“All my doctor colleagues think I’m nuts to continue renting, but quite frankly, if I get a big fat mortgage and a nice fancy “doctor house”, I won’t be able to retire.”

This personal account from Tina, a doctor making $350K pa living in Vancouver Westside in a $3Million house that she and her husband rent for $4K per month (as featured by Garth Turner at greaterfool.ca 16 Mar 2012):
“I had anger and bitterness towards the unaffordable market. Last year, I was one of those “house horny” individuals looking to get into the market. After losing out on 4 bidding wars and building up a hatred for lying, arrogant RE agents on the Westside, my husband and I decided to stop looking. It was ruining our lives! I didn’t know who was on the other side of the bidding wars but whether or not it was an Asian immigrant with a million cash or some other crazy westsider like me, it didn’t matter. Thank goodness we found greaterfool.ca. For those who comment on the fact that prices are not dropping, maybe they need to see the daily “red sheet” for the Westside that I still receive every day.
As a physician that earns approx $350k per year, this rent is affordable and still allows us to save, invest and be able to retire in 25 years. But the discrepancy in what I can rent compared to what it would cost me to buy the same house is huge! Of course all my doctor colleagues think I’m nuts to continue renting, but quite frankly Garth, if I get a big fat mortgage and a nice fancy “doctor house” as I like to call it, I won’t be able to retire….”

And the following in the comment section from another MD:
“My wife and I are happily in a similar situation. Only one other colleague that I know of in my age cohort is renting. Numerous others have large mortgages. Our department is having a very hard time recruiting because new MDs cannot afford housing in Vancouver.”
Burnt Norton, greaterfool.ca, 16 Mar 2012 10:05pm

Sensible doctors can’t buy “doctor-houses” in Vancouver.
Vancouverites may not realize this, but this is a problem.
There is pressure on doctors to simply move to places where they can buy accommodations of a standard commensurate with their earning ability.
(And don’t anyone volunteer that they could easily buy a townhome in East Van with that kind of income. That is entirely missing the point.)
– vreaa

120 responses to ““All my doctor colleagues think I’m nuts to continue renting, but quite frankly, if I get a big fat mortgage and a nice fancy “doctor house”, I won’t be able to retire.”

  1. Yes, this is exactly what I said a few days ago:
    https://vreaa.wordpress.com/2012/03/15/how-bad-do-you-really-want-a-house-in-vancouver-part-of-being-an-adult-is-making-sacrifices/#comment-30824

    One often hears commenters who think of today’s young folks as whiners: “I can’t afford the place I want.. blah blah”. But there is clearly an affordability problem when medical doctors, presumably the top 0.5% of earners, cannot afford to buy a decent home in a nice part of the city.

    • And when someone in the top 0.5% of earners can’t win a bidding war, you really really have to wonder who is buying these places and how.

    • Supposing Tina was married to a real estate agent, What would be the scenario? Richmond councilor, Derek Dang was a realtor before and no doubt he and his doctor wife are savvy investors. Any lesson here?
      $350K !? CMBC bus technician making $50+/hr owns a dozen properties in VW, Richmond and Tsawwassen, thanks to the low rates.
      holy guacamole! buy your banker a nice christmas cake.

  2. Renters Revenge

    $350k pa?
    The good doctor could make that kind of money just flipping houses, seems like a waste – all that med school training.

    • Yes, and that’s another problem — in the Wild West created by cheap money, many bright professionals have been drawn away from areas in which they are trained, to rather ‘waste’ their time & skills (from the community’s perspective) doing things like flipping condos, selling real-estate, or trading stocks.
      Misallocation of resources wrought by speculative manias.

  3. Someone earning $350K pa can carry a $2MM property. Nobody in this income bracket is “priced out”. Some do, however, seem to have better things to do with their money.

    BC has an extremely favourable tax rate for most physicians. Maybe it’s somewhat ironic that many are being taxed more than they think.

    • None of these people are saying they’re “priced out”, or that they can’t “carry a $2MM property”, BUT they are saying that they don’t find value in what you’d get for your $2MM in Vancouver. Therefore, they don’t buy. Sounds completely sensible.
      Those who believe that everybody who lives in Vancouver and who can also afford to buy in Vancouver should do so can’t comprehend this logic.

      • “BUT they are saying that they don’t find value in what you’d get for your $2MM in Vancouver.”

        Yes, the $2M SFH on the West Side are candidates for CrackShackOrMansion.com. The going price for a “doctor house” is over $3M.

      • “None of these people are saying they’re “priced out””

        I was commenting on Jeff’s comment above (but couldn’t get the nested comment to work), but yes that someone chooses not to buy because it’s too expensive, regardless of income, seems sensible.

        The doctor and income thing is irrelevant in terms of making a rent-vs-buy decision. If that is true, then, I take the anecdote of the aircraft mechanic, bookkeeper, and blood-sucking-squid-like rentier on par with a physician.

  4. Basement Suite

    “As a physician that earns approx $350k per year, this rent is affordable and still allows us to save, invest and be able to retire in 25 years.”

    EXACTLY. Nice income by the way, now I really feel poor, and yet even you can’t/won’t buy 2 million dollar tulip bulb. Why not? Maybe 2 million dollar tulip bulbs are actually a tad poverpriced in the BPOE… But no, this is the Best Place On Earth, c’mon doc, why would you not want to OWN (a mortgage on) that tulip bulb at all cost, cash in your RSP, borrow from your practice, BUY BUY BUY doctor or be priced out forever!??

  5. “doctors house” AKA west side (far above avg looking) home.

    You should start another blogroll called “I’m entitled, gimme my house” and put this anecdote right next to the UBC prof’s comments.
    If you aren’t rolling significant equity into your detached purchase you won’t be able to compete with those that have been here for many years and are supplying their next purchase with equity from sale of their last Vancouver detached.
    Funny, the good doctor might just be outbid by someone making 50K/year with better “fundamentals” (equity).

    • this anecdote smells to me.
      A Doctor considering retirement should have pretty good equity from another home, shouldn’t they?
      I call this yet another Garth Turner shill post.

