“I got on the “property ladder” 14 years ago using my RRSP savings to buy a 500 sq.ft. condo, then I moved up to a 2 bedroom, then a townhouse, then a 1/2 duplex, and now am the proud owner of my dream 4 bedroom westside home for my family.”

Posted on 5 November 2011 | 100 Comments

“You lazy spendthrifts have no one to blame but yourselves…I got on the “property ladder” 14 years ago using my RRSP savings to buy a 500 sq.ft. condo, then I moved up to a 2 bedroom, then a townhouse, then a 1/2 duplex, and now am the proud owner of my dream 4 bedroom westside home for my family. Hard work and saving money, keeping my head down and saving and investing like previous generations. It worked then, it still works now. It is doable. Great condos are available in Gastown right now starting at $200k, not that much different than the $165,000 I paid for my first place Downtown in 1997.
But everybody wants the easy life, no one wants to work for it!”
- r_dub71 at Vancouver Sun, 25 Oct 2011, 11:49am

We believe 98.37% of the anecdotes we read.
Granted, we err on the side of gullibility.
We are more the librarian, less the prosecutor.
But, even we found this story too ‘cute’.
Hard working property ladder climber or hard working Gastown condo salesman?
(“You’re not buying a small box for $200K, you’re taking your first step to securing your dream home!”)
OK, let’s assume it’s all true: We’d really like to see the math on the sales-prices and mortgage debt for each of the 5 deals, and to see the current networth:RE ratio.
Anybody care to come up with some hypothetical numbers for climbing the ladder the way he/she claims?
Has that worked through the mania?
Don’t the higher rungs get further away each step? (Yes, they do.)
Sure, you build (paper) equity, but you fold it into a higher buying price, and take on more mortgage debt, each step.
- vreaa

This entry was posted in 01. He Said, She Said, 05. Where do Buyers get the money?, 08. Overextended Buyers, 15. Misallocation of Resources and tagged , , , , , , . Bookmark the permalink.

100 Responses to “I got on the “property ladder” 14 years ago using my RRSP savings to buy a 500 sq.ft. condo, then I moved up to a 2 bedroom, then a townhouse, then a 1/2 duplex, and now am the proud owner of my dream 4 bedroom westside home for my family.”

  1. scullboy | 5 November 2011 at 7:32 am | Reply

    Quite honestly, I find comments like this a bit insulting. In the last 5 years I’ve spent nearly 50K on various forms of professional certification. I’ve spent many hours working on business plans. At one point in my life, I worked 16-18 hours days for a period of three months with a total or 2 days off because I was determined to succeed. I’ve spent literally months holed up at home, studying for qualifications that eventually lead to the job I have now. And yet some how this idiot sales person / Vancouver home owner want to slamder me and people like me because we refuse to go along with stupidity of the Vancouver home owning herd.

    In the end *this* was why I left Vancouver. It didn’t matter what you did in your career or how hard you strove to succeed. If you didn’t own a home, you were a loser.

    I come back to this blog to remind myself of that mindset, because it’s going to feel really fucking good to remember that hard times, and to know that I was right.

  2. Jeff Murdock | 5 November 2011 at 7:39 am | Reply

    This story makes no sense.

    The second half of his story claims that “you should do what I did because prices are not much different now that they were in 1997″. In other words, prices have been flat for 14 years. If there were true (which it’s obviously not), and if he believes that prices are going to continue to be flat, then why buy now? You’re not going to be priced out in the future.

  3. diablo | 5 November 2011 at 7:59 am | Reply

    finally, a sane post vreaa. Are you OK?
    Only way to buy a detached home in this city is to get on the property ladder and keep rolling over your equity. You’ll need to start this quite young and move up every 4-5 years. Gotta start climbing this ladder in your 20s now.
    Sorry scullboy. You sound like you worked hard but not smart. If you wanted to own a home here you needed to start building some equity somewhere. You didn’t and now you’re gone.
    Pretty smart lesson to be learned here.

  4. Village Whisperer | 5 November 2011 at 8:33 am | Reply

    Proof positive, eh?

    By this logic, there’s another way.

    If you dumped the condo in 2000, poured your money into Gold then you would be able to buy your dream house on the West Side today AND have money left over.

    Therefore dump your real estate and tell everyone you know to avoid buying in Gastown at all costs.

    Pretty smart lesson to be learned here.

  5. fred | 5 November 2011 at 9:32 am | Reply

    oh oh, a post like this will be torn apart here. bloggers here do not like “property ladder”, affordable, sacrify, and trade-off stories. OTOH, anything got to do with RE is classified as “speculative mania” regarless of its purpose.
    so many people have done it, then ask yourself why you cant. sitting infront of your computer bitching all day long about it doesnt solve anything.
    oh wait, let pack and move to Winsor.

  6. Daniel | 5 November 2011 at 9:32 am | Reply

    Climbing the property ladder as house prices increase dramatically in comparison to income is a myth. Just as getting into the market is harder and harder under these conditions, so is upgrading as the price differences between condo, townhouse, detached homes become ever larger.

    Looking at this chart, http://chpc.biz/Vancouver_Real_Estate_Chart.htm, it becomes obvious that buying a second townhouse would be almost cheaper than getting into the detached market right now. That’s not climbing the ladder.

