‘The Mortgagors With Hands On Their Faces’ – “Extremely poor and rapidly eroding affordability in the Vancouver-area market”, “without a doubt the most stressed in Canada, facing the highest risk of a downturn.”

Above images advertise videos accompanying the Globe and Mail article Vancouver housing affordability ‘rapidly eroding’: RBC‘, 22 Aug 2011 [hat-tip Nemesis]. They are remarkably sorrowful images for a 2011 Canadian housing article, and remind us of ‘The Brokers with Hands On Their Faces Blog’.

Excerpts from the G&M article:

Most Canadian cities offer “reasonably affordable” housing, according to Royal Bank of Canada’s quarterly survey into affordability, but Vancouver is at risk of a downturn.

“Extremely poor and rapidly eroding affordability in the Vancouver-area market is somewhat skewing the national picture.”

“Vancouver’s housing market is without a doubt the most stressed in Canada and is facing the highest risk of a downturn,” Mr. Craig Wright, senior vice-president and chief economist at Royal Bank, said.

This sensible comment at the G&M by PF Murphy, 22 Aug 2011, 10:35am:
“With the average price of a house in Vancouver being 11 times the average annual salary, the RBC’s advisory is many days – like several years – late and shows the conflict of interest of their benignly offering advice in an industry on which they depend for their bloated profits. To think that ill-advised people can go on buying houses that mortgage their grandchildren’s futures is idiotic. It is to be devoutly hoped that this bubble pops soon [so that] some sanity will be restored to housing in Canada.”

23 responses to “‘The Mortgagors With Hands On Their Faces’ – “Extremely poor and rapidly eroding affordability in the Vancouver-area market”, “without a doubt the most stressed in Canada, facing the highest risk of a downturn.”

  1. My fave abstract was actually this one…

    “The Greater Vancouver Area directly accounted for one-third of the deterioration in affordability at the national level since the beginning of 2011. The average family buying a house in the city would need to dedicate 92.5 per cent of its income to own a bungalow.”…

  2. looks like all the papers are running this story today


    no comments yet on that story, not even a “yeah but it is different here”? is the rain getting everyone down?

  3. you can always rent.

  4. pricedoutfornow

    Only a fool would buy.

  5. Er, vreaa, that would be “mortgagors”…

    …thanks, bubba… corrected…
    another idea for a blog:
    “The Bloggers With Egg On Their Faces”

  6. Tell me, RBC, are you approving less loans in Vancouver due to this study?

    Oh wait it’s a Canadian bank. I doubt even if the CEO knows this report was released, which I doubt, he wouldn’t be able to find the department that’s releasing it even if he tried.

  7. Vancouver has always been expensive compared to other cities in Canada.

    • The real issue is affordability and rental yields. If you think Vancouver is becoming MORE desirable then prices are perhaps more deserved but this will show up through higher rental rates. Still waiting for those rent gains…

  8. Hi. I wrote the Globe story. if anyone has deep thoughts, I’d love to hear them at sladurantaye@globeandmail.com

    • Hi Steve, I will bite and leave my comment here for everyone to see.

      Well we all know that SFH in Vancouver is not intended for the average working person. Seriously with land so scarce, Vancouver has been tearing down SFH where it is appropriate to build high density housing like condos, townhouses, etc. What remains of the SFH housing stock is really reserved for those who have achieved success in their endevours and enterprises, here or elsewhere. These people buy the houses with pure cold cash, none of these mortgage senses that requires 92.5% of their pre-tax income. Any mortgage they may have are purely for business and/or tax reasons. Vancouver SFH is now reserved these successful people who have been rewarded with their hardwork and skills. The average working person you see in the city do not in any deserves to live in such opulant housing as SFH. They, being lazy and without the drive to succeed, are at best deserves a condo or townhouse in the subburbs. While the few who are hardworking enough to provide useful skills might be worthy enough to have the right to purchase a SFH in the subburbs and perhaps be inspired enough to work hard that one day their children might have a shot to live in a coveted SFH in Vancouver. To assume that Vancouver SFH is for the average person is simply a preposterous believe that has no bearing with reality. Living in Vancouver is priviliage that has to be earned!

      /off sacarsm

    • Yeah space889 you tell ’em!

      Really renters are just jealous because they can’t fathom how their middle-class peers are willing and able to take big risks with debt, and work like dogs with renting out basement suites and rooms to students to afford to live in the Best Place on Earth’s epicentre. Maybe this is just jealousy; with homeowners’ equity-rich tears of sweat poured into maintenance and property management, it makes renters’ free-and-clear weekends well up with guilt.

      Suck it up, and don’t hate people for taking big risks and working their rear ends off for marginal returns. They must see the bigger picture, otherwise why would they even bother? It’s not like they’re idiots.


    • From your article: High prices have put home ownership out of the reach for many, at least if they want to stay in the city and live in a standalone house instead of a condo tower. Financial planner Adrian Mastracci has one standard piece of advice for young families who walk through the door of his Vancouver office looking for advice on how to buy a house.

      “I tell them they need to go to the Bank of Mom and Dad and see how much money they can withdraw for a giant down payment,” says Mr. Mastracci, president of KCM Wealth Management Inc. “Otherwise, I tell them to consider a condo or to look outside of the city.”

      Why parents do this I’ll never know, but damn that familial love. Stephen Harper should eliminate these kinds of illicit fund transfers between family members. Disgusting!

  9. A Vancouver detached home is not affordable for the avg person. This is not bereaking news

  10. pricedoutfornow

    Anybody else getting tired of reports like these? Yeesh…I’m so tired of hearing about how overpriced Vancouver’s real estate is, I don’t even care anymore if I ever own a home (at least not in this city). It no longer matters so much. I give up.

    • Aldus Huxtable

      Unemployment in BC is almost the highest in the country, surpassed only by the maritime provinces. I ask people who take out 25 and 30 year mortgages what career they are in where they can guarantee employment for the length of their mortgage. The looks on their faces quickly change. In the early 80s people took on mortgages for periods which they could forsee stability in their income stream for the duration of the mortgage. However, now with prices and the lack of coinciding wage increases people are taking gargantuan risks on property, oh wait, we all know that prices never go down…..

  11. Some guy on CBC radio this evening went on at length about how Vancouver homeowners are not starving and without clothing, so obviously affordability is “more complex” than the reported numbers, because people aren’t just spending 8% of their incomes on other things. Although I don’t know anyone who actually looks at affordability as what the average homeowner is paying, so he seemed to me to be tilting at a strawman.

    But he went on to say that our banks are careful and don’t lend people such they’d spend more than 40% of pre-tax income on housing. I thought this was pretty worrisome, actually. 40% of pre-tax income, in our family, would after source deductions take 68% of what we take home each month, and any interest rate shift would have us at the food bank PDQ.

    The guy (whose name I missed, sorry!) then went on to mention how 2/3rds of home-buyers had previous equity … and then mumbled a bit about FT buyers maybe having affordability constraints, coming back to how complex it all is. He never really connected how the resale and first time markets usually interact, or giving any sense of why in Vancouver the trouble for the FTB wouldn’t eventually translate to trouble for the move-up buyer. Sigh.

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