“He says he made more on the sale of that house than he made in his entire career as a dentist.”

“My neighbor is a dentist, probably in his 70s. He owned a house in Shaughnessy, custom built decades ago, which he recently sold. The buyers, from Beijing, viewed the house for 20 minutes, then wrote a cheque for the entire asking price. He says he made more on the sale of that house than he made in his entire career as a dentist. I asked him why he doesn’t sell his current house too. He says that, because he can defer the property taxes, he can live in it essentially for free, and the property tax bill that his heirs will be faced with in 20 years pales in comparison to the capital appreciation that the house will experience by then.”
– from Jeff Murdock, via e-mail to VREAA, 21 Aug 2011

Thanks, Jeff. A remarkable story.
The appreciation in the price of a house overshadows monetary gains from an entire professional career of honest labour. Breathtaking, actually.
What are the consequences for the society?
– vreaa

19 responses to ““He says he made more on the sale of that house than he made in his entire career as a dentist.”

  1. I don’t know what the point of this post is. Seriously, sometimes I can’t tell if posts like these only make bulls more bullish? Maybe I’m just filled with fear but isn’t this the kind of anecdotes bulls share and spread? Why are we perpetuating these here? Appealing to the implied morality of the situation is ridiculous. Why don’t we organize and effect political change to address this issue? (sorry just screaming from behind my romulan cloak)

    • To clarify:
      Regular readers know that we make no secret of the fact that we are very bearish on the Vancouver RE market. We foresee price drops of 50-66% (real; peak to trough) in the years ahead, and we continue to be of the opinion that, for the coming decade, “A Real Estate Bear Market Will Be Vancouver’s Defining Social And Economic Event.” [see ‘Prediction’ sidebar].
      Sharing an opinion on the markets has become a significant part of what we do here.

      However, at the same time, we still see the prime purpose of VREAA as being one of archiving/documenting personal stories of the Boom (and coming Bust). Those include stories from those who have profited from the mania. After all, those are the stories that have helped fuel the fire. So, we seek out stories that appear ‘bullish’ as ardently as any other kind. Moreso, perhaps, because (here’s the funny thing)… such stories are harder to find. I suspect this is partly a selection bias in that the Vancouver RE blogosphere attracts bulls who have an interest in ongoing market strength, and bears who are prospective buyers. It doesn’t really attract people who have cashed in their RE and aren’t really thinking about the RE market too much anymore. (Similarly, it doesn’t really attract renters who never ever would consider buying). So one comes across very few “I made a mint cashing out” stories (I know, because I look out for them and have even occasionally ‘advertised’ for them.).

      So, we will continue to post personal stories regarding folks who have profited. It’s part of the bubble market. For every one such story there are, of course, ten or more holders awaiting their jackpot. And it is impossible, as in all bubbles, for those people to all realize their paper profit. At some point there are not enough greater fools waiting to take it to the next level, and the market crashes.

      Perhaps we should print a “Past performance is not necessarily indicative of future returns” disclaimer at the end of every such post.

    • It is only a bullish post in the sense that it confirms that there have been people who have profited immensely in the present boom. It is not bullish in the sense that it makes no predictions about what will happen going forwards. Indeed, rather than handing over the house to his kids, the dentist saw this as a great time to sell.

      A rather sad corollary of the dentist’s story is that: even if one works their entire life as a dentist, they would not be able to afford that house. (Of course this is not completely accurate as one never knows about future prices, wages, inflation rates, etc.)

      Two more things:
      – I’d love to know what he thinks about affordability for his kids. If I get the chance, I’ll ask him.
      – He didn’t explicitly say that he owns the current house and is deferring property taxes; it was more a general remark. After reflecting on the conversation, I suspect that he might be renting.

    • I thought I’d share an interesting comment from a realtor friend of mine. Vancouver westside homes are being bought, left vacant, then flipped at higher prices after one home in same area is bloated after a STAGED price bidding war. Most disturbing is local buyers still wanting to get in at these prices because they are afraid they will be “Priced out Forever”. Sadly when this ends the locals with be holding the bag of mortgage debt for homes that are worth 50%-66% less.

