“87% of BC residents believe real estate is a good investment”

“87 per cent of residents of B.C. who were polled believe real estate is a good investment (compared to 84 per cent of Canadians).”
[From an investment perspective, when 87% of any population take up one position, it is wisest to take the opposite position. – vreaa]

Question: “The amount at which, if your monthly mortgage payment increased this much, you would be concerned with your ability to make your payments”.
32% of canadian respondents could not make additional payments of $300 more per month

70.2% of Canadian homeowners have a mortgage and/or HELOC on their homes.
Of those, 22% (1.5 million owners) have less than 25% equity in their homes, and 47% have less than 50% equity.
10% of home owners with mortgages have taken out equity during the past year.
The average amount taken out was about $49,000.
During the past year renovation activity resulted in $28.5 billion of equity take-out by mortgage holders.

“Many Canadians believe that other people have taken on too much debt or have bought homes for which they are unprepared. But, when responses about their own situations are aggregated, most believe that they have been responsible. The contrast between these sets of responses is interesting. Actual behaviour by people and their beliefs about their own behaviour tells us more than does their beliefs about the behavior of other people: overall these responses suggest that prudence rules the land.”
[Alternative interpretation: Individuals are inherently biased towards making overly optimistic forecasts regarding their own future prospects. Thus these individuals may be accurate about seeing risk in the situations of others, but far less so when it comes to assessing their own risk. – vreaa]

– Annual State of the Residential Mortgage Market in Canada, Canadian Association of Accredited Mortgage Professionals, Nov 2011 [pdf], and discussion thereof (‘British Columbians think prices unreasonable but real estate still a good investment’, Vancouver Sun, 9 Nov 2011)

18 responses to ““87% of BC residents believe real estate is a good investment”

  1. Is BC real estate a good investment? I say if you bought 10 years ago yes. It’s a GREAT investment if you sell now; chances are that kind of return won’t be seen again in these here parts for a generation or more.

  2. Buying in BC can no longer be considered an investment; it’s more like a gamble.

  3. I would have to disagree here on this. An investment operation is defined as one which, upon thorough analysis, promises safety of principal and an adequate return. As we all know, residential real estate has returned inflation, i.e. a 0% real return. It is only in hindsight that Vancouver real estate looks like a GREAT investment – in reality, a large % of the gains were due to regulatory changes (CMHC, interest rates, amort, etc.) and the rest due to unforseeable increases in speculative and non-speculative demand from foreigners. Unless property is bought with an acceptable net yield after all actual and expected costs or net savings on rent after the same, it IS NOT an invvestment. In summary, people making money on something doesn’t qualify a stupid purchase as a “wise invesment”.

    • People who bought 10 years ago have done well on their investment through lower imputed rents compared to the asset price. A good return based only on earnings was a high certainty as soon as they bought.

      Capital appreciation is another matter.

    • Bang on. I was at a US real estate investment presentation given by the England Group several years back when one of the investors in the audience asked Kevin England, the president, if he was considering an investment property in his home city of Vancouver. The investor provided his opinion of why a Vancouver investment was of such interest to him while other investors in the audience agreed and nodded their heads in agreement. Kevin then carefully responded that the required investment returns were simply not available in Vancouver and that a feasible investment project was not possible. I still remember the loud and resounding gasp that came from the audience as if Kevin had spoken blasphemy! “But this is the best place on earth – how can you not make money buying real estate in this market”. Vancouver RE – all amateurs and foreigners!

  4. Funny how this contradicts the poll on here about a month ago by news1130 where 51% of people said it is a better idea to rent. I dont think many people think renting is better if they think RE is a good investment. Perhaps it depends on the polling method.

    Also:

    “10% of home owners with mortgages have taken out equity during the past year.”

    Wow.

    • What’s the problem. As Jesse’s already said:

      “Is BC real estate a good investment? I say if you bought 10 years ago yes. It’s a GREAT investment if you sell now; chances are that kind of return won’t be seen again in these here parts for a generation or more.”