      • I’m 32 and consider all my financial decisions in the context of retirement. What’s your point? Smart people do this, that’s why they are either renting, sell, or they leave (I did). They understand the profound impact borrowing too much will have on their futures in the very likely event that house prices don’t continue to appreciate. The requirment to pay that huge debt will negatively affect their retirement, their ability to pay for school for their kids, private medical care, vacations, new cars, organic food, etc for the rest of their lives, especially when contrasted against a family who invested in equities, who will be able to afford to buy a house in cash in a handful of years and have all those things and still retire…

      • f1, you know what really smells? my coffee. it’s freakin incredible.
        in many ways, the attitudes that you express are emblematic of the installed political apparatus – incapable of comprehending the problem until it fully experiences real pain. watch the political leadership in every 1st world nation (except iceland) hypnotized, paralyzed as traincar after traincar keeps going off the rails. it is increasingly clear we have passed the point of no return for managed solutions. to path to redemption now involves apocalyptic pain.

      • Oh F-1 Please promise you will stay around.

    • “If you aren’t rolling significant equity into your detached purchase you won’t be able to compete with those that have been here for many years and are supplying their next purchase with equity from sale of their last Vancouver detached. Funny, the good doctor might just be outbid by someone making 50K/year with better “fundamentals” (equity).”

      It is not a healthy society where someone earning in the top 0.5% can’t afford a decent house because they didn’t bring along “equity from their previous sale” and they are being outbid by people earning income less by a factor of 7 who have more equity. That is almost a reversion to feudalism.

      “I’m entitled, gimme my house”

      I’m not a medical doctor, so I’m not biased here, but yeah I think medical doctors earning $350k are indeed entitled to a nice house. They spent what, 5 years in medical school, 4 years doing a residency, and if my kid gets cancer, they can hopefully cure that sucker. They deserve a $350k salary and nice house, a lot more than someone with a McJob who has been flipping houses for the past 10 years.

      • “…someone earning in the top 0.5% can’t afford a decent house”

        Can’t vs won’t. The Doctor CAN afford to buy a home in Vancouver. The Doctor WONT buy a home in East Vancouver because it doesn’t provide the status befitting her occupation.
        When it moves and smells like entitlement it usually is.
        Sorry, I just don’t have much sympathy for the 350K/year crowd – I save mine for the 50K/year family.
        Let’s focus on solving the affordability issue for folks who really need the housing…not those that want a housing hierarchy based on income and occupation.

      • Completely missing the point … professionals earning that much are movable and have high demand all over the world … they can easily move and have much better lifestyle, a loss for Vancouver. They have networks of friends living elsewhere and can easily compare price vs. value.

        I can afford buying a Ferrari, but it doesn’t make sense … what’s the point ? Affordability is much more than being able to make monthly payments, but RE has brainwashed everyone into believing so.

      • F1: “Can’t vs won’t. The Doctor CAN afford to buy a home in Vancouver. The Doctor WONT buy a home in East Vancouver because it doesn’t provide the status befitting her occupation.”

        Uh, any professional with a good income (even below $350k… let’s sit at a “mere” $100k for the sake of argument) will look at the crap in E. Van and compare it to much cheaper and better housing stock elsewhere and will either:

        a) rent now,
        b) move now, or
        c) ensure personal mobility so that they can move when the opportunity arises.

        It’s not rocket science. Which is good, because rocket scientists couldn’t afford to live in anything other than a dive in this town anyhow.

        Obviously, from the anecdote, it’s not brain surgery either.

      • As Jesse says, the affordability problem is pronounced across the spectrum. It is simply easier to recognize amongst the high-status jobs.

        Although the concerns of the $50k crowd are legitimate, one can glibly dismiss them by saying “Well of course you can’t afford nice housing, because you’re in a low paying job. That’s just how it was 30 years ago.” The woes of the $350k crowd cannot be so easily dismissed because 30 years ago they absolutely could afford great housing. This is a very vivid picture of the affordability change.

        [Personal anecdote: I know a doctor living in Dunbar who loves telling the story of how he bought his house 30 years ago with a $15k downpayment.]

        “The Doctor WONT buy a home in East Vancouver because it doesn’t provide the status befitting her occupation.”

        Yes, we agree on this, but we disagree in our interpretation of that reality. You malign the doctors as feeling “entitled” to a West Side SFH. I don’t view it that way: the top local earners should be able to afford nice housing in the best part of town. When that’s not the case, your society has a problem. This “doctor housing” issue is just a symptom of that problem.

      • “Uh, any professional with a good income (even below $350k… let’s sit at a “mere” $100k for the sake of argument) will look at the crap in E. Van and compare it to much cheaper and better housing stock elsewhere”

        E.G.
        If one tree produces bad apples it doesn’t mean the whole orchard is rotten. Why move out of the garden of eden without sampling the apples from the other trees?
        I think an M.D. is smarter than to move to Calgary, Kelowna, Toronto, etc. without looking for sweeter fruit in their own orchard.

      • F1: “Garden of Eden.”

        :/

        Statements like that are starting to solidify my suspicion that F1’s account is pure satire.

      • “garden of eden”? really?

        well let’s be clear about who the snake is in your metaphor 😉

      • Garden of Eden, eh. Good one F1.

        How about this instead. I was a smoker for more than 40 years before quitting. I LOVED smoking. Its that whole garden of Eden thing. You know,….. why quit when you can try Players King-size instead of Export A? No need to leave the clan of the idiotically addicted. Just try another version of the same damn thing and do that for another decade or two. if you can’t beat ’em then join ’em. Right?

        Your ideas stink some days.

      • F1- Don’t confuse entitlement with economic literacy.

        The doctor is too smart to get over-leveraged and doctor is sick of bidding wars. Doctor has the $$$ to rent a nice house and save for retirement. Doctor is doing the safe economic move if Doctor wants to live in a house of that quality in that neighbourhood. Prudent Doctor is Prudent.

    • How do you view entitlement f1? How do you define it? For me, I view someone entitled when they feel like they are owed something for which they don’t earn the right or ability to own. Are you trying to imply that a physician has not earned the right to own an above average to superior home in a desirable neighbourhood at a reasonable price?

