“So, here’s the punch line… At these killer low rates, AFTER a down payment of $600k, the carrying costs would be $1,374 per month MORE than renting, and that’s not even adding in the $500ish strata, taxes and special levy! Why would I buy? Why?”

“I’m renting a $1.5m house in Vancouver which was renovated to the tune of $180k just before we moved in. I had to peel the protective lining off the steel appliances and fittings in the 4 bathrooms.
“I have a 3 year lease for $2,900 per month. I don’t know how much the taxes are (surely more = better in the self gratifying eye of the locals) but the strata fee is $446, with a special levy of $43,000 (yes thousands) this year to refurb the outdoor and indoor pools and common facilities. It is in Shaugnessy where the cream is turned for its cream.
“So, here’s the punch line… At these killer low rates, AFTER a down payment of $600k (no 95% financing here) the carrying costs would be $1,374 per month MORE than renting and that’s not even adding in the $500ish strata, taxes and special levy! Why would I buy? Why?”

– Mark, as quoted at greaterfool.ca 8 Apr 2012

Why? Well, Mark, we agree you shouldn’t buy, but if you were a citizen who was buying, you’d be buying for two reasons:
1. if your net-worth was large enough that a 50% or more drop in the $1.75 Million home would be very easily tolerated; where such a drop would only make up an insignificant portion of your net-worth;
or,
2. if you were consciously or unconsciously betting (speculating) that the price of this house will rise substantially year after year.
There really is no other reason to buy.
(BTW, are there any $1.7M ‘homes’ left in Shaugnessy? Don’t think so.)
– vreaa

22 responses to ““So, here’s the punch line… At these killer low rates, AFTER a down payment of $600k, the carrying costs would be $1,374 per month MORE than renting, and that’s not even adding in the $500ish strata, taxes and special levy! Why would I buy? Why?”

  1. Joe_Blown_Away_By_High_Housing_Costs

    It rears its head once again: The idea of developing condos next to skytrain stations to generate cash for transit. I mentioned this in a post here last week. Government agencies view residential development on their real estate holdings as a way to print money. BC Housing is doing it, the universities are all doing it, now Translink may be doing it. I haven’t heard this idea in connection with transit for a number of years now, but it’s in today’s Vancouver Sun:

    “Lekstrom suggested mayors look at options for collecting revenue from developers building around transit hubs, which will see a lift in property values — a move that has been floated by mayors in the past.”

    I don’t this model for funding government agencies will work out so well after the bubble bursts.

    http://www.vancouversun.com/news/this+spring+clamp+down+TransLink+fare+evaders+minister/6437897/story.html

    • Nothing wrong with this, its the way most countries fund their rapid transits systems. The transit companies buy up land long the proposed transit routes and flip to developers later at a profit when land is in high demand. This helps to keep the companies funded and out of the tax payers pocket, unlike Translink.

      It seems like the only way Translink is able to raise funding is with taxes, thats not remotely a sustainable way, especially given the fact that most of its services aren’t profitable.

  2. Let’s ensure that Jesse’s link does not get lost:
    http://withinyourmeans.ca/resources.html

    Instead of “withinyourmeans.ca”, I think they should have chosen “knowyourlimitplaywithinit.ca”.

    Now that I think of it, anyone could register that domain name and redirect to their site. That would be a fun prank.

    • Hattip Zerodown!

    • One remark. Although the presentations are mostly nauseating, one of them contains an answer to a question I asked here a week or so ago: what is the chart of “median monthly mortgage payment vs income” over the past 30 years.

      Slide 15 of Tsur Somerville’s presentation contains such a chart. Of course, without properly defining “Vancouver House” and “Loan Payment”, it is hard to really know what it means.

      • I did appreciate the obvious (to me), that the type of dwelling currently residing on most of Vancouver’s land mass is not the direction the city should be heading.

        I was disappointed that there was close to zero talk about the business case of housing, instead it was all supply supply supply and density density density. No surprise though, nobody likes a doomsayer.

  3. A “house” with strata fees and a special levy? Regardless, sounds like a good setup you have there.

    • It sounded to me like a townhouse – there is a big complex over by the van Dusen Gardens (heart of ‘new’ Shaughnessy).

  4. renter traps.

  5. 3 years is a long time to lease anything these days. Productive farm land would be an exception. But the sense here is that there’s a very high premium people are willing to pay to enjoy a climate and cultural Quality of Life found few places else. Of course this sense is transient and not well understood by the Estate enriched boomer.

  6. nice tidy encapsulation of the entire housing ‘thing’
    http://tinyurl.com/6r4eafe
    gots nice charty things for nem and addresses many of f1’s famous refrains
    ps. may as well head it off – van is not different, it’s just lagging

    • Canada’s like Australia, where the only way the country can earn money is by whoring out resources to China…with China collapsing so’s the real estate…

      • China is not collapsing. We need to keep the slowing of GDP growth in perspective. The estimates for next years GDP growth is still 7.5% according to the Government there. This is a very respectable number and far higher than anything we are seeing in the West. Even a property bubble bursting will be very unlikely to actually send China recessionary (negative growth is a recession) Nobody is anticipating anything so dire as that.

      • CanuckDownUnder

        It’s all about the rate of change. Standard & Poor thinks that if Chinese growth slows to 5% per annum it will mean a severe recession in Australia and house prices will fall here by 20%.

      • well, china is trying to have a real economy instead of a financial economy. that involves some near term pain for a better future. a recession to purge excess and malinvestment is one you desperately want to have.

      • I think I would agree with Standard and Poor’s on that comment. China’s real GDP (netted for inflation) in 2010, for example, was 10.3% so a drop to 5% Real GDP in 2012 would be the equivalent of a system-shock as it represents a halving of growth. Let’s all say a little prayer that does not happen. The outcome would be devastating for the commodity producers of the world. For a while anyway. That includes us along with the Brazilians, Ozzies and Russians amongst others. Fear not though. Resource demand is not likely to slip too far for too long. On the basis of population growth and fresh demand from the developing nations alone the upside is pretty much baked in the cake for as far as the eye can see. I am not concerned in the slightest and still consider most commodities a buy (giving consideration to the fact that some slippage may occurr on the basis of sentiment and fear from time to time). The big picture is what we all should really care about. And the big picture tells us there are not enough resources to go around as the years roll by. So stay invested in quality mines as bargains come to the table. It is a no lose proposition long term.

      • China may be in for something like 3% RMB-denominated growth depending on how they handle wealth transfers to households. If that comes to pass, and it could happen within a couple of years, commodities would be clobbered. That’s not necessarily curtains for Canada but BC almost certainly would be in recession.

        Again, my call is 3%. I’ll take the under on 5%.

      • @farmer. re: mines. on the exploration front, heavy into to a lot of african stuff lately. the region is becoming a sort of haven. prices are risk-adjusted. can-aus are going to have a lot of competition from 2nd/3rd world producers.

    • Renters Revenge

      From the CBC link: “The combination of strong underlying credit fundamentals, a prudent regulatory environment, sound government fiscal management policies, and a more stable real estate market have all contributed to the superior standing of Canada’s banks.”
      A more stable real estate market? Good luck with that.

  7. Am I the only one who thinks that $2900 per month rate is noteworthy too? That seems very expensive to me, even if it is cheap compared to buying.

    • it’s probably like 3000 sf in outer shaughnessy. in some spots, there are 2-3 new construction projects per block. it looks insane.

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