  7. pricedoutfornow | 5 November 2011 at 9:33 am | Reply

    I’m not sure the build equity argument works all the time. There are several units for sale in my building, and have been for months, which haven’t sold despite price reductions. Sooo….I should go dump $50k on one of these condos, pay double what I currently pay in rent, and hope prices march upwards over the next 4-5 years? Sorry, it just doesn’t look like it’s working. I’ve been here a year and a half and prices have been pretty much stagnant. So much for equity and using the property ladder. It only works until one day…it doesn’t. This guy just lucked out, that’s all it is. Anyone buying today will surely not have such success.

    • diablo | 5 November 2011 at 9:44 am | Reply

      so if you own a detached home in Vancouver you “lucked out”? And hard-working, honest, salt of the earth people are the renters? Give your head a shake

      • Royce McCutcheon | 5 November 2011 at 9:54 am |

        Yeah genius – if you were able to buy a detached home in Vancouver when it was only about 3-5 times your annual pay – and today that same annual pay would be less than a 10th the amount needed to buy the same house – you WERE lucky. Or if you bought something smaller several years ago and were able to take advantage of record year-over-year gains to make big money to leverage you into better spaces, you WERE lucky.

      • pricedoutfornow | 5 November 2011 at 4:51 pm |

        I call it lucky, or good timing. I look at people who are ten or fifteen years older than me, make no more income than I do (and never have) and yet they were able to buy modest homes at reasonable prices, with 20% down. They are lucky they are the age they are, otherwise they’d be like us youngins who don’t have a hope in hell of being presented with the same set of circumstances to buy. I know plenty of people who were able to scrimp and save for a 20% downpayment on a $300k house, ten years ago that was a lot of money! And yet here I sit with $100k in the bank and there’s no chance I will be presented with the opportunity to buy modest house in Vancouver for $300k. Timing, that’s all it is, really. They just did what people did, and have been doing for decades: save, buy, raise a family, pay off the mortgage in 20 or 25 years. My opportunity seems to be: save (or not, there’s still 0% down mortgages), take on astronomical debt, hope I don’t go bankrupt if rates go up, struggle to make the mortgage payment every month with a basement tenant and pay the mortgage off in 30 years. Or just rent, where I’m actually saving money every month. There may be no Vancouver homeownership in my future but perhaps by retirement I’ll have enough cash to buy somewhere prices are reasonable (for cash).

  8. nobody you know | 5 November 2011 at 9:38 am | Reply

    A recurring theme with the trolls is that they’re morally and intellectually superior, harder working and just all around better citizens. It’s easier to puff up your chest and crow like a little red rooster than admit you just got lucky and were fortunate enough to be able to buy a home back when they were affordable.

    Could a young couple get on the bottom rung of the fabled property ladder and climb it quickly enough to meet the needs of their growing family in today’s market? In the example suggested by troll, they would need to buy and sell 5 different properties over the course of 14 years, starting at $200k and eventually ending up with a $2M home. This is, of course, ridiculous.

    Could a typical long term westside owner even afford to buy their own house at today’s prices and if so, would they?

    But never mind the westside. How about the $650k homes anywhere else in the area? Young families will face the same problem when they try to take on an extra $150k-350k of debt every time they move up when they’ve paid off barely anything on their 5% down 30-40 yr mortgage.

    Troll knows this, which is why his anecdote amounts to little more than “You should buy a Gastown condo BECAUSE SHUT UP, THAT’S WHY.”

  9. Beyond Debt | 5 November 2011 at 10:10 am | Reply

    This guy is a dream for realtors. Four transactions in 14 years, when most people would have done one or two. That’s a lot of realtor fees.

    But nevermind, the tale is a lie.

  10. Absinthe | 5 November 2011 at 10:38 am | Reply

    I came into a small amount of money in 1996 and was looking at bachelor or one bedroom downtown condos between 75K-90K. So, if he spent $165K then he’d bought serious luxury – the move to a two bedroom or a townhouse the move could have been *lateral* many places and ranges in the city. Heck, in 2002 a freestanding house on my block sold for $350K, and now comps are selling for a million something.

    I will say I have seen people take the property elevator in this same time frame, but they’re moving east, not west, and started out with condos cheaper than 165K.

    • diablo | 5 November 2011 at 6:31 pm | Reply

      yes Absinthe, not sure I believe the west side detached either – this would be a huge jump up from a 1/2 duplex (or perhaps he/she came into some $). The property ladder does work and it’s the only option for most first time buyers now – but I think this example doesn’t seem very realistic

  11. Absinthe | 5 November 2011 at 10:41 am | Reply

    ( Truthfully, I wish I had bought that condo and later cashed out… although I might have ended up as smug as diablo and just as deluded… )