      The “good doctor” that you speak of beat the odds to get to where she is today. Probably top marks in high school to get into the “right” university. Then worked hard in university, knowing that one bad mark in a core course (B- or so) could torpedo her hopes of becoming an MD. If you went to university then you should know that getting consistently high grade point averages is no small feat. Forgot to mention the hours of volunteer work, research projects and other extracurricular activities to round out the resume so she could even get an interview… at the end of the day she beat out the 1 to 10 odds (that was what it was in the year I made into med school… now I hear it closer to 1 acceptance for every 7 applicants). Then 4 years of med school, 2 to 5 years of residency (which when you do the math about number of hours worked plus call duty, pays just above minimum wage), numerous board exams, countless sleepness nights on-call to get her to the point where she can dare to write her ranting post. Oh and being a physician still takes its pound of flesh regularly… it is not easy street once you are fully qualified. Has she not earned the right after 10 to 15 years of school and training to own a nicer home at a reasonable price?

      f1, benefit of the doubt to you though, maybe your definition of entitlement is different, although likely wrong.

  6. another professional

    I too am a professional, making roughly the same as this physician. As jesse says, I can “carry” a $2M house (in the sense that I can afford the payments at these interest rates) but have better things to do with my money. You have to be a financial imbecile of the first order to purchase a $2M bungalow that you can rent for $3500/month, unless perhaps you can arrange financing at 1% for the entire life of the mortgage (which you can’t).

    The problem I face is that the rental stock in this city is pathetic, no doubt owing to the extremely poor cap rates. Subject to the concerns expressed in the next paragraph, I’d be content to rent permanently, but finding a good-quality house for long-term lease is nearly impossible; the rental properties I see are extremely poorly maintained or intended to be flipped shortly or both.

    In addition, the growing dearth of culture and real economic activity in this city is depressing, particularly when it’s combined with the smugness of so many of the city’s residents. So many seem to think we’re living in Chicago, or, more implausibly still, Manhattan, when we’re really more like Milwaukee or Oklahoma City. Actually, I suspect both those cities have more museums, theatres, parks, and businesses.

    As a result, I’m looking east and south. My family can make more, spend less and enjoy living in a more dynamic city. I’m fairly confident that the only things I’ll really miss about Vancouver are my friends and extended family. Thank goodness for Skype.

  7. formula1 -> We find it remarkable that every time you hear of a Vancouver citizen with adequate funds to buy, but who chooses to rent, you call it a “fabricated story”. These stories are true; we have personal knowledge of these individuals; and ‘another professional’, above, is yet another example.

    And, BTW, which is the strongest hand:
    – A MD making $350K pa buying a $2MM home (with, say, 15% down)
    or
    – The person you describe; somebody making $50K pa rolling, say, $900K equity from a SFH sale into a $2.1MM purchase (and thus ‘outbiding’ the MD)?
    Answer: The MD; they still have earning power and discretion. The latter buyer will get killed in the downturn, and will lose perhaps all of their RE accumulated equity! (The 900K will disappear).

    • Jesse,

      And, BTW, which is the strongest hand:
      – A MD making $350K pa buying a $2MM home (with, say, 15% down)
      or
      – The person you describe; somebody making $50K pa rolling, say, $900K equity from a SFH sale into a $2.1MM purchase (and thus ‘outbiding’ the MD)?

      If this were the gambling table the 50K player is dealt the better hand and the MD needs to draw more cards to upgrade. You’re talking about spending your own money on a home vs borrowing from the bank. And who want to borrow 2Million to buy a home? I bet not many. Certainly not our good Doctor

  8. reality check

    $4,000 per month for a house worth 3,000,000. I don’t buy it. People are paying close to that for just the main part of the house.

    • We’ve had these discussions here before.
      The description is almost definitely true.
      The rented home is likely a very modest structure on a plot of land that is now valued at $3M. Thus the $4K rent is not for the value of the land built to full potential, but for the modest house on it at the moment.
      Those are the rent multiples for many westside homes, of the order of 1:750 ! (it doesn’t mean much, but there you have it).
      Any landlord with a napkin and a pencil should _ _ _ _ .

    • another professional

      Sold for $2.75M last year: http://www.henryso.com/Properties.php/Details/343

      ASKING rent is $4500/month: http://vancouver.en.craigslist.ca/van/apa/2880969181.html

      Close enough?

      • Thanks!
        reality check -> Check that out. Thoughts?

      • interesting.
        So the buying at 2.75M put down enough equity so the $4500/month covers their mortgage and expenses and are speculating on the eventual appreciation?

        This brings us to a discussion about cap rates.
        Question – we know that cap rate in Vancouver is very low. But when we add appreciation to the calculation on income isn’t the cap rate in Vancouver high? No telling whether buyer of this 2.75M property is taking the long or short view. Pretty good chance they’re speculating if they’re looking short.

      • formula1 -> “interesting.
        So the buying at 2.75M put down enough equity so the $4500/month covers their mortgage and expenses and are speculating on the eventual appreciation?”

        Doesn’t make any difference if they bought with 100% cash or with minimal down-payment — it’s shockingly cash flow negative for the landlord, and definite speculation on future price gains. However you slice it; and regardless of timeframe.

  9. I’m surprised that “you have to sacrifice to live in the best place on Earth”, “it’s a privilage to live here”, and “you have to start building equity from the bottom” hasn’t come up yet.

    Anyways, who loses more? The doctor who moves away from Best Place on Earth so they can earn more/same with much cheaper housing and cost of living, or us the regular joe who depends on doctors when we are sick?? What’s the use of Best Place on Earth when you are sick and there are no doctors to help you? We can’t all learn medicine like Neo in the matrix in 10 seconds….

    • These losses are the kinds of ‘stealth’ changes that are occurring in the community as a result of the speculative mania in housing; most are oblivious to them.

      • …”most are oblivious”…

        Incontrovertibly, IllustriousEd. Such is the intrinsic nature of ‘stealth changes’… although, inevitably, they always manisfest in more obvious ways…

        AlohaAirlines Flight 243, for example… afterwards, on the ground, StructuralFatigue/Explosive Decompression… looks like this*…

        http://tinyurl.com/7zykdnx

        *Actually, it’s ‘somewhat’ scarier during the emergency descent.

