“Are we all lying to each other? How the f*%#k are people affording to live in Vancouver?”

“Today I read an article in the Vancouver Sun, which stated that …the combined cost of mortgage payments, utilities and property taxes costs the average Vancouverite 88.9% of their household income. … Something is really, really wrong here. How the f*%#k are people affording to live on less than 12% of their incomes?

My husband and I scratch our heads about this all the time. We feel like we are beyond cash poor. We’re certainly not financial wizards, but we take pride in the fact that we manage our debts and try as much as we can to live within our means. Meanwhile, we see people renovating homes, buying new cars, new clothes, paying for daycare, nannies, dinners out, vacations etc. etc. Are all of these people getting by on 12% of their incomes or is there a massive amount of credit spending happening behind closed doors? Are young families around this city floating their lifestyles with plastic? I fear, for many, this may be the case.

For most of us in the “young parent” stage of life, we’re literally “just getting by”…however, I think our definition of scraping through a month has drastically changed. There are conveniences and luxuries we have become used to that are nearly impossible to imagine forgoing. I’m guilty myself of not using up everything in my pantry and going out to buy more groceries (although I don’t shop at the infamous “Whole Paycheque”…something that completely boggles my mind – how in the heck to people afford to do their shopping there??).

Aside from our own needs, which can largely be attributed to growing up in a culture that values consumerism (an entire conversation in itself), and our government’s role in the state of our economy, there is definitely something askew when home ownership becomes so coveted and, at the same time, overpriced that people literally finance their lives away. Now, I’m no economist, but what then happens when the s*%t hits the fan, interest rates rise and these families are not only sat with mortgages they cannot afford, but massive amounts of credit debt incurred to actually “live”?”

Melissa Carr at TheThirtiesGrind 29 May 2012 [hat-tip to OH YAH]

Nobody in Vancouver is living on just 12% of their income. The math reflects that the average bungalow in Vancouver would cost an average Vancouver household 88.9% of their (get this) pre-tax income. So, in short no average households are buying average bungalows any longer… they simply can’t afford them.
Which is not to say that Melissa’s indignation and exasperation isn’t justified. It is. Vancouver is very, very overpriced, and the 88.9% figure indicates how spectacularly overpriced it is… prices are two to three times those determined by fundamental value.
Housing bulls argue that this simply means that, as in Manhattan, Monaco, and Tokyo, bungalows have become a coveted property, only for the mega-wealthy, and that ‘average’ Vancouver families should accept the ‘new average’ — that they should be happy with properties like a condo or town home in New West or White Rock, or a modest condo closer to Vancouver, or perhaps a basement suite.
We disagree. Just fly into or out of YVR… does that look like Tokyo?.. No! Bungalows as far as the eye can see! (Bungalows, and land, by the way.) Bungalows in Vancouver will never be cheap, but they will certainly become a lot cheaper than they are now.
– vreaa

58 responses to ““Are we all lying to each other? How the f*%#k are people affording to live in Vancouver?”

  1. Spoken from a true “small town” mind. Vancouver is renowned worldwide not for being like Tokyo but for the lifestyle the City offers which is bar none. With 9.5 million people retiring in Canada in the next 15 years, you can expect a large portion of this demo will find the lifestyle in our backyard VERY attractive. Baby boomers are moving into the city, downsizing and bringing the equity they have built along with them. Many of these downsizes are also helping their kids get into the game by helping them buy their own places (bank of mom and dad). You also don’t want to discount that while all of the pessimist were waiting for the prices to go down 10 years ago and are still on the sideline, the large part of the current market is made of people who did put their money down and have been benefactors of the increase in prices. This makes up a large part of active buyers. Look behind the numbers the media will throw around, its short term gain for them, it helps sell papers and gets people to tune in. Like anyone successful in real estate will tell you…. it should always be a long term game.

    • You’re so 2011!

    • The sad part about this RE bubble in BC is that there will be people who will see the values of their homes drop tremendously in the coming years, even people who purchased before the bubble may see ALL the gains of these a past 7-10 years disappear. Home prices may never recover for decades, not untill I’m guessing all those Gen-x, GenY offsprings are old enough to get jobs and buy a house. How sad is that????

      5 years tops. Here in Edmonton 5 years ago luxury condos could go for $400,000 + (southside of city) now a brand new condo, downtown $200,000. Its only been five years!!!