  12. vreaa | 5 November 2011 at 10:49 am | Reply

    “Never mistake a bull market for brains”
    - investor dictum

  13. Ridiculous | 5 November 2011 at 10:57 am | Reply

    I had a conversation with a friend the other day. He and his wife live in Dunbar and have done so since 1994. When they bought their house, they paid $500,000-ish. At the time, he had about 80k down from another property he bought in a distress sale 5 years earlier and sold prior to purchasing the new house. He made it clear that this kind of windfall gain on the sales was NOT normal for Vancouver at the time – it was two lucky “right buyer at the right time” situations. At this point, he and his wife were in their mid thirties and he was taking in somewhere around 100k./ year. He ended up starting that mortgage at about 4.5 times their income (500-80)/100. Over the next 18 years, his career progressed and he was made partner in a successful professional services firm downtown. He managed to increase his average income to somewhere between $500 and $600k / year, where it is today. I asked him: now, in 2011, houses on your street are routinely selling for somewhere in the neighborhood of 2.5-3M. Would you EVER consider buying you’re own house today? His answer: of course not.
    Now one might argue: Why would someone be any less likely to pay 2.5M when they make $550k than they would be to pay $500k when they make 100k? (at about 5x each) Well, first, he’s now in his fifties and his propensity to avoid risk is higher. Second, there are far fewer jobs in Van that reliably pay at that level. In bad years, he pulls in 400k, good years maybe as high as 700k. However there are many jobs & careers that reliably pay 100k, so borrowing 5x at that level was far lower risk. There were many firms that would have paid what he was making then, but now, there is only one, and even that income stream isn’t “dependable” at its highest level.
    The crazy thing about this talk is that the only thing that progressed in the intervening period was his ability to make money relative to everyone else – the people at the level he was at in 1994 are still making 100k/ year! So over almost 20 years, he increased his earning power by 6 fold, and even he wasn’t able to keep up with housing prices in Vancouver.

    ANYONE who thinks the current prices are sustainable is out of their minds.

    • diablo | 5 November 2011 at 6:38 pm | Reply

      house appreciation has always outpaced increases in annual raises/employment income.
      i.e. 5% modest appreciation in a Vancouver home = more than 40K/year. Not many getting raises like that unless they’re CEOs.
      So let me ask you…if appreciation is 40-60K year, and it’s impossible to earn or save enough to keep pace, why the battle? You’re making the same mistake over and over and over and expecting a different result. Time for a strategy change

      • Jeff Murdock | 5 November 2011 at 7:11 pm |

        You’re right about one thing and wrong about another thing.

        “house appreciation has always outpaced increases in annual raises/employment income”

        This is where you’re wrong. I suggest you familiarize yourself with some of the statistics presented by Robert Shiller.

        “if appreciation is 40-60K year, and it’s impossible to earn or save enough to keep pace, why the battle? Time for a strategy change.”

        This is where you’re right. I can assure you that I have the credentials to pull in a massive income in the US — indeed, I spent most of the past decade living in the US. The strategy change you’ll see from people like me is to leave Vancouver. Does this sort of change benefit Vancouver?

      • Ridiculous | 5 November 2011 at 7:13 pm |

        You’re lack of understanding of basic mathematics is mind boggling…

      • keeperofthederp | 5 November 2011 at 7:32 pm |

        Your lack of understanding of basic grammar boggles the mind!

      • jesse | 5 November 2011 at 8:58 pm |

        It is comical to see how obtuse diablo’s comments are when comparing to price drops in the US. It’s like living in Wonderland. As a Carroll fan, Vancouver’s prevailing trade winds provide no end of pleasure. Luckily I have an outboard and a few Jerrycans full of dino juice for when the party ends.

      • diablo | 5 November 2011 at 9:00 pm |

        from what I’ve read from you I think Vancouver is probably better off if you left.

      • Joe Q. | 5 November 2011 at 9:53 pm |

        house appreciation has always outpaced increases in annual raises/employment income.

        This statement is demonstrably false.

      • jesse | 5 November 2011 at 10:06 pm |

        “from what I’ve read from you I think Vancouver is probably better off if you left.”

        Don’t feed the troll.

      • Jeff Murdock | 6 November 2011 at 8:59 am |

        diablo, I wasn’t looking for personal career advice from you, but thanks anyways.

        My point is there are people in Vancouver who could live anywhere in the world but come here because they genuinely want to contribute to the local society. To avoid further ad hominem attacks, let’s consider some acquaintances of mine, one of whom is a pediatric oncologist, the other of whom is a breast reconstruction surgeon. Few would dispute that they provide a huge value to our society.

        Of course being medical specialists, they could certainly buy something in Vancouver, but it’s clear that the “bang for buck” of Vancouver real estate is exceptionally poor. That could drive my acquaintances away, simply because they weren’t here 10 years ago to buy property.

        Regardless of where one lies on the income spectrum, newcomers to Vancouver will find that their housing dollar goes much further elsewhere. This makes Vancouver less competitive on both the national and international labor markets.

      • Chubster | 6 November 2011 at 9:28 am |

        Beware fear/arrogance/hubris. The cult of this time it’s different always claims it victims. We have reached an extraordinary time in world credit markets due to money having been mostly disconnected from real savings. People are only just realizing the capital they thought to have safely secured has been stolen and wasted away.

