Vancouver Real Estate Anecdote Archive

The Costs Of Ownership – “Here are the economics of my renting since arriving and how this would have compared to buying.” – Renter Ahead $200K Over 5 Years

vreaa — Mon, 30 Jan 2012 14:00:00 +0000

ZRH2YVR is a regular poster who recently revealed that they will be leaving Vancouver for a job to Switzerland. Their story was headlined 28 Jan 2012.

On that thread, ZRH2YVR added this useful analysis [VREAA 29 Jan 2012]:
“Here are the economics of my renting since arriving and how this would have compared to buying. You know real estate always go up so this renting thing must have been a real bust.
Property info – 1400 sq ft unobstructed 270% view of English Bay south down granville street and up and around to the mountains east approx to My. Seymour. New building 2007.
Rent paid from move in to June 2012: $196,000
This is a true consumption cost and was well within our means.
Value of property in 2007 on move-in – approx 1.4M.
Value today – estimated – 1.4-1.5M . Let’s say 1.5M just to be conservative.
Cost of ownership – Assume 100% leverage and ignore investment opportunity cost.
Interest rate – Let’s sat 5% even though in 2007, it may have been more.
Strata and property taxes amount to approx $1050-1100 per month.
So – Cost of ownership over this period is $395,000. But wait – the property went up in value right? !!! Well
Purchase cost would have been approx $1,430,000 with all up front costs.
Selling at 1.5M and subtracting costs would net say- $1,450,000 – so there is a gain of $20,000. Fantastic . . . Offset this against the cost of ownership of $395,000 – that gives you net $375,000 (ignore taxes). Compare this to cost of renting of $196,000 – we are up approx $200,000 – Believe me we notice this!!!
So – – For all you property virgins out there – the numbers above may be outside your normal range but divide this by 3 for a $500K property and you will be in about the same place – – up by $60,000 over 5 years. I would never buy in the current market.
Now the funny thing is that in order for us to have broken even, the purchase price would have been close to $600K initially -and that is over 50% fall from where we are. Good luck to all of you. A house is a place to live first – invest second and anyone who is investing right now is completely out of their mind. You would have much more fun going to Vegas for a month – and would probably be better off.”
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Notice how often different methods of calculating the fundamental values of different properties come up with a “over 50%-off” conclusion.
Add bad sentiment on the downside and you can see one source of our 50%-66%-off estimate.
- vreaa

REMAX KickStart 2012 Video – “Ultimate Objective: Satisfaction… And Satisfaction Is A Perception… May Have Nothing To Do With Reality.”

vreaa — Mon, 30 Jan 2012 06:14:32 +0000

- posted by REMAX, on youtube, 25 Jan 2012. A few stills below.

—
ADDENDUM. Even more stills:

“What I can tell you from long, direct experience is that the Westside of Vancouver is now and always has been ground zero for real estate corrections.”

vreaa — Sun, 29 Jan 2012 17:13:18 +0000

“Take it from a born and bred Westsider, who has owned more than one house on the Westside. A lot of people have made a lot of money in residential real estate on the Westside. A lot of people think that they have a lot of money because they own a house on the Westside. Some of them are right, depending upon their equity levels, some of them are wrong for the same reason. Some of them will get out while the getting is good, some won’t care or don’t need to. Many of them on the lower end of the scale, however, will hold out and be absolute toast. What I can tell you from long, direct experience is that the Westside of Vancouver is now and always has been ground zero for real estate corrections as it has been the same for price increases. A whole generation of property virgins have grown up and bought in without having a clue about this, even when their Kool-Aid drinking parents ought to know better.”
- JR at vancouvercondo.info 26 Jan 2012 9:13pm

ADDENDUM:
Point Grey SFH Inventory (MLS):
27 January 2011: 34
29 January 2012: 79 [Up 132% YOY]

Market Is Slow – “When times were good, developers wouldn’t let realtors near their projects, just paid their own sales staff. Now they are dropping by offices with presents, taking realtors out to lunch.”

vreaa — Sun, 29 Jan 2012 06:46:30 +0000

“Was speaking to a realtor in Vancouver yesterday, he said that when times were good, developers wouldn’t let them near their projects, just paid their own sales staff. Now they are dropping by offices with presents, taking realtors out to lunch etc…HA!”
- kilby at greatfool.ca 27 Jan 2012 5:15pm