      • Talking about ‘stealth’ changes, I had dinner with a family member who used to vacation in Spain every winter. His comments were interesting since I look at the Iberian experience closely for parallels to BC (as weak as they are). He said the following:
        – Spain has been playing “catch up” for close to 3 decades in terms of its tax structure. They embarked on a construction boom as the remnants of the Franco regime were unwound.
        – Spain’s tax collection system is still relatively immature
        – He no longer feels safe there. High unemployment wreaks havoc on the social fabric. Spain’s GDP is higher than reported (see tax collection issue), and part of that comes from tourists.
        – He now vacations in southern France. It turns out to be cheaper in net, he figures, due to the hidden costs of not feeling safe.

        Not that this resembles BC at all, but highlights that boom-bust cycles and difficulty expropriating capital from residents generally leads to unhappy times. BC’s destiny is different from Spain’s but there are still parallels I think are worthy of study.

      • Right Jesse. We really don’t hear enough about what is happening in Spain as the media is so full of worries like those in Greece and China. They are at depression levels of unemployment though and to call the country traumatized is almost an understatement. But their experience is just one more example of a property bubble failure and how badly it can turn out. It is one that has ended in more tears than most ever imagined. I keep wondering why people here see our country as so different and somehow immune. They are not so foreign as we might like to think. People still behave in the same way in all these cases of credit excess and government typically respond with the same medicine. But what can they really do when the medicine fails and the economy still keeps slumping lower every month.

    • Doctors don’t move to small communities and they also move away from Vancouver. Where are they going?

      Last I checked they all wanted to work here. But perhaps some other posters have doctors in their family who provide different feedback

      • There are plenty of physicians, and other professionals, who work and live and plan to stay in our BC interior community. I know, because I’m one of them and, as part of that demographic, I rub shoulders with plenty of them as well.

        F1, I have to say, it’s time that you got out a bit more. It’s a big country… a big continent, in fact. Vancouver is nice. But there are plenty of other places – big and small – with advantages that others prefer.

        So, if people want to choose Vancouver and crazy RE prices, then that’s their boat. But many of us don’t do that for good reason.

      • formula1 -> “Last I checked they all wanted to work here.”

        Let me guess, you polled physicians who… work here… right?
        Look up: selection bias.

      • vreaa,

        And you are posting anecdotes only from Doctors who want to leave Vancouver. How are you any less biased?

      • f1 -> We post any anecdotes that we find, about anybody’s experience with Vancouver RE, whatever the perspective (really, we do). It’s just that there are very few available/publicly shared stories about people happily coming to Vancouver and buying RE and being satisfied with the RE situation here. We have published a few of those (all that we have come across); we have published stories from people who have been happy to profit from Vanc RE; if you or any other reader know of any such stories, please, please, send them along.

      • E.G.

        To suggest that Vancouver is having a difficult time attracting Physicians due to high housing costs is to say that there is a shortage of Doctors are in short supply in this city.
        The opposite is true. Regions in BC with the most affordable housing are also the areas with an extreme shortage of GPs.

        Moreover, the data does not support your claim that Doctors are moving to the US. In fact the opposite is trending:

        “Fewer physicians are migrating within and outside of Canada. For example, there was 20% overall less movement of doctors over provincial and territorial borders in 2010 than in 2006.

        As for the national border, physician migration out of Canada decreased by 16% between 2006 and 2010. In total, 202 physicians returned to Canada in 2010, and 173 left for another country”

        http://www.newswire.ca/en/story/896357/physician-supply-increasing-twice-as-quickly-as-canadian-population

        There may be anecdotes of some Physicians leaving Vancouver unhappy about the high cost of housing, but they are in the minority.

      • I don’t recall claiming anything of the sort…

        All that I said was that I know of plenty of physicians and other professionals who choose to live in other parts of BC.

        Yes, places like Burns Lake are not as generally attractive as Vancouver. But we still have:

        Kelowna
        Kamloops
        Prince George
        the Kootenays in general

        Each of which has thriving little professional communities and reasonable house prices… plus a lot of other tangible and intangible benefits of residence.

        And, I said nothing of the USA.

      • formula1
        Not all of us want to work in Vancouver. Personally both my wife and I (both doctors) are here because this is where we grew up… our parents and siblings are the only things that really make Vancouver desirable. So to refute your claims that everyone wants to work in Vancouver:

        1. My wife and I have often said that if it were not for our families, we would rather go to Ontario.
        2. As I posted a while back, a friend of mine from residency came out to scout out Vancouver, saw the house prices and decided to stay in Toronto.
        3. One of my colleagues is stuck in Vancouver due to family circumstances. He grew up here but laments on how much this place has changed (he practiced elsewhere for a while) and says he would rather be elsewhere. Scared once his family obligations are up he will pack his bags and leave… would be a big loss.
        4. Two acquaintances from med school / residency have set up shop in the Okanagan.

        I could go on all night. We do not all want to practice here… in fact for our physician group, recruitment has been hamstrung by a combination of better remuneration from other provinces and the high cost of living in this city.

      • “I could go on all night. We do not all want to practice here… in fact for our physician group, recruitment has been hamstrung by a combination of better remuneration from other provinces and the high cost of living in this city”.

        KFPanda,

        in spite of your anecdote and observation Vancouver continues to attract medical talent from around the world.
        You are out of touch with just what a draw Vancouver is to professionals.

        “A record number of new doctors registered with the College of Physicians and Surgeons of B.C. last year, which should make it easier for British Columbians to find a family doctor”

        “The number of doctors in B.C. increased 17 per cent between 2001 and 2009, Falcon said, while the population growth over that time rose just 7.5 per cent”.

        “According to the college’s annual report, 175 of the new registrants are international medical graduates from places such as South Africa (66), the United Kingdom (28), and the United States (20). The international graduate numbers are up from 156 in 2008 and 148 in 2007”.