  14. terminalcitygirl | 5 November 2011 at 11:01 am | Reply

    This person was simply lucky, hard work had nothing to do with it. I think the tale could be true but we all agree the last 15 years in Vancouver have been quite exceptional (read speculative mania) for re appreciation. Many here already know my story. I bought a 850 sq ft gastown loft in 1998 for $144K (listed $169K) – the market then was dead. Had been a while. That neighbourhood was terrible. Price appreciation was virtually stagnant for 4 years, then in 2002 it started ticking up. I sold in 2003 for $199K. The person who bought from me made a few renos and sold in 2005 for $399K. So if I would have held on and sold in 2005, I could have probably banked $250K. Roll that $250K into a 2 bed, sell in 2008 before the dip with a long close and buy in the dip, maybe make another $200K. Now $400k equity into a townhouse… well you get the picture. This anecdote is about lucky timing during a speculative mania and nothing more.

    • diablo | 5 November 2011 at 6:42 pm | Reply

      tough lesson…
      moral of the story – if you’re selling your real estate make sure it’s because you’ve already bought something else and are always an owner. Getting caught renting will eventually shut you out of the market

      • vreaa | 5 November 2011 at 9:13 pm |

        Good strategy. Make sure you own at least one to two items of Vancouver RE at all times. /sarcasm/

        Can you imagine the group of folks caught with two properties when sales dry up and prices drop the first 15%?

  15. leo | 5 November 2011 at 11:02 am | Reply

    Timing. This guy got in and was able to ride the property boom. He is implying that people should do what he did 14 years ago. He was just lucky but people getting in now, will lose their shirts because there is overbuilding, high debt-levels, eroding incomes, lack of jobs and affordability.. He is assuming that the real estate is going to continue to climb forever!!! What goes up, in time will come down.

  16. Observer | 5 November 2011 at 11:15 am | Reply

    The likelihood of an individual buying a condo now and being able to sell in two years with enough profit to buy “up” is a pipe dream. I have a relative who purchased a condo downtown – paid $449,000 about three/four years ago. It’s a 650 sq.ft. box – she has been trying to sell intermittently since four months after the purchase – no offers. I think she put about $50,000 down and, what with the monthly fees, increased taxes and utilities, I do believe she has already lost money. Rents (the building has a permanent rental office) are about $1600 per month for a unit like hers but will probably be falling since there is a glut of them. Property ladder dreams shattered is all I can say.

  17. chipshot | 5 November 2011 at 11:59 am | Reply

    This guy is an idiot with a low self esteem problem that needs to rub it peoples faces or is full of sh*t.. Anyone who bought back then and survived without getting divorced,laid off, fired, transferred or avoided any medical setback made cash and/or equity. I’m afraid the perfect world only works for some of us. With demographics clearly shifting like the Titanic, only someone with their head up their ass would think that prices can repeat the last 15 years with interest rates to eventually head up higher.

    As well, most people outside of the insane West Side or Richman land has made basically diddly squat the last 4 years and paid off hardly any equity with the high percentage of 35 and 40 year mortgages still ripe for a torpedo.

  18. yltnboomerang | 5 November 2011 at 12:05 pm | Reply

    Totally off topic but just saw the news about the domestic homicide in North Van and the woman they interviewed was going on about how the apartment complex is very safe and peaceful because it is almost all owners with only a couple rental units like the one where the woman was killed. She was basically saying that renters are more likely to be violent. This attitude makes me sick!

    • subterranian | 5 November 2011 at 4:56 pm | Reply

      Even further off topic, but related to yltnboomerang’s comment..
      We’ve rented in several neighborhoods in Vancouver. In one neighourhood, my wife canvassed the neighborhood, successfully petitioning the city to install lights in the back alley. She has also been block watch captain in two of the neighborhoods we lived in, where she had a major uphill battle getting many of the “owner” neighbours to give a damn.
      “Safe and peaceful because it is almost all owners”, indeed.

      • MM | 5 November 2011 at 8:28 pm |

        and then you get the owners who believe they’ve purchased the right to do as they please, regardless of consequence to their neighbors … money wasted because you can be a jerk for free

  19. 4SlicesofCheese | 5 November 2011 at 12:17 pm | Reply

    Property snakes and ladders.

    My parents came to this country on a fucking boat. Bought their first house for 80k (about 3 times their income then) when they sold that place they made a whopping 30k in appreciation in 10+ years.

    Bought their second place, which they still live in, for 240k. They had a 40k mortgage cause they were able to actually save money from not having to go all in on housing costs. And paid it off in about 5 years. Again about 3.5 times income for the place.
    That place now is worth a cool million in about 20 years cause everyone wants to live near metrotown.

    Try repeating that now.

  20. fred | 5 November 2011 at 12:25 pm | Reply

    all the bears have talked about “today’s prices” since 2004. how much $$ has run from them since? people wanna secure a roof for their children; and bears keep talking about opportunity cost and ROI. Again, let pack up and move to Deadtroit, ROI is very high there.

    • vreaa | 5 November 2011 at 1:23 pm | Reply

      In other words, “buy now”; “Never a bad time to buy”.

      Housing here was already overpriced in 2004. Then it became insanely overpriced. Now it’s über-insanely overpriced.
      Prices could well return to those of early 2000′s; even earlier (real).
      Nortel was overpriced at $30, $50, $70 on the way up to $125.

  21. fred | 5 November 2011 at 2:19 pm | Reply

    and gas should return to $0.35 a litre, gold should return to $250/ounce so every occupyvancouver can own a ton.