“Sky-high Vancouver housing prices were one of the reasons why my son, a young engineer, and his wife chose to move to Montreal, where they were able to buy a townhouse for half what they’d have to pay here.”

vreaa — Sun, 29 Jan 2012 02:04:51 +0000

“In fact, sky-high Vancouver housing prices were one of the reasons why my son, a young engineer, and his wife chose to move to Montreal, where they were able to buy a townhouse for half what they’d have to pay here.
They miss Vancouver terribly, and we miss them and our little granddaughter. But we realize the vast distance separating us is the penalty we pay for living in Lotusland, and my son pays for having a real job.”
- from ‘We need to look at a greater variety of housing options’, Jon Ferry, The Province, 27 Jan 2012
Hat-tip to Patiently Waiting, at vancouvercondo.info 27 Jan 2012 2:44pm, who also adds:
“A smug Boomer newspaper columnist is suddenly concerned about housing affordability. Why?
He’s only concerned now that it affects him personally.”

Leaving Vancouver, Again – “Came back for what was supposed to be career advancement. Didn’t pan out. My old company in Switzerland called and wanted to know if I would move back there to work for them. Immediate 100% increase in salary, 6 weeks holiday again, living in truly the best place on earth, etc.”

vreaa — Sat, 28 Jan 2012 22:18:37 +0000

“I did the whole ‘go-away-and-make-money’ thing. Saved over $1 million in 5 years working abroad. Had a fantastic client situation, was making amazing money. Came back for what was supposed to be career advancement. Didn’t pan out. Making 65% less, doing same job, working longer hours. Real Estate also went way way up and now – So – even though I could get “something” it just makes no financial sense to own. Renting a penthouse downtown for a 1.5% cap rate.
So – now looking to go back on the world circuit. Vancouver is nice – but if you have a choice of where to be – there is no reason people should make a professional career here . . period.
I have a very deep skill-set from my experiences abroad that are just not available from others in the local market – however – the local market won’t pay for it.
People are leaving all the time but Vancouver as a city will not progress and attract any outside talent because if they are mobile, the amount that would have to be paid to be here is so high that nobody will pay.”
- ZRH2YVR at VREAA 10 December 2011 1:08 pm

“Today I got the call I thought would come one day. It took almost 5 years of being in Vancouver – however – My old company/client in Switzerland called and wanted to know if I would move back there to work for them. Immediate 100% increase in salary, 6 weeks holiday again, living in truly the best place on earth, no street people begging from me on my walk in every day, 50 world class cities within 2 hours flying, 30 ski resorts within 3 hour drive, perfectly on-time and clean and spacious public transit, unbelievable career potential, international Global 100 company. Um – – – – let me think about it . . Absolutely no weekend working. Or – – – slaving it out here waiting for the market to crash while working 70 hours a week trying to get ahead…”
- ZRH2YVR at VREAA 27 Dec 2012 10:35pm

We hear this news with mixed feelings: Almost definitely good for you, ZRH2YVR; but not good for Vancouver.
We wish you all the best in all future endeavours.
Many thanks for all of your posts on these pages.
The pressure on sensible folks to leave is not good for our town.
- vreaa

TD Training Session Teaches Mortgage Agents How To “Overcome Objections” To ‘HELOC Product’

vreaa — Sat, 28 Jan 2012 14:00:39 +0000

Sent: January 24, 2012
To: Undisclosed recipients
Subject: Overcoming HELOC Objections and the HELOC process, Wednesday Feb 8, 2012

From: Main Reception [mailto:Admin@XXXXXXXX.com]

Hello Agents,

On Wednesday, Feb 8 from 10 – 11AM, my assistant Sarah and I will be putting on a presentation regarding the HELOC product.

Our goal is to discuss the following:

The full application process for the HELOC on our end and how we can streamline it
Provide you tools(Excel sheets, HELOC calculators) that will ease the process in dealing with clients for you in the future
Explain to you exactly what we discuss with the client (and how we discuss it)
Overcoming objections that we face and role play overcoming objections that you face

We will also have a detailed Q&A period following the presentation so we can assist in helping you overcome common concerns that we face when working with new clients.

