents tend to be frugal to begin with (hence why China has the highest savings rate in the world), so a lot of asian parents have some money to spare to get their kids a head start in the market. Besides, the money goes both ways, I had to pay my parents mortgage before and I never complained about it because I know in the end this system works better for us both.
“tend to be frugal”
You mean instigate poverty. The savings is a capital transfer. The next generation did not earn it.
BTW the family I described in a few posts back had their children help with the mortgage in years past. Nothing wrong with it of course but that’s a lot of capital tied up in a marginally productive asset.
Agree with you that price-income doesn’t tell the story.
I saw the family a few nights ago and they asked what I thought of their purchase. I told them I didn’t know but if they had bought a condo they definitely were overpaying. Not my place to criticize. They agreed with me on condos.
It’s the land, baby! Place yer bets!
This scene is one of my all time favourites. They’re “pretty strict”, “just like a bank”.
Humanity is glorious. Wealth lasts 3 generations, so goes the adage. Worrrrrrd
A big part of her saying that her parents are “pretty strict” and they’re “just like a bank” is probably mostly self-preservation of her ego/self-esteem.
Most people probably don’t want to feel like they’re accepting a hand-out, charity or free-ride from the parents. So I would imagine that a part of it she needs to tells herself that they’re “strict” so that she feels she’s being “responsible” by meeting their requirements and paying them back as if they were just like a bank.
In many ways it’s better to owe the bank money; all they care about is getting their payment on time. With family, parents, etc., there’d be pressure to not buy certain things, go on vacation, etc. while you still owe them money.
Yes she has no problem expecting a big tip or at least $1 for each drinks she pours/make for customers, even though she’s paid a wage for doing her job??