  22. IamOuttaHere | 5 November 2011 at 2:50 pm | Reply

    Comparing Vancouver real estate to oil or gold is a bit like comparing apples to oranges. You have classified all of them as instruments and that is where the similarity ends. The other instruments are way more liquid than RE. The other instruments are highly divisible – in other words you can sell just one ounce of your gold and still remain with the other 5 ounces. You can not sell just one of you bedrooms and keep the rest of your house.

  23. IamOuttaHere | 5 November 2011 at 3:07 pm | Reply

    Anyway, doesn’t the validity of the property ladder concept depend on normal price appreciation. In fact, it is a model that encourages building equity (not speculation) and then rolling over that equity into you next property. However, the purpose is completely defeated when you factor in runaway housing inflation and extreme leverage that will never allow you to build any equity since all you will ever pay for is interest.

    Anyway, the nice thing about markets is that they always have a way of correcting themselves, if politicians (CHMC and BOC) stop interfering.

  24. jesse | 5 November 2011 at 4:40 pm | Reply

    Rich Asians, low rates, good debt, parental help,
    Pop growth, don’t pay their mortgage, no one starts out big.

    Long run, prices rise, rates stay low another decade,
    Savers pay, bears were wrong, prices have a floor.

    Land shortage, flight to safety, good schools, immigration,
    warm climate, prices are always higher out here.

    //

    Hogwash. Earnings matter.

  25. scullboy | 5 November 2011 at 5:32 pm | Reply

    …and there we have it. Thank you Diablo for demonstrating the atitude that made me decide to leave Vancouver. In other cities it’s “work hard, save money, buy a house”. in Vancouver it’s “do whatever you can to buy a shitty home, keep rolling them over so you’re paying the CMHC, your banker, your realtor and lawyer, don’t bother to do anything to ACTUALLY MAKE YOURSELF SUCCESSFUL, because *appearing* to succeed is more important then actually succeeding”.

    I sincerely hope you own some shitty, leaky Vancouver condo buddy, because it’s locking you down to one city. I’ve moved for work 3 times in the last 5 years and I’ve come to see that the ability to move is a competitive advantage. It’s unlikely I’ll buy a home anywhere in the short or medium turn. Instead I plan to invest. There’s no “investment ladder”, I can start right away, investments will pay ME to own them, and they leave me with a competitive advantage in a difficult economy.

    But yeah…. you go ahead and keep sinking money into that anchor… I mean condo. That’ll pay off really well for you.

  26. Nonymouse | 5 November 2011 at 5:43 pm | Reply

    “It is doable. Great condos are available in Gastown right now starting at $200k,”

  27. Nemesis | 5 November 2011 at 8:06 pm | Reply

    Watching your ‘private banker’ and/or BranchManager ‘grovel’ is way more fun than owning a DezRez. Really! ;)

    (Note to Ed re: gullibility vs. ‘prosecutorial’ – Will Rogers always said it was morally superior to be the guy who bought the BrooklynBridge vs. the guy who sold it. And he was right.)

  28. ACP | 5 November 2011 at 9:11 pm | Reply

    I find the concept of “everybody wants the easy life, no one wants to work for it” ironic considering that this person didn’t work for anything, they just supposedly climbed the property ladder and built equity through appreciation, not through slogging away at paying off a mortgage for a decade or more.

  29. Nutmeg | 5 November 2011 at 9:17 pm | Reply

    I am sold – I signing up for this property ladder thing on Monday Lol

    • vreaa | 5 November 2011 at 10:01 pm | Reply

      Excellent!
      Bring money. For ever dollar you bring, your banker will lend you twenty.
      You then give all of it to a Rung1 guy, taking his place.
      He takes the money to his banker, who gives him two, three or even five times that; he gives it all to a Rung2 member. This process repeats until Rung5 guy gives $3 million to Rung6 guy, who achieves ladder transcendence.
      You then wait, paying your membership dues, hoping that a Rung1 guy comes along soon to take your place.

      Anybody remember chain-letters?

  30. bubbly | 5 November 2011 at 9:19 pm | Reply

    This post is pure troll.

  31. bubbly | 5 November 2011 at 9:27 pm | Reply

    BTW, did anyone actually look at MLS and find a Gastown condo for $200k?

    I did, and there is only 1 (ONE!) studio for less than $300k. A “New York-style loft” for $294k. Open house “Sunday June 26th”. :roll:

  32. Julian Lee | 6 November 2011 at 12:01 am | Reply

    While I can see how he climbed the property ladder, my parents have done similar steps. But I have no idea how in the world this guy found a place in gastown for 200K, if anyone finds it, please let me know.

    You can’t climb the property ladder today, it’s pretty hard unless you leveraged yourself to the max and invested it all in the future facebook IPO and then it shot up like google’s.

    • vreaa | 6 November 2011 at 6:05 am | Reply

      Note how thinking about Vancouver RE leads to daydreaming about high risk leveraged bets or getting lucky on the lottery.
      Prices are far out of reach of incomes. This will all reconcile; it has to.