      BTW my parents are in Edmonton and if they sell thier SFH value $300,000, they wouldnt have enough money to buy a 1/2 a condo in Vancouver, so I’m not getting where you think all these rich boomers are???? Most people retiring have barely any RRSP only CPP and OAS for pensions so how are they gonna afford Vancouver??????

      New buyers push the market foward and considering 70% of Canadians are owners where are all the new buyers gonna come from???? Almost everyone who can own, does own. No new buyers, more inventory, prices drop…and no new buyers till all those high scholl, junior high, and elementray kids get jobs and money for a down payment. Which could take decades. Kiss all your equity good-bye. And it’s gonna go faster than you think. Its gonna be alot worse than people are gonna think, even the Bears are gonna be shocked.

      • Swing Level

        Where can you get a luxury condo in edmonton for $200? Is it near downtown and near transportation? If so that sounds like a bargain. I’ve had a place off Jasper for about 3 years, not luxury at all but cash flows. Markets are local and have different factors coming into play. I actually like Alberta because of the fundamentals. Vancouver is more of a lifestyle play where Edmonton is more on job growth. Also, just because your parents or your friends get 1/2 a condo here doesn’t mean that everyone is in the same boat. What about the guy in his 20’s who toughs it out on the oil riggs for 2+ years and comes back with 200K+ in his pocket? Or the guy that just graduated from university and moved to Calgary for a few years because his starting salary is 80K+. All I’m saying is, different folks, different strokes.

      • Haven’t you heard Swing Level??? The Ultima is doing thier pre-sales, its only a block away from the soon to be built arena 102 ave 102 street, a block away from what was Eaton Centre. Buy now!!! They were 50% sold out on opening day !!!! How could you lose?????

        BTW that guy working the oil riggs wont be buying in BC soon, why? Too busy buying that $400,000 mobile home or $800,000 SFH in Fort Mac and that guy in Calgary he wont be buying in BC either too, busy buying that $450,000 SFH or maybe shelling out $$$$ for that “investment” condo in Canmore for 50% of what it was worth 2 years ago.

      • @ Swing Level BTW Jobs have been growing in Edmonton, but house prices have not. Sign of things to come. There was even a video clip, I think EdmontonJournal.com, where someone from CHMC couldnt understand how emplyment was up but homes sales where down. The good jobs here wont matter, like i said its new buyers who push the market. When everyone already owns whose gonna buy?

      • Swing Level

        @Arshes 76 Well just to put it into context, I personally know 5 guys that have done just that. They tough it out for a few years and buy a place and invest properly.But you are right, the prices aren’t going to go through the roof their but with a 20% downpayment the rental income easily covers the cost and you have a few hundred a month to add to the contingency fund. All markets have unique growth patterns.

    • Swing level said: “Baby boomers are moving into the city, downsizing and bringing the equity they have built along with them.”

      Please share some sample math with us.
      You’re implying boomers from elsewhere will sell, and come and buy in Vancouver, right? Show us how the numbers work on that.

      • Not only that, they are bringing their children as well:

        “Many of these downsizes are also helping their kids get into the game by helping them buy their own places (bank of mom and dad).”

    • The only benefactors of the fantastic price increases are those who were prescient enough to actually cash out and sell. All the rest is just paper profit which is nothing more than bragging rights. Bullshit and bluster is the technical term. There are almost 20,000 homes for sale in the Vancouver region now, Swingline. They all want to lock in the market highs but buyers have mysteriously vanished. What does that tell you?

      You might want to rethink your thesis.

      • Yeah. Especially like this bit: “…the large part of the current market is made of people who did put their money down and have been benefactors of the increase in prices. This makes up a large part of active buyers.
        What precisely does that mean?
        Those who have bought are buying more?
        Sounds… dangerous.

      • More than 20,000. Include the FVREB.

        Nothing greater than the “prices are high therefore I have more equity therefore I can afford to buy at higher prices therefore higher prices are justified” argument. 5 year old children are subjected to equally intellectually stimulating lectures regarding octogenarians swallowing flies.

      • Swing Level

        Supply and demand, isn’t that great news for everyone here that there are a lot of listings out there? That would mean the prices would go down. The question is how low would the prices have to go before you would actually put your money where your mouth is?

    • It’s not considered downsizing if you sell your house in Winnipeg for 450K to buy a Condo in White Rock for 550K. You’re delusional if you think Baby Boomers will move to the lower mainland to deplete their savings. But, hey keep drinking the koolade. I’m sure it tastes great to you.