      • Royce McCutcheon

        @F1: The article you link to says nothing specific about the recruitment/retention challenges RE: MDs for the Lower Mainland. When this topic came up on this site in the past, I recall you citing a report to make the same points you’ve made here, except the report ran counter to what you were saying (and, as an aside, having known one of its authors, I can say with certainty that you did miss its point). I know several residents and young MDs. Many are cognizant of cost issues here and hedging on whether they will stay (i.e. they ain’t putting down roots). I am also familiar with more senior positions for MDs that needed staffing but lost out on desirable candidates – with local ties, no less – in part because of the cost of living here. It is reaching a sufficient degree of noise that more established, mid-career physicians that are involved in policy and training are beginning to openly muse about the challenges the cost of living here presents regarding recruitment/retention. I know this doesn’t compute for you (I’ve not yet read far enough to see whether you’re again suggesting that foreign-trained doctors will save the day), but your unwillingness to acknowledge this growing issue doesn’t mean it’s going away.

      • Royce McCutcheon

        And your most recent quotes are applicable to the province as a whole.

      • I’ve worked with Physicians every day for many years. There are more coming than going…from everywhere including Alberta, Ontario, South Africa, India, etc. You can choose to believe or not – let’s move on.

      • What a laugh! More coming than going. How many professionals with family are moving from Toronto and Calgary, etc. to Vancouver in order to start from financial scratch again. Just take 20 years of savings and investing then flush it down an Eastside toilet along with your kids’ futures. And so many of these families are so desperate to be in Van that they are willing to overpay half a million for a home that would be condemned anywhere else. Idiot.

      • @f1 – Nice stat to trot out, and I do agree, the plural of anecdote is not data. That said, stats are also meaningless if you don’t know the story behind them.

        From 2001 to 2009, the UBC med school has been increasing the number of students it accepts, from about 120 to a current 280 or so. This was done incrementally and I don’t have the when and how many off the top of my head but the students graduating from 2005 would be counted into the 2009 new doctor figures. Also, the quote makes no distinction between fully qualified physicians (i.e. finished residency) and those who are just starting post-grad training positions. Both have to register with the College. No mention of how many of those trainees actually stay.

        17% sounds like an impressive increase but really, it may be smoke and mirrors given what that 17% truly represents. Seems to me that if we are training double the number of med students compared to the late 1990’s / early 2000’s that we should have more than a 17% increase.

  10. Ralph Cramdown

    The more I think about it, the more I LIKE the extreme skepticism of some of the posters here. I’m in a similar position to the doctors.

    I worry that if there’s too many people like us with money “on the sidelines” (actually invested elsewhere and doing OK, thank you), there will be continued support for this madness. But homeownership is at a record high and with stats like 25% of brokered loans last quarter being variable rate, along with the view that non-ownership among the somewhat monied is so implausible as to be fictional, I can wait more patiently.

    • The numbers of people on the sidelines, with available funds, AND who will be ready and willing to step in when the market weakens decisively is a very, very small minority.
      What is more, routine-source buying turnover will pause, too (why buy this month when it could be cheaper next?).
      Also, almost all ‘move up’ and ‘move down’ (Rennie’s ‘buy-downs’) buying will go on hold (as sales of those properties slow).
      Buyers who do step in will be overwhelmed by the 5% or 6% or 7% or more of homeowners frantically trying to lock in their imaginary/paper gains.

      • Yes. We know savings rates are terrible in this country. Credit is rampant. We know too that little is socked away on average and registered pension funds are abysmal. For most, debt ratios are sky high relative to both assets and incomes. It is only cheap and readily available money provided by lenders that allows this situation to continue. And that is where the choke needs to be applied. It is clear to me interest rate increases will be damaging to the country at this time. Policy must now lead and there are few with the power to take those decisions other than our Finance Minister. We will be looking to Mr Flaherty for direction during the upcoming budget. If he is able to reign in access to credit for risks and temper the activity of our banks (who complain they cannot act without appearing to be in collusion) and to do so without spilling the cart and sending us straight into a recession then he will be absolutely brilliant. We need action here but we also need a steady hand and sensible thinking. People can complain all they want about the government but they need to keep in mind that most of the globe has been undergoing a similar process of stimulus through easy credit. This is not something that is unique to Canada nor to those who lead this country and so setting aside partisan ideas benefits all of us. We need solutions now more than ever but a careful approach is preferred if a gentle landing is going to be our goal.

      • Vreaa, the move-ups will certainly hold, but the move-downs will rush to shift, as the difference in absolute $ between current and future home values is more in an inflated market. I know this all too well because we indeed rushed to “down-size” my mom’s house as she was entering retirement and the property values were slowly depreciating in her area.

      • Makaya -> Yes, those who intend to downsize will come to market (it’s the same as ‘profit taking’), but who will they be selling to?

      • -> Vreaa: “beaucoup d’appelés, peu d’élus”

    • “if there’s too many people like us with money “on the sidelines” (actually invested elsewhere and doing OK, thank you), there will be continued support for this madness”

      If it puts you at ease, the exact same arguments were used in other locales. Take a step back: what is your “sidelines” capital, really? If we trace your capital back to its origin, we can only conclude that asset bubbles must be ephemeral, albeit the timeline of correction uncertain.

  11. pretty cool vreaa brand watercooler. another step in the direction of apocalyptic pain. got the redirect from mish:
    http://tinyurl.com/88l83bn
    ttac is pretty neat for motorheads – used to visit
    psst f1… this is having no effect on ham whatsoever

  12. formula1 said: “Let’s focus on solving the affordability issue for folks who really need the housing…not those that want a housing hierarchy based on income and occupation.”

    What happens to societies that don’t have “a housing hierarchy based in income and occupation”?

    • Ralph Cramdown

      They end up with a hierarchy based on time in the market, and the younger professionals who’d traditionally be in the upper half (i.e. should be able to afford a nice house) but find themselves in the lowest quartile move elsewhere in disgust?

      • They will probably still be in the upper half in five year, 10 years, etc. So any disadvantage they currently have in the housing market is temporary.

        Meanwhile the house price lottery winners will behave like lottery winners in general do, and spend their one time winnings without ensuring a future revenue stream.

    • “What happens to societies that don’t have “a housing hierarchy…?”…

      Well, Ed… depends. On the society.

      Once upon a time, local housing had nothing to do with occupation/income…

      http://tinyurl.com/7qkbc8m

      ….