      • Julian Lee | 6 November 2011 at 8:32 am |

        I disagree that prices need to reconcile to incomes. I can buy Jesse’s argument better that prices need to reconcile to rental ratios potentially because in a sort of way, you can view real estate as an investment with a set “dividend” and a certain return. But even then it doesn’t take into account the cultural stigma against renting, not as a result of inflating of housing prices, (my parents were against renting even when Vancouver prices were dropping fast in the late 90′s, they insisted on buying at that point because they just felt that it was ridiculous to pay someone rent so they can own the place and they hated renting the house from someone who can evict them with a notice).

      • vreaa | 6 November 2011 at 10:07 am |

        Julian -> Agree that rental income is a better, more valid, fundamental ‘floor’ under prices than one calculated from incomes.

  33. fred | 6 November 2011 at 8:51 am | Reply

    “Prices are far out of reach of incomes. This will all reconcile; it has to.”

    yeah, it has to; cuz Vreaa said so, and so he is able to get into RE ladder.

  34. diablo | 6 November 2011 at 9:16 am | Reply

    one caucasian pediatric oncologist plus one caucasian plastic surgeon leave, one of each asian take their place. There is no shortage of bright, educated and equally skilled professionals migrating to Vancouver. We simply replace the unwilling (usually caucasian) with the willing (usually asian).
    A quick survey of the demographic of these renter sites will reveal that most are male, most are caucasian, most are childless, most are 35+

    • Jeff Murdock | 6 November 2011 at 6:30 pm | Reply

      “one caucasian pediatric oncologist plus one caucasian plastic surgeon leave, one of each asian take their place.”

      The race of these acquaintances is irrelevant. (But for the record, only one of them is caucasian.) What is relevant is that both of them were born in Vancouver, both became very highly trained specialists, and I think it’s to everyone’s benefit if they stick around town.

      Are you actually suggesting that Vancouver should bring in doctors trained in China if the locally trained doctors find the cost of living too high? What a dystopian city it would be if you were elected mayor!

      “A quick survey of the demographic of these renter sites will reveal that most are male, most are caucasian, most are childless, most are 35+”

      Well, I’ll admit you got the male part right. But I guess “Jeff Murdock” kinda gave that away.

    • vreaa | 6 November 2011 at 6:33 pm | Reply

      diablo -> Okay, but where do the new guys live?..the new oncologist and new plastic surgeon?
      Why would they tolerate living in housing conditions one half to one quarter as good as they would be able to afford anywhere else in Canada (or the US)?
      If they qualify to practice in Vancouver, they can pretty much work anywhere in Canada.
      Haven’t you heard the stories about specialists avoiding Vancouver?

    • Royce McCutcheon | 6 November 2011 at 6:56 pm | Reply

      Hey Diablo: little past 30, married with offspring, wife and I both earn well over city’s median income. Pretending that I and the people like me that I know (with one foot out the door) don’t exist won’t make this issue go away. You probably still troll here because it’s beginning to dawn on you that, just maybe, you might soon find yourself either ‘vultched’ after a correction or paying through the nose to retain the young talent you need to keep this place running.

    • Julian Lee | 6 November 2011 at 11:40 pm | Reply

      I don’t get why you all are so hostile toward this guy. He does have an opposing opinion, that doesn’t neccessarily make him a troll. Is there some history that I missed?

      • vreaa | 7 November 2011 at 12:00 am |

        We are very happy to entertain and discuss opposing opinions.
        (In fact, please, send us some credible bullish anecdotes… they are few and far between).

        ‘diablo’ has posted under at least 6 different handles, in the process assuming more than one ‘persona’.
        “Disingenuous” if we are feeling charitable; “weaselly” and “deceitful” if not.
        Frequent and careful readers have followed all that.

      • Royce McCutcheon | 7 November 2011 at 7:15 am |

        I have ably and constructively discussed this issue with folks who are bullish on Vancouver real estate without sarcasm, etc. entering the mix. It’s usually not hard to get along fine with someone you disagree with. diablo (and his coterie of alternative names) is, simply, a troll in the truest sense. He has zero purpose here beyond serving as a hone on which to sharpen your own arguments pertaining to what’s wrong with this place regarding housing.

  35. Vesta | 6 November 2011 at 1:14 pm | Reply

    Diablo, where you do get the information you so confidently provide? Does it fit all of Vancouver, or is it for the Lower Mainland? Take a walk through Kerrisdale, visit some of the many apartment buildings there, inquire about suites with a building manager, look at the names on the intercoms, talk to the people in the lobbies, and then tell me if “most” the renters there fit the profile you suggested. You might be stunned at how many a) are female b). are Asian c). have children and d). are younger than 35.

    Also: You said the other day you didn’t think there’s much flipping going on and asked me for stats. I don’t have stats, but just to get a glimpse, you might go to Sandy Garossino’s website and hit on one of the links that talks about real estate in Vancouver. You’ll find a North Shore/West Van realtor’s blog where she details some quite interesting information on flips out there.

    Finally, I have my doubts about how many of the Asian students I teach growing up in Vancouver who would like to be doctors will find it easy to get work and a house here. My best students in those areas left for New York and Scotland. Anecdotal evidence can sometimes tell truths just as valuable as statistics.

    • Julian Lee | 7 November 2011 at 11:16 pm | Reply

      Vesta, unfortunately, for every one Asian student who aspires to do greatness, there are also many who are content to live here and spend their parent’s money.