      • Swing Level

        Coming from the Winnipeg market is a whole different story. Phoenix might be a better option. Buy a house out there and you have 200K to travel with… Vancouver market isn’t for everyone, everyone has a different scenario.

      • “Vancouver market isn’t for everyone.” But you’re basically arguing through several posts that the Vancouver market is for everyone: i.e., “The whole world wants to come here.”

    • If “small town” means living within your means, then “cosmopolitan” Vancouver is definitely the opposite. I’ll take “small town” anyday since it doesn’t mean living under a bridge and panhandling when your real estate speculation blows up…

      • Swing Level

        I meant “small town” as in its not the city that it used to be. The rest of the world isn’t taking their eye off Vancouver anytime soon. It used to be a completely different way of life around here 15 years ago. Am I the only one that spoke to foreigners during the olympics who were amazed by what the city offers?

      • Vancouver is nice. But you haven’t gotten out enough if you think it’s world class.

      • Aldus Huxtable

        +1 E.G.

      • Swing Level

        @ E.G. Doesn’t matter what you or I think, the market will dictate where they want to live and Vancouver is very high on the list for the price they’re getting in. Canada House at Olympic Village broke $1100 psf. You think the people buying there will be hurt from a little price dip? Different folks, different strokes.

  2. I know many Asian families in Vancouver that make extra $ from the black market. Some have gardens in their homes. Some well, do other stuff for tax free money. Asians will do what is necessary to make a living to support their families. Especially when the penalty is (if caught) an slap on the wrist. there are so many gangs out there of all kinds of ethnic groups. And they all have money. And that money goes into RE. Of course the regular Joe families will not afford it. Either a rich foreigner, or a gangster can buy in Van. The rest, well, you guys rent or live in Surrey. Canada’s law system is designed perfectly for the criminal to make their $. Just remember, you pay over 60% tax from your paycheck. Income tax, sales tax, property tax, extra gas taxes, tax, tax, ta, etc. God damn!! We work for the government. Like a bunch of slaves. Go make cash and pay no tax. Problem solved for expensive housing. Are you game enough?

    • Do you also have a black friend which makes you not racist? You’re inline with all of the Americans who complain about Mexicans stealing their jobs. When you actually look at what most of these families do it’s much simpler. They work the jobs that no one else wants to do… pumping gas, work on farms, car wash, have an entire family work at a restaurant. At the end of the day they pool all of their money and grow equity together. The western culture or “regular Joe families” are more inclined to kick the kids out at 18 and let them make it on their own. Not saying either way is right or wrong but its a different way of thinking. Most of these gangsters everyone hears about in the news are the lowest level guys who do it for the fame, girls and lifestyle. Ethnic gang groups are all puppet groups of the Hells Angels anyways which are all white.

  3. “…a large portion of this demo will find the lifestyle in our backyard VERY attractive.”

    Until they find out our dirty little secret: June-uary!

    • Gotta love the snowboarding season! Whistler, Cypress or Grouse… take your pick.

      • Renters Revenge

        Right. Retired boomers are totally into snowboarding.

      • Swing Level

        Depending on when they retire. Skiing rather than snowboarding though. Or walk the sea wall or feed the ducks in the park. Whatever tickles your fancy. Actually, I take that back, snow shoeing.

      • I hear Whistler condos are 65% their peak too. “Buy now or be priced out forever!”
        I thought the 2010 Olympics were going to keep Whistler real estate investments at a permanently high plateau. Silly me.

  4. Same old tired arguments, same old rebuttals. Just be honest about how you’re making your money.

  5. Iether San Fran needs to go up in price or Vancouver needs to come down. San Francisco or Raincouver?

    Surfing VS Slush?

    Where do you wanna retire?

  6. San Francisco is awesome! They have the luxury of having plenty of land to build on if need be. We’re not that lucky in “Raincouver”.

    • Isnt San Fran highly densely populated??? Land is a MASSIVE premuim threre. My bosses sister went there and at the hotel they stayed at they had to have an hotel employee take thier care and park it in a lot outsidde the city. Didnt see their car till they left. Its also where people pay big $$$$$ to have thier basements dug out and converted into garages, so they can have a place to park there car.

    • 4SlicesofCheese

      This post cements that you have no idea wtf you are talking about.