PLEASE RSVP WITH RECEPTION

I hope to see you all there!

Trevor Yerema

Manager, Residential Mortgages

TD Canada Trust

Prairie Region

Phone: 403-466-6654

Fax: 403-770-8382

http://www.tdcanadatrust.com/msf/trevoryerema/index.html

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- this e-mail passed on to VREAA, 26 Jan 2012 by regular reader ‘Peter Pan’, who also writes:

“A friend forwarded this e-mail to me - a TD Manager, Retail Mortgages is organizing a training session with independent financial planners on techniques to OVERCOME objections from retail clients to HELOCs. Hey, what better way to shove more debt down clients’ throats, right?

This e-mail really struck in my craw because Ed Clark and the other Bank CEOs rail against Canadians increasing their levels of personal debt while actively encouraging their employees to do exactly the same thing.”
—–

Hypocrisy deserves to be called out. This is what Peter Pan is talking about:
“Less than a year after Ottawa forced the banking sector to cut back on risky mortgage lending, the head of one of Canada’s biggest banks says the federal government should go even further.
Ed Clark, the chief executive officer of Toronto-Dominion Bank, said in an interview that he believes Ottawa could tighten the rules on housing loans more than it already has, without hurting the economy or putting the housing market at risk.”
- ‘Mortgage rules should be stricter: TD chief’, G&M, 14 Dec 2011

Still Ignorant After All These Years – “During our lunch my friend told me that he was going to quit his job to become a realtor. He seemed surprised by my comments about the market, and said that he hadn’t heard any of this before, and wouldn’t even begin to know where to look for that kind of information.”

vreaa — Sat, 28 Jan 2012 00:00:36 +0000

“Recently had lunch with a friend of mine. During our lunch he told me that he was going to quit his job to become a realtor. Was quite surprised as he was just promoted and is doing very well. I launched into the usually bear arguments: debt-to-income, easy lending standards (CMHC), risk of further restrictions regarding mortgages, housing starts and that most economists are waving red flags regarding Canada’s RE market.
He seemed surprised by my comments and said that he hadn’t heard any of this before and wouldn’t even begin to know where to look for that kind of information. We’ve talked about RE before and as I pointed out to him that I’m still wrong but have been right about every other housing bust I called, from the U.S. to Ireland to Spain — Australia’s right around the corner, and that at some point I’ll be right about Canada’s as well.
In any event, I didn’t dissuade him. He is a great salesman and will undoubtedly have success regardless of getting in at the top of the market, taking on tonnes of listings and having to deal with future sellers that will refuse to lower prices because their house is worth more. I wished him luck and told him to make sure that he had plenty of cash set aside to grow his business.”
- Manna from heaven at vancouvercondo.info 25 Jan 2012 11:09am

Boy, this is late to the party.
Like arriving at 6.30am, after the cops have broken it up.
Mental note to self: 1. Never underestimate the ignorance of some folks, and, consequently, 2. Never (again) try to estimate how long a speculative mania can perpetuate itself.
Yeah, sure, perhaps it’s we bears who’ve been ‘ignorant’. But the game isn’t over yet.
- vreaa

Vancouver RE Blogosphere Watch – Poster Publishes His Annual ‘The Wengzhou Money Is Coming’ Post