      • And ‘car-pooling’, the ‘commute’… was, like, way more fun.

        http://tinyurl.com/6t93obo

      • Today however?… first you get assorted asocial modal adaptations…

        The ‘end game’ is almost always some form of ‘explosive decompression’.

        On the other hand… sometimes the wings just fall off… in which case, quantum fractal complex conglomerate systems become entertaining – if brief – studies in Newtonian Mechanics… also known as, “Going kinetic”.

      • we’re going to need to re-brand those pictures, nem

        inconvenient history – does no good for the re biz

      • Inconvenient history indeed, Realist…

        The problem, of course, is that when you make ‘markets’ the central organizing principle of your society…

        Your ‘society’… becomes a market.

        As for inconvenient histories/rebranding… all you need to know about the RE ‘game’… market societies [I know, Ed – that’s an oxymoron] … and YVR’s future… is wrapped up, quite nicely, in TheEagles, “The Last Resort”…

  13. I am 28 yrs old and make 70k a year. I live in a very small apartment with a roommate and I feel that something is wrong with that picture. I mean, I’m not a student anymore so I shouldn’t have to live with a roommate with this level of income. I could obviously afford a 1 bedroom apartment but the cost would jeopardize my ability to save/invest/enjoy life. Call me an “entitled brat ” if you want but the point I’m trying to make is that people making 60k + should have more“ flexibility in terms of housing in a “healthy” society.

    F1 —> Alright F1, bring it on. I’m ready for your virtual abuse. I’m already bent over and just waiting for you valuable input.

    • If you want to downsize your costs and keep saving money without moving you will need a room mate that sleeps in the same bed as you. You know….get married and start having a normal life. Cripes, you are right. This is not college anymore.

      • But wouldn’t that roommate want to get something like a “mixer mortgage” from VanCity specially designed for roommates? Could end up costing a lot more!

      • If a “Mixer Mortgage” is an alcoholic beverage then I would say yes.
        How much are they? Do they come as shooters?
        All HD needs is directions to the bar.

    • HD: ” I mean, I’m not a student anymore so I shouldn’t have to live with a roommate with this level of income.”

      If you choose to remain in Vancouver at this time, then yes you should have to do this.

      However, if you take a moment to notice the big country – in fact, the big wide world! – out there beyond Hope then, no, you shouldn’t.

      Choice is yours. I’ve made my choice (i.e., I left town), and I believe that I’m happier for it. My income has gone up, my housing costs have dropped, my commute is miniscule. I have plenty of left over time in the week and money in the month.

      Yup, I have to shovel snow from time-to-time. But that leftover money has been great for buying things like snowblowers or the neighbor kids’ snow removal services.

      I live in a place with a small, but vital, cultural community. A place where one can easily engage with that culture, or the local (and diverse) sports scene. Or where I can walk from my office to a trout-stocked lake right after work. Where we get more sun than we know what to do with. Where people get to know each other and take the time to actually hear how your day was.

      If you, on the other hand, have decided that Vancouver is what you want, then you also get to live in that particular situation. It’s a really nice city. I enjoyed my time there, and I enjoy my visits now. It has plenty going for it. But real estate and accommodations in general is not one of those things.

      It’s pretty simple arithmetic. And, unless you are held here for some other reason (family? very non-mobile job?) the choice is up to you.

      • Nice comment EG. I can understand the rut of Vancouver too by the way. All fluff. The moment you leave and see how much more there is to the world the less you will ever desire going back. Even a two week holiday is enough to change your life plan. This is a big world. Too big to spend eating crow and listening to all your friends brag about becoming millionaires without having ever lifted a finger or doing anything useful in their whole God forsaken lives. Screw that (and them). Get out while you still have a shred of dignity left. And NEVER go back unless you get the opportunity of lifetime to buy and make some of those suckers your tenants.

    • it’s not your $70k vs another’s $50k or $100k. you are competing with people willing to lever up and assume high debt load. the down is only good options are you can either move or wait them out. the up is all the overleveraged will get wiped in time and if you can learn enough to navigate so as not to be collateral damage, it could shave decade(s) to retirement.

      • chubster: “you are competing with people willing to lever up and assume high debt load.”

        That is the biggest issue of all. If you are being wise with your money, you won’t get into the “game” (the fact that it’s even called a “game” kills me, actually).

        Or, if you are in and lucky to have bought at the right time, you should be getting out.

        Either way, Vancouver is not a highly attractive place right now for the fiscally prudent. Although, when the Apocalypse comes, it will be.

    • HD,

      Funny. I always believe in treating the gentle gently, and the harsh harshly. You’re doing well at your age. Do with your money what is in your heart to do. the big caveat…don’t keep renting for 10 years and complain about high housing costs because you can’t roll equity into a housing purchase. You need to start somewhere, sometime. Decide where and what. Ask yourself how long you want to live in Vancouver for.

      • Forget all the rest of the world for a moment F1. I just want you to be very relaxed when you consider that there are more than 200 cities in China and India alone with populations in excess of one million people.

        There are many hundreds more when all the world is considered.

        Of all those cities,… in all those countries… what human ever knew that Vancouver (of all places) would end up being amongst the costliest of cities on planet earth in 2012? The most ripe for a bubble POP?

        Who knew it would have the second highest income to cost ratio where housing was concerned? Who told us that Vancouver would be the target and the poster child for one of the biggest R/E meltdowns in all history?

        Nobody. That is who. Nobody could tell us because nobody ever knew for certain. What is happening now in your community is so exceptional relative to others that it is simply off the charts.

        Yeah buddy. That’s right. Vancouver is going to make history for all the God Damned wrong reasons. Do me a favour and stop mocking those who do not buy now. The whole city is a victim to what is really coming.

        Even the rich smart asses like you.

      • Thanks to all the people who took a moment to comment. The comments are very insightful and they certainly give me a lot to think about.

        Vreaa . Love this blog. I truly think that you are making a difference in moving the conversation forward regarding housing in the BPOE.

        F1 Thanks for your comment. I graduated from University of Montreal (where I’m from) when I was 25 yrs old. Moved to Vancouver almost immediately afterwards. I was able to pull 70k per year for the last 2 years and have 50k in cash saved up. We can safely say that I have been financially responsible and that my situation is not too bad (thanks to my small apartment and my roommate). It still doesn’t make sense for me to invest/throw/gamble my money in Vancouver real estate at the moment…..it’s just off the hook. I will have to make a choice eventually if this circus drags on for too long.