  5. I think a more telling statistic is the number of people who classify ‘housing’ as an ‘investment’ rather than treating it as, well, a place to live.
    I find this saddening because I believe this kind of thinking leads to people making choices based purely on financial assessments (real or imaginary) rather than assessments of the true value of a home (a good place to live in safety and comfort, raise a family, build a community of friends, enjoy life etc.)
    To me the transition of houses from a societal to a financial asset is the main unappreciated cost of the speculative bubble.

  6. I’ve been browsing the House Hunt Victoria blog out of curiosity today. It looks like the market is really bad out there… Here are a few anecdotes I got from the comments section:

    “The sale at 2511 Cranmore Rd for $610,000 has to be a misprint. [sarcasm]
    It was listed for 739,000 and assessed at 831,000.”

    “And a $100,000 drop on 4446 Tyndall Ave this morning. [Nov 11]”

    “Hey Just Jack: Do you remember a year or so ago when I said the vendors were out of their minds to think they could get nearly 900K for their house at 345 Linden? You said that it should go for around that price and the style of the home “California Rancher”…(actually California Bungalow) was your favorite of all favourites. Well, it sold today for $670K….five thousand below BC assessment. I should have put money on it!!”

    “Those that think they may be retiring to one of the Gulf Islands.
    Small price reduction on Sidney Island from $4,200,000 to $2,950,000.
    With your 4 acres of waterfront, you get a new 7,000 square foot log home, a dock and a private air strip.
    I’m a little short this week, but Xmas bonus time is coming!”

    “(…)
    Some findings:
    – on a paired VREB area (i.e. Saanich West) by area basis, average prices for 2011 are down 7.4% from 2010 (the only areas with increases are Victoria/Victoria West, Saanich West and Metchosin, the biggest decreases are Central Saanich at -14.3% and North Saanich at -19.0%)

    – in the second half of 2011, Sooke has gone done a full $82,000 from 2010 levels, or 18.6% in a year and a bit. (…)”

    “You mean like the waterfront home on Glenwood along Portage Inlet, that was listed at one time for $709,000. And sold this week for $515,000?”

    Interesting…

  7. “Is BC real estate a good investment? I say if you bought 10 years ago yes”

    And if you bought 20 years ago, better than 10. And 30 years ago better than 20. And buying now is better than 10 years from now.
    What’s your point?

    • Royce McCutcheon

      I take this as you asserting that it’s always been a good investment to buy Vancouver real estate. Can you please confirm?

    • You can read I assume, my point is that over the past 10 years RE in Vancouver has been a GREAT investment if you sell. Otherwise it’s a good investment. I made no statement about the next 10 years. Because clairvoyance doesn’t run in my family.

    • F1 – your logic is really bad. So would it also stand that buying bonds today is a better investment than buying in 10 years? Is that because in 10 years you think we’ll have to pay 2% for the right to put our money in the bank?

  8. ridiculous,
    If you’re talking about property as a pure investment it’s probably one of the worst you can make if you need to borrow money. Paying 10K/yr interest for 20 years is terrible if you’re looking to max out your investment. Unless you really need the property for a specific purpose (i.e. children, parents, etc) then it’s pretty easy to argue yourself out of ever owning anything.
    Keep investing in equities and stay away from real estate – this is my advice to you.

    • This is not a good time for equities either. The US is entering into a recession (ECRI) and Europe is already there. Analysts are now downgrading earnings predictions for the Dow, and this is known to be the best leading indicator for stock prices (David Rosenburg). Hold on to your cash and sit this thing out….this is my advice to you.

  9. The problem the bulls can’t see, and never will, is the world never had multiple countries on the verge of bankruptcy in the past 30 years while the economic engines ramped up. Now that the brakes are being applied with both feet and no assurity any of these measures will even work, they are the deers in the headlights ready to be the roadkill of a generation.

    So the “real estate has been great” mantra has on so many pairs of shades with ear plugs, they won’t know what hit them in the coming year.

    What I get a kick out is when I read of these young real estate agents posting on these BC blogs preaching the same sh*t on these boards when they didn’t even know how to wipe their ass during the last serious correction in the early 90’s.

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