      Btw, while we are on that topic, Christy Clark just signed a bunch of education agreements which allows us to gain more access to the vast numbers of Chinese students who are willing to pay a high premium to go to school abroad. I wonder if this will mean that their families will eventually immigrate here.

  36. chubster | 6 November 2011 at 2:44 pm | Reply

    congrats to all for some nice mudwrestling today. little vignette. during the dotcom bubble when our company stock was flying while we rushed crap out the door just to be able to book the revenue, i overheard from my cube one of the sales guys ask how is it possible customers go along with this and we still get paid? to which, our gm very loudly proclaimed we’ve worked very hard and earned it! this will stick with me forever. the reason being at the time he absolutely believed it 100% … and so did i. our gm was a very sharp guy. so how did he get sucked in? how did i get sucked in? took me a bit but i figured it out: it’s possible to have your ego gets so pumped up that it completely destroys all logic and common sense. so let me ask the bulls, AFTER all that you can see laid out before you (san diego, phoenix, miami, las vegas, shanghai, hk, spain, ireland, greece, blah-blah-blah), how can you think this will end differently for you? have your heads really become that enormous? ps. homer wrote a nice little volume about this

    • vreaa | 6 November 2011 at 6:14 pm | Reply

      Spot on regarding the “can’t happen to me” psychology.
      Amazing, isn’t it?

    • Nemesis | 7 November 2011 at 9:31 am | Reply

      Hilarious!… & when semioticians are sifting/interpreting the anecdotal ‘chicken gizzards’ ‘o fate/circumstance – the first question they ask themselves is, “Does this dude actually believe his own BS?”.

      In that same vein, no librarian’s collection would be complete without this weighty tome [highly recommended]…

      http://tinyurl.com/829wqjx

      ” [he] does not reject the authority of the truth, as the liar does, and oppose himself to it. He pays no attention to it at all. By virtue of this, bullshit is a greater enemy of the truth than lies are.” – Harry G. Frankfurt

  37. Feels good to be out | 6 November 2011 at 5:31 pm | Reply

    This individual’s property ladder success story might be true but I suspect important details, which they would rather not admit to (as it would significantly weaken their story), have been left out. For example does this person “own” their house outright, as in mortgage totally paid off? Unless their personal income levels increased significantly over the years, which would have enabled them to take on larger mortgage payments, mathematics suggests the answer is no. It’s conceivable that during the past decade or so, which can be characterized as a period of abnormally rapid house price increases, and lower and lower mortgage interest rates, a person could flip their way up from a relatively inexpensive condo to an very expensive west side house. Selling into a rising market would lead to a larger after sale profit that would be available for a larger down payment on a larger house. By taking advantage of increasingly lower interest rates, one would qualify for a bigger and bigger mortgage loan without having to significantly increase their personal income level. If this person actually owns their house outright because they scrimped and sacrificed to pay down each successive new mortgage without significantly increasing their personal income levels well then that’s very good for them, they have a reason to be pleased with their efforts. On the other hand if all they have done is acquired a more expensive property with a proportionately larger mortgage, and they still have a long way to go to debt freedom day, then this is far less of a “success story” than the flipper would like you to believe. As it becomes more and more apparent that Vancouver is in the final throes of a massive housing bubble, for those highly leveraged real estate “owners” with only minimum equity in their home, or a large, barely affordable mortgage, there is a good chance things are going to end very badly.
    Second, market timing is absolutely critical. Whether you are a speculator, or just need a place to live, there is a good time to buy and a good time to sell (or if you prefer – there is a bad time to buy and a bad time to sell). In my opinion property ladder guy flipped his way to his dream home ownership during good times – as in rising real estate prices like Vancouver has never seen before. I say this based on personal experience. I bought my first house in 1998 on the west side after saving up a 15% (60k) down payment. I did do some market research and personal finance calculations before I bought. I concluded that prices had been flat for the previous 10 years, and that I could reasonably carry my mortgage (at a 6% interest rate) based on my income at that time. Over the years I built up significant home equity but barely reduced the mortgage amount (partly by choice and I chose to invest extra money elsewhere – you gold bugs can rejoice). Until very recently I had no intentions of selling my house, and I was quite pleased by the 50-150k year-over-year gains suggested by my city property tax assessment. However, due to some recent changes taking place in my life (mostly opportunities), coupled with a nascent awareness that Vancouver house prices were “extremely expensive” it seemed like a good time to get out of the market. I did some more research that included looking at house price to income ratios and other house affordability metrics, personal debt levels, and global/national economic trends, and concluded that Vancouver prices were at dangerously high levels based more on speculation than fundamentals, and that a significant near term market correction was the most likely outcome. So not wanting to get trapped in a down market I decided to put the house up for sale in early 2011. The house was on the market for 3 months but finally sold for 4 times what I bought it for only 13 short years ago. Needless to say I think I made out very well. The point I am trying to make is that I was lucky because I wanted to buy at a time when prices were relatively low, and lucky (and perhaps just a little bit smart) because I decided to sell at a time when prices were probably topping out (won’t know for sure until a correction has actually played out since speculative bubbles can remain far longer than market fundamentals might suggest). I am now out of the market and renting for the time being and I feel really good, and I mean really, really good. Zero debt, highly liquid investments, and cash. If somebody were to ask me today if I would buy back into my old neighborhood at today’s prices my response would be a very emphatic no, whether I could afford it or not. At this time there are far more lucrative, not to mention far less risky investments than Vancouver real estate where I can park my savings. For any person contemplating a real estate purchase today that is based on maximum financing (leverage), assumptions such as flat interest rates, steady employment, and a stable to growing Canadian economy, the downside risk is just way too scary. So to conclude, not only is the property ladder strategy unlikely to work in the current market, it has to potential to financially cripple a highly leveraged real estate buyer for many, many years to come if (and more likely when) a significant price correction comes.