      • @farmer re: rich smart asses. not quite. though perhaps more like soon-expiring uncashed winning ticket pseudo-riche asses.

      • Yes. Good point Chubster. Cash your ticket. (Then run like hell).

  14. Told-you-so-in-2007

    This just in:
    Bank regulator moves on mortgages
    http://tinyurl.com/7l2ddh9

    “…OSFI says lenders should be doing an assessment of a prospective borrower’s assets (mutual funds, savings etc), anticipated living expenses and property ownership expenses such as maintenance costs. Banks should also assess whether the borrower will likely be able to keep up his or her income until the mortgage is paid off. ”

    Uh… they’re not doing this already? Yikes.

    “Notably, the regulator has issued a warning to banks about home equity lines of credit, or HELOCs, noting that while they can provide consumers with an alternative source of funds, “these products can also significantly add to consumer debt loads.”

    Pardon my French, but no sh$t, Sherlock. I just don’t understand why OFSI hasn’t felt compelled to speak publicly about this yet.

    • Do I even need to say that “I LOVE OSFI” (there must be a bumper sticker)

      This is fantastic news. I was mentioning just this morning that we needed more done on the regulatory front and then this brilliant piece from the Globe showed up. I would encourage all our regulators to take their business more seriously from now on. They need to step up to the plate as Mr Carney is NOT in a position to increase interest rates at this time. The solutions all lie in the hands of government and policy makers.

    • Ralph Cramdown

      No margin in it. Let’s look at what happened to the last OSFI Superintendent, shall we? http://people.forbes.com/profile/nicholas-d-le-pan/15028

      Or you could make a stink and be happy with your government pension after your term ends…

      • Ralph Cramdown

        The 2nd last Superintendentwent on to do yeoman work at Manulife:
        http://people.forbes.com/profile/john-r-v-palmer/142023

      • Ralph, that link has absolutely no connection whatsoever with today’s announcement, with the current intentions of OSFI, with how the banks will react to changes that are coming, with the current crop of administrators or even the bubble itself…….

        Why did you post it?.

      • Your second post equally makes no sense, Ralph. Where is the connection to today’s article? Just give me a little hint. Are you suggesting the previous guys income somehow means that we should ignore all the press releases and the intentions?

    • Ralph Cramdown

      Told-you-so-in-2007 asked why the regulator has been late and lax until now. I pointed out that, as with most regulators whose staff are poorly paid compared to senior management at the organizations they regulate, it suffers from regulatory capture — the tendency of its members to maximize their lifetime earnings by doing things that will later get them rewarded with a lucrative post at one of the regulated organizations.

      Do you see this latest announcement as a great proactive piece of work, or the minimum Flaherty could get away with doing, too late, and implementing what should have been the status quo since day one?

      • I disagree Ralph. Speak now or forever hold your piece. There is still time for corrective action and we all need to encourage it. Please understand that only a few cities in this country are as bubbly as Vancouver. Few in the world to be more accurate. These are rather exceptional circumstances we are in so try not to be too fatalistic of the outcomes just yet. These things do take time.

      • Sorry Ralph, I meant “forever hold your peace”.
        Did not mean to suggest you were a gun owner!

    • When the tide goes out you get to see who has been swimming nekkid . . . taking out HELOCs to help make the mortgage payment . . .

  15. Told-you-so-in-2007

    Apparently the OFSI report is still a draft, with “suggestions” that do not yet have to be implemented. I can’t find information in the article as to when it might take effect. Seems like more of a “heads up, losers” notice for the banks. It’s a great step, but would have been best implemented about 2002 or so. The horse has left the barn, if you ask me.

  16. Told-you-so-in-2007

    @Farmer,

    Just found a copy of the actual OFSI guidelines themselves, if you’re interested.
    http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?ArticleID=4831

    • Many thanks “Told you so”. I would encourage everyone who is utterly disgusted with the situation of excessive credit and poor lending practices in Vancouver and who reads this site to respond to OSFI’s open call for comments. Try to do so sensibly and without swearing (like I do).

      To Vreaa. Please bring this to the attention of all. OSFI is preparing to draw up a new set of regulations as a result of the “out of control” situation in Vancouver and other key overheated housing markets in Canada. They are doing so at the urging of the banks themselves and a large contingent of the public who are interested in this developing problem. There is no time to waste in making your opinion known.

      • These pretzels are making me thirsty

        I think that all this really does not matter until the CMHC is reined in.

        Limit CMHC the first $ 500 K and with restrictions to citizens and PRs and the rest will fall into place.

        (CMHC insurance is not restricted to citizens or PRs. Canadian citizens are responsible for the loan risk of a speculator in China). Canada is such a joke!

      • A full history of CMHC rule changes (who made them and why) would be an awesome resource. I’ve seen some brief summaries, but they are hard to find.

        If the established media won’t do it, perhaps something to interest an ambitious student? http://www.journalism.ubc.ca/

  17. Back to the ‘story’

    Jeff Murdoch – I agree with you – the doctor should be able to live in a nice house. Look at doctor’s in other cities and the salaries and homes they live in. Again it just shows what a rip off (overvalue) homes are on the west side. To get a decent place (upgrades, nice lot etc) you are looking at something close to 3 million and over.

    I know of a few people I have met here (doctors) who moved back to Vancouver for a job. They ended up buying in yaletown, commute to Royal Columbian and make less money than Alberta. It’s their choice – more about lifestyle to them. They both were young and single. If you look at the UBC med school numbers they boosted enrollment quite a bit a few years ago. I have had friends go through – some simply cannot get a job in their specialty in the Lower Mainland. They have been relegated to doing locums (equivalent to being a substitute teacher).

  18. time for a glass and some cheap monday night therapy, ciao out

  19. http://www.canadiandemocraticmovement.ca/americans-relying-too-heavily-on-housing-wealth/
    By TD Economics From 2005 on the USA housing market. “one key distinction is the relatively low supply of homes,which mitigates the possibility of a supply glut.” “One the demand side, low interest rates, a stable inflation environment and low unemployment have provided more sound footings for housing demand this time around.”