vreaa — Fri, 27 Jan 2012 21:30:43 +0000

2012
“Wenzhou money is now in Vancouver. An article from Vancouver’s chinese media talked about groups of businessmen from Wenzhou are in Vancouver now and purpose of their trip is to buy properties. One agent by the name of Zhang Wei Bin of Sutton picked up 4 parties at the airport alone on Monday, the first day of the year of dragon. Starting on Tuesday, they have started to look at ocean view properties in West Van, most in $5 million range, including one at 2400 Halston Crt, which those businessmen consider very cheap, comparable properties cost 3 times more in China.
Most of you may never have heard the city. It is the birth place of current day capitalism in China and it is estimated the residents of the city have amassed over $90 billion investable capital, people from Wen Zhou are known as fierce business competitors, and fearless properties buyers. Wen Zhou housewives formed buying teams and go from city to city to buy big chunk of new development projects and sell later for profit.”
- unicas at RE Talks 26 Jan 2012 8:44pm
—
2011
“The Wenzhou ladies may be coming. Wenzhou people are feared in China both as fierce business competitors and real estate buyers. 30 years ago, they were among the first Chinese who set up private business shops. They calculated profit by fraction of a penny. For the past decade they have been known as bigshot condo buyers. They form teams of RE buyers, go from city to city in China, and bring up prices whereever they go. And for the first time ever, they are allowed to invest directly overseas. So the suit case for cash will not be needed anymore. And “I buy 3, husband buy 3 thing may not be evening news material anymore. The money they are allowed to invest oveaseas may not initially sent out of the country in the name of RE investment, eventually most of the money will find their way in some kind of real properties.”
- unicas at RE Talks 23 Jan 2011 10:05am
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Well, they certainly have more inventory to choose from this year.
Any news on how Wenzhou Chinese stock market and RE investments have done over the last 12 months?
What do these guys do when they’re holding assets in falling markets?
- vreaa

Maclean’s – “Yes, we’re in a bubble, and it will probably pop soon. The signs of a bubble are unequivocal.”

vreaa — Fri, 27 Jan 2012 16:14:12 +0000

“Are we literally living in a bubble? And when it bursts, will it get as ugly as it did south of the border? Here’s where the most recent speculation is pointing:
Yes, we’re in a bubble, and it will probably pop soon.
The signs of a bubble are unequivocal. At 13 years and counting, Canada’s current housing boom is one of the longest-lasting in the world, the Bank of Nova Scotia noted in a recent report. The real price of Canadian homes has increased by 85 per cent on average since 1998. Prices stagnated in 2008, at the height of the financial crisis, but they were back on the rise again as soon as 2009, when they grew by nearly 20 per cent, according to the Canadian Real Estate Association.
Meanwhile, Canadian household debt set a new record last year. On average, the debt burden of Canadian families stands at 153 per cent of their disposable income, according to Statistics Canada. That’s almost as much debt as American households had at the peak of their bubble.”
…
“The scary part is that, by most accounts, 2012 is going to be the year when housing prices start heading south. The housing market is already showing signs of weakness. Despite a rebound in December, housing starts fell in the last quarter of 2011. And in some smaller markets on the west coast, condo prices have already declined 15 per cent, according to Merrill Lynch. The bank predicts that prices nationwide will slip by five per cent this year in the best-case scenario. A spike in unemployment could trigger a 10 per cent price drop.”
…
“No, it won’t be “housemageddon.”
The good news is that, in all likelihood, our bubble won’t go KABOOM! Instead, we seem to be in for a painful but not devastating pop. That’s because only certain parts of Canada are in a bubble. Overcrowded markets in B.C. and Ontario may be close to busting, but many other areas of the country remain very affordable. The very same survey that ranked Vancouver most-unaffordable-city after Hong Kong rates Canada the third most affordable country, after the U.S. and Ireland.” …
“Most likely, then, the Canadian market will let the air out gradually. As inelegant as that sounds, it’s good news.”
- excerpts from ‘What happens when Canada’s housing bubble pops?’, Erica Alini, 26 Jan 2012 [hat-tip Potato]

Well, hard to get more mainstream, or more definite, than that.
All of the signs of a speculative mania were very definitely present by 2006-2007, but the MSM were silent about it then.
Now, 5 years and tens-of-thousands of overextended buyers later, it is even more glaringly obvious that the bubble is present, so the media ‘warns’ of this. What do they expect the record high number of homeowners to do about this now?
The MSM are rear-view commentators, and their articles have little predictive capacity. Like all other mainstream commentary recently, this Maclean’s piece is overly optimistic in its price-drop predictions.
—
Note ‘Maclean’s’ is calling for a soft landing. All those predicting a slow gradual reconciliation of prices and the fundamentals (which are currently far, far below prices) have to answer one big question:
Who do they imagine these buyers will be, who will step in and buy, in an orderly fashion, all the way down?
Who will, essentially, step in and bail out current owners, with promises to pay banks a stream of money for the rest of their lives, at these still very elevated prices?
And, while they’re pondering that, ask them for historic examples of speculative manias that have resolved with a soft landing. (There aren’t any.)
- vreaa