  2. VREAA I think that the dentists income would have to be adjusted for inflation I wonder if it would still be more once his life time income is inflated with the inflation rate for each year that he worked.

    • Sure, very valid observation, and there are many other factors that would have to be taken into account to really ‘account’ for the career benefits… He may be getting the math wrong; he isn’t taking into account the non-monetary benefits of having been a dentist; etc, etc.
      However, the fact remains that he is concluding: “I made more on the sale of that house than I made in my entire career as a dentist.” That’s his summation, it’s what he considers to be the truth, it’s what he shares with his friends and family… and THAT is powerful stuff.

  3. Assuming the demographic shift does make things a bit tougher for seniors in the years to come, and prices take a beating, I’m sure his children will appreciate the extra tax bill they get – “thanks dad!”

  4. The property tax deferment is nice. No deferment for certain maintenance costs, unfortunately.

  5. Interesting property tax proposal:
    So here’s one provocative proposal that might help put a dent in both problems: Double TransLink’s current residential property tax rates. But at the same time, create a homeowner grant that rebates 50 per cent of the TransLink tax.

    http://www.bclocalnews.com/opinion/128211193.html

    • I thought there was already a personal residence property tax reduction?

      One thing of note, though: certain areas of Van West are appreciating significantly compared to condos and less-desirable neighbourhoods on the east side. When it comes time for the 2012 roll call, many homeowners will face a bit of sticker shock. Worse, they will be paying more because others’ assessments won’t have gone up nearly as much. How much? Assume 20% Van West appreciation, 10% average appreciation, and 4% tax rise, gives 13% rise in taxes year-over-year. When wages are stagnant that’s a mighty big pill to swallow. Good thing for the council that elections are in November, not January!!!

  6. Yup. Why work at all? We can all get rich through real estate. Working is for those losers living in cities that are not world class.

    • Yeah.
      In 1999 ‘x’% of college students in the US wanted to careers in the financial sector and ‘y’% of them estimated that they would be millionaires before they were 30. (we can’t recall the exact numbers, but we know that ‘x’ and ‘y’ were far higher than they’d be now.)

      • And many of them got those careers, and became millionaires as their organizations engaged in fraud. A bubble can always get bigger.

    • for many many people it’s more like: “We all got rich through real estate so what’s the problem?”

      the anecdote is about selling now to take profit, not about buying (or holding) expecting further gains

  7. Interview with Warren Buffet:
    http://www.charlierose.com/view/interview/11845

    Around 17:00:
    He believes that unemployment will be improved once residential construction picks up, which can only happen once the excess supply of houses has shrunk.

    So how can one shrink the excess supply?

    18:20:
    “You could have a bunch of rich immigrants come in, and they’d all need houses, for example. If you wanted to change your immigration policy so that you let 500,000 families in, but they had to have a significant net worth and everything, it’d solve things very quickly.”

    • Hmmm… I think that’s been tried somewhere, UD… And the Jury’sStillOut… So to speak.

      More to the point, there’s a reason why that WilyWascalWarren bought himself a WailWay… and it ain’t because – as a child – he failed to awake OneFrostyMorning to a coveted TycoChooChoo underneath the Lights/Ornaments/’nNeedles.

      Never mind though, DearReaders – cause your next BlastRadius is currently floating somewhere between TheCloud & VREAA’s DigitalPress….

      & here’s you’re TeaserTrailer!

      http://tinyurl.com/3rvup3c

      (who knows, with any luck, our IllustriousHost may even option another ‘season’/13 episodes from ‘Nem’???)

  8. I wonder if the dentist sent his kids to school. If so, why?

  9. This is an astounding story. What a colossal misallocation of resources. This is also why we need to remove the homeowners grant and introduce a LVT (land value tax).
    Alas it will never happen because our politicians are in the back pocket of the real estate industry.

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