    • vreaa | 6 November 2011 at 6:04 pm | Reply

      Thanks for the story and the thoughts. We’ll headline them soon.

    • Airedales | 6 November 2011 at 6:04 pm | Reply

      Put that in your pipe and smoke it Diablo! Can’t wait for another one of your impotent and ignorant comments!

      • Royce McCutcheon | 6 November 2011 at 6:53 pm |

        The guy is entrenched and his pipe is already full of… god, who knows? I don’t think this’ll register. :-)

        9 out of 10 times diablo (or one of his ilk) will dismiss a story like this as a fabrication. He flat out won’t let himself believe that such a person exists (as with the idea that young LOCAL professionals with families are being pushed out). On the rare occasion he puts forward a (weeeeeeak) defense on why this story doesn’t matter, his deeply flawed reasoning is ripped to shreds and he does not respond to the point again. He will then soon revisit the notion that everyone here is an embittered renter who is simply jealous that they missed the chance to buy into this market many years ago. Because, y’know, there couldn’t possibly be people in their 20s/early 30s with great incomes and families that are from here and entertaining leaving this place because the cost of living/family housing options are so distorted.

    • diablo | 6 November 2011 at 7:35 pm | Reply

      property ladder is the only hope for newcomers now. Unfortunately, the top rung on the ladder now and at any future period is a townhouse, not a detached home.
      With the need to add density to make room for the (estimated) double our population in 30 yrs, it means the detached home will become a rare sight decades from now.

      • MM | 6 November 2011 at 8:49 pm |

        Aha, Townhouse Developers, yet another reason prices will never go down!

      • ETB WATCHER | 6 November 2011 at 9:07 pm |

        You’re absolutely hilarious. Points for self-assuredness. I hope you stick around.

      • Feels good to be out | 6 November 2011 at 9:09 pm |

        In an up market a property ladder strategy does not make much sense. In a down or stagnant market, which is where we are headed now, it does not work at all. Your suggestion that Vancouver’s population will double in thirty years may well play out. And the need for higher density housing is just a natural outcome of growing populations. No argument there. Also agree that population growth puts upward pressure on more “exclusive” housing areas. However, trends rarely play out in a linear fashion over the long term; most often they are characterized by alternating periods of rapid growth, slow growth, stagnation, and even decline. That includes real estate. Look at any historical chart for real estate price over a long term period and you will see this is true. If a weak or contracting global economy and financial uncertainty continues for a prolonged period, as I believe it will, prudent investors contemplating a real estate purchase are likely to take a wait and see approach, and those who have already made one may decide to pull out. There is plenty of anecdotal information out there suggesting this is already happening. Vancouver real estate prices are highly dependent on speculative investors, including a significant percentage of foreign investors. This leads me to think that we are headed into a period of stagnating or decreasing prices in real estate. Yes, there are still plenty of uneducated or ill-informed investors taking the plunge, but eventually their numbers will be overwhelmed by the smarter investors pulling out, no matter what incentives the government, CMHC, Bank of Canada offer up. That moment will be the tipping point and it usually can’t be reversed, no matter how much a government or other interested party may fight it. Having said that do you really think right now is a good time to buy? Do you really want to take the risk that your investment could be underwater for 2, 5, 10 years, never mind the financing costs, until the smart investors decide the worst is over and step back in? Thirty years seems like a very long timeline for an investment strategy, especially something as illiquid as real estate. When the majority of evidence suggests that global investment is on the decline doesn’t it make more sense to wait it out? As a final note it does not matter which class of housing we are talking about (condo, detached), they all go down to varying degrees in a down market.

      • diablo | 6 November 2011 at 10:53 pm |

        fees good to be out,
        It’s difficult to have intelligent discussion when you post assumptions that are simply a product of your personal opinion.

        How do you prove this?
        “Vancouver real estate prices are highly dependent on speculative investors”

        my personal observations are opposite – but my peers are not the jetsetting west side type.

      • vreaa | 6 November 2011 at 11:38 pm |

        diablo -> How do you prove this?
        “Vancouver real estate prices are highly dependent on speculative investors”
        –
        It is self evident.

  38. peter | 6 November 2011 at 9:36 pm | Reply

    Hi .. new reader here and I really appreciate the site! But who are “fred” and “diablo” ? I find their smug and rude remarks annoying.

    But I like the tone and attitude of almost everyone else here. Keep up the great posts and discussions!

  39. chubster | 7 November 2011 at 1:09 pm | Reply

    freds and diablos are as interesting as any anecdote. besides, bull perspectives are critical to understanding the phenomena. and if nothing else, to help prevent forum becoming a circle jerk. more bull(s) please.

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