    • You’re either ill-informed of just like yanking people’s chains… San Francisco land is at such a premium, cemetaries aren’t allowed within city limits. When Vancouver starts doing that, then I’ll know there a lack of land here…

    • See! Doesn’t get out enough.

    • just look at the map – surrounded by sea and mountains on all sides

    • What the? Have you ever been to SF? There is absolutely no land, except parkland, that hasn’t been built on already. The city is very small geographically (and has a population of less than 1 million). That said, there are many larger, more populated outlying cities in the region.

  7. Honestly all of this doesn’t matter even more. Sales are tanking, listings are at a high and nobody is buying. Its already begun.

    Dun dun duuuun. (Sound of doom in the background.)

    September is when everyone is gonna realize.

  8. Swing Level said: “I actually like Alberta because of the fundamentals. Vancouver is more of a lifestyle play where Edmonton is more on job growth.”

    Vancouver is a “play”?
    Please simply admit you’re a Vancouver RE speculator. Is that correct?
    Out of interest, what percentage of your total net-worth is represented by your RE holdings?
    100%? 200%? 400%? More? (leverage effects, for those who are puzzled).

    For some, Vancouver RE is housing, for others it’s a “play”.

    • Of course it’s a “play”. The despondency I see recently among those who see high prices as a problem is that prices are governed by those who don’t care about comparing their investment in Vancouver real estate to other similar investments available to them.

      There needs to be some introspection here by all readers of this blog: is a city capable of having its prices determined by those who can perpetually accept lackluster returns? Because that, as far as I can ascertain, is the last thread holding up the “prices won’t go down by a lot” camp. I won’t rule it out but Vancouver isn’t exclusively a resort. If it is, it’s brilliantly disguised.

      • Aldus Huxtable

        You know, Granville Street on a weekend night isn’t wildly far off from Magaluf. The weather is disguising the resort status indeed.

    • Returns have been great, about 50% of my equity is in RE. It’s never just housing, it’s the biggest financial investment your going to make. You honestly invest in a home and have no interest of the value increasing? The end users usually don’t care about the short term high and lows but are long term PLAYS.

  9. As an aging individual I feel I can make a purely anecdotal comment on “boomers moving to Vancouver”. From my (limited) field of cronies I can state that most don’t have defined pensions anymore and are expecting to live off “their equity” as most of them put it. The ones that have loaned or gifted their adult children down payment money tend to regret it since that is money that will never be available for lifestyle needs of mom and dad. Noone is moving to Vancouver to downsize – they may be moving down here for access to better medical care but that’s about it. As well, many boomers have had to look after their own adult parents and have discovered that elder care is extremely expensive, even getting a part-time caregiver in to help with chores runs about $20.00 per hour. The other fly-in-the-ointment is that many of the boomers parents did downsize and stay in Vancouver so one generation back the family home was sold, mom and dad moved into either an apartment or facility so there is very little equity left to leave to boomer parents, who in turn, will have little left to leave to their children.

    • Def something people forget when it comes to Boomers, alot are part of the sandwich generation, supporting parents that are living longer and supporting kids who are taking longer to leave the nest or achieve adulthood in the sense of jobs, home owndership and kids.

    • Observer, I can add anecdata to your thesis – both my inlaws and a friend’s Boomer parents cared for their elderly family using sales of “the family home” on the West Side of Vancouver. Both are retiring away from Vancouver, because Vancouver is too bloomin’ expensive. My mother will also retire away from Vancouver.

  10. So, speaking of racking up consumer debt, I saw this odd juxtaposition of ads on the sidebar of a blog that I sometimes visit:

    https://dl.dropbox.com/u/299166/huh.tiff

    Pretty much sums it up.

  11. lots of anecdotes in the comments of the original blog post!

  12. reality check

    that stat is so misleading. No first time buyer without a significant downpayment from the bank of mom and dad is buying a sfh in vancouver which is what this stat is based on. First time buyers are buying houses or most likely condos in the valley where it takes a manageable chunk of your income to buy a property.

    • rc -> Agreed. You’ll notice that we said as much in the body of the post.

    • reality check

      Sorry VREAA i missed that section of the post. I agree with you that Vancouver doesn’t look like Tokyo and the reason that land is so expensive in Vancouver is because the density is not there. Vancouver is still a city of primarily sfh’s and that is why they are so expensive. The price is in the land close to the core. This is highly desirable.

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