    Doesn’t this all sound familiar?

  20. Maybe someone has made this point before, but if the cognitive elite with high income skills leave, would we not expect the less cognitively gifted to blow the bubble larger? To what extent is the pre-existing terrible fundamentals worsened by a brain drain?

    • Yes Hazu, that point has been made here before. Actually quite a few people said it already. Stop being so repetitive (I hope you know I am just kidding!!! I think I just got in a crazy mood after watching that George Carlin bit above and could not stop laughing. The best part is right at the end). We all need more Carlin and less Global TV in our daily lives.

  21. Wife and I are both physicians with a household income just below double doctor in the above anecdote. Wish we had found this site a few years ago when we were making decisions on housing although it would not have mattered much given her nesting desires and the goading from various family members to get into real estate. We have a smaller house in a suburb that doesn’t scream “house-invasion target” but has enough niceties inside to be comfortable. Definitely not a McMansion. Bought this for $800,000 4 years ago. Starting to get a bit small though given growing family.

    This however is a far as we are willing to go as the prices in Vancouver don’t add up and the last thing we want to do is add unwanted financial stress to our lives. Could we afford a $3 million home? I guess so (if the bank would extend us that kind of money). Somehow I think to do so would not be prudent as we would be devoting a large chunk of our earnings to house debt and in return have diminished quality of life (less extracurricular activities).

    We would love to have bigger place but for now we are “trapped”. The prices for the properties we would like to live in are way out of keeping with our ideas on what “value” in housing should be. $1.5 mil for some of the houses we google in California… would do it in a heartbeat. Same amount of money for what it gets us in Vancouver is a no-go situation.

    • KFP -> “The prices for the properties we would like to live in are way out of keeping with our ideas on what “value” in housing should be. $1.5 mil for some of the houses we google in California… would do it in a heartbeat. Same amount of money for what it gets us in Vancouver is a no-go situation.”

      Spot on.
      Thanks for this and your other comments on this thread, KFP.
      You are not behaving in an ‘entitled’ fashion, you are behaving sensibly, and seeking ‘fair value’.

  22. LandlordRescue.ca

    The word we’re looking for here is thoil…

    It’s when you can afford to buy something but won’t because you can’t stand paying what it costs.

    It’s pretty clear that for these people at least the value proposition just isn’t there for Vancouver real estate. I get that. I get the same feeling when I look at new cars. I can afford them but why would I when the $400 car I bought in December from a tenant who abandoned it drives really nicely.

    • “It’s when you can afford to buy something but won’t because you can’t stand paying what it costs”

      obviously not owning a home is causing this would be buyer a lot of stress – hence finding greaterfool in which to share her misery with.
      I don’t define the comfortable renter as someone who frequents these sites and posts miserable pessimistic comments and attacks the homeowners. These folks are definitely in a lot of discomfort by not owning.

      • Royce McCutcheon

        It is sad to see you resort to “miserable renter” comments (again). VREAA has repeatedly asked people to consider the wider implications of “misallocating resources” ($ and effort) in real estate. Many here are passionate about this topic for reasons that extend way beyond being “embittered wannabe owners” (or whatever hack term you want to apply) and are all about the healthy functioning of the region we’re trying to make lives in. There is zero doubt that you have been here long enough to know that this is the case. Sad, really.

      • @royce

        if you don’t conform, you’re a loser … or worse, someone who might hold an opposing viewpoint

        and this environment, dissent from the prevailing viewpoint must be quashed

  23. LandlordRescue.ca

    Well Formula 1 I don’t see it that way.

    She’s evaluated the value she can get in this market with the money she has and has chosen not to buy because it isn’t good value.

    Have you considered there might be something wrong with Vancouver when there are sites such as crackshack or mansion. I tried my hand at it and didn’t do very well. 🙂

    However if you don’t get the concept of thoil, I’d like to sell you a Landlord Rescue t-shirt for $100. Or you could go visit your realturd and subsidize housing in the city of Van or Toronto. Now that’s genius…

  24. This ambivalence is cutting across all professional circles. I can feel for the doctor when you know your colleagues in other cities, working same hours as you, are enjoying a better lifestyle.

    I am an up and coming professional. My salary is nowhere close to what the good doctor makes. I am in the $60k range in Alberta and the $50k range if its Vancouver. Formula1 might wanna call me entitled and if wanting a standard of living commensurate with the sacrifices I have made in life, then I will gladly don that “entitlement” cap. My wife pulls in around $40k. In any normal society we should be able to afford a middle class existence. If Vancouver can not offer us such an existence there are at least 20 other North American cities capable of offering us such a lifestyle.

    I recently moved to Calgary and the only regret I have is why I did not make the move 5 years ago. During job interviews I have even been told by interviewers how they have been getting former Vancouverite candidates, lately. Sadly, it is not the house flippers who keep the wheels of BC turning. It is us average working people like accountants, engineers, nurses, welders, plumbers e.t.c . Once such professionals realize that they could get more in other provinces in terms of both salary and quality of housing – the decision to leave becomes a very easy one. It is only when a shortage of professionals reaches a tipping point that people like Formula1 will realize the price they have to pay for those real estate paper profits. Already, UBC is having a hard time attracting/retaining quality faculty because of the housing fiasco.

    My needs might be limited to that 2500sqf McMansion and a Honda pilot for my wife. However, when people earn more money their needs also grow. So it is understandable that the $350k doctor has bigger needs than mine. Doctors in other cities drive Porsches and G55 Wagons. Doctors in LA making that sort of coin live in Malibu or Belaire. Why should she be reduced to living in East Van and driving an Acura? Do not ever underestimate the motivational power behind material goods. Just like any other professional who makes their income through “WORK” she is feeling the pinch. Only people who do not work for their money (politicians, flippers, realtors) will embrace such madness. So many things I could do with that difference between a Calgary mortgage and a Vancouver mortgage, rather than pay out a big 5 bank CEO’s stock options. Could lease that new mercedes, could send the little brat to Upper Canada College, could own a second home in Phoenix.

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