“I moved here a few years ago from the US; my wife is Canadian. I was astonished at the housing prices. The math never added up as to how people could afford to live here, especially with an extravagant lifestyle of toys and trips, based on known incomes and living costs.”

“I moved here a few years ago from the US; my wife is Canadian. I love living here, although the cost is a bit hard to stomach at times. I think people should feel lucky to live in such a beautiful place that offers so much opportunity; it seems a lot of people take this for granted and even feel entitled to it.
When I first came here I was astonished at the housing prices. The math never added up how people could afford to live here, especially with an extravagant lifestyle of toys and trips, based on known incomes and living costs. I realize there is a lot of wealth here, many have done very well being self-employed, but there also seems to be a lot of imaginary wealth based on debt.
The debt rate here is astonishing considering these facts, which at least in my experience differ significantly from the US:
– Here people rent out a basement suite, which is not very common in the US. The people I know who do this do not declare this income.
– Tax avoidance seems to be common here and socially acceptable, likely due to a more lax enforcement. I think this especially rings true for business, where more here are self employed.
– Income for non-technical jobs and manual labour, like retail and construction for instance, pay substantially more here. The middle and lower middle class here have higher wages which I think is awesome, whereas in the US there is really a war on the middle class.
One would think considering the above that people would have a lower debt level since their disposable income would be higher based on higher wage, less tax, and undeclared income. But that isn’t the case.
What are people’s exit strategy when they can no longer pay their debt? I find it kind of sad that people think this is sustainable, that housing can increase by 10%+ forever when wages don’t, and that real estate for most people is their retirement plan.”

Anonymoose at VCI 15 Nov 2012 11:01am

66 responses to ““I moved here a few years ago from the US; my wife is Canadian. I was astonished at the housing prices. The math never added up as to how people could afford to live here, especially with an extravagant lifestyle of toys and trips, based on known incomes and living costs.”

  1. I heard similar sentiments about Spain about 5-10 years ago. That is not to suggest BC is Spain, but BC appears to have some Spain-like qualities!

  2. pricedoutfornow

    “but there also seems to be a lot of imaginary wealth based on debt.”
    Bang on!

    • Wealth based on debt doesn’t become imaginary until the debtor stops paying. Debts are always paid, either by the borrower or by the lender.

      • I think pricedoutfornow is referring to debt fuelled spending, where someone can spend and appear wealthy, when they actually aren’t.

      • Ralph Cramdown

        Right, but the wealth is there, even if it doesn’t belong to the person fronting it. For every overleveraged count no ‘count who’s barely cash flowing, but driving around in a leased late model Mercedes there’s somebody who earned and lent the money on a reasonable expectation of being repaid with interest. These people are easy to spot, too — they hang around on big media comment boards bleating about how the government and Bank of Canada are screwing “savers.”

      • “there’s somebody who earned and lent the money on a reasonable expectation of being repaid with interest. ”

        Replace “earned” with “created”

        Most debt is created by punching in some numbers on a keyboard.

    • All wealth is based on debt. Sort of. The “imaginary” part comes from debt unsecured by future earnings. The rest is “real”.

  3. Watch Til Debt Do Us Part on Global.

    There are a lot of sensible people here. We don’t get swept up by the tide and can analyze things ourselves. I wouldn’t invest in Canada at the moment. Debt loads are unsustainable.

    • pricedoutfornow

      Great show, I notice though that the host never does any shows in Vancouver-just in Toronto and the debts presented in the show seem to be substantially less than what I have a good idea of the debts to be in Vancouver. I wonder what Gail would think of a couple who earn $120k in annual household income and have a mortgage of $700k?

    • Well for every Mike Holmes big budget extravaganza, the network needs a bunch of really-cheap-to-produce content, and that means no travel budget to Vancouver.

      I know someone who was on that show. Guy who collects WAY too many comic books, gets told to sell them and, when the comic shop offers cash or store credit, takes the store credit… I know that guy.

  4. “The math never added up as to how people could afford to live here.”

    Many can’t.

    “It wasn’t like he was building a shack on a street corner, or on the beach. It was basically just a temporary type of thing [so] that he could protect himself from the weather.” – Scott ‘pRObONo’ Bernstein, PivotLegalSociety

    [CBC] – Vancouver’s ban on homeless street sleeping challenged

    …”Vancouver bylaws that prevent people from sleeping on streets, in parks or on other city properties are unconstitutional, the Pivot Legal Society claims in a lawsuit it is filing with B.C. Supreme Court on Thursday on behalf of a formerly homeless man.

    The society is filing the suit on behalf of Clarence Taylor, 57, who was homeless for nearly three years and says he was ticketed several times and repeatedly harassed by police and city employees when he slept outside.”,,,

    http://tinyurl.com/c3lfa2u

  5. Tax avoidance seems to be common here and socially acceptable

    Is that a joke? Canadians, with the exception of gang members, are the most obedient tax cows I have ever seen anywhere in the world.

    • “Tax cows” is perjorative. Don’t you think citizens should abide by tax laws?

      • Yes – to avoid jail. Many Canadians act as if paying taxes was a moral duty. There is no critical questioning of this, even when they see the money being used for political pet projects, corruption, bailouts, wars etc. They always fork over the money and peer pressure others into doing the same. The loudest supporters of taxing seem to be the people who pay the least.
        Canada is a tax spender’s dream. So, “tax cows” (as in milking cows) seems appropriate.

      • As much as the farther out libertarians may think paying taxes is for the stupid, the weak, or the blindly obedient, such practices are actually a demonstration of upholding civil society.

        It’s just a matter of how much one is willing to pay and making sure the money goes to the things that society values the most first. In that regard, you have the ballot box, the soap box and the ammo box to resort to. It’s advisable to use those options in that order.

      • JJ -> Well said; agree.

      • As much as the farther out libertarians may think paying taxes is for the stupid, the weak,

        Your words, not mine.

        It’s just a matter of how much one is willing to pay and making sure the money goes to the things that society values the most first. In that regard, you have the ballot box, the soap box and the ammo box to resort to. It’s advisable to use those options in that order.

        This naiveté would be almost adorable if it wasn’t so expensive.

      • All I hear in my head is “structural deficit”. I know where I’m moving if I don’t like the taxes. And no you can’t come.

      • I don’t agree with you Bubbly. I like living in a society where there is a safety net even though I don’t need it myself. I also like paying taxes for services that I believe are essential to a well-functioning society (education, health, infrastructure, defense). I don’t like government waste and excess which I believe there is too much of but that doesn’t mean we shouldn’t tax people in the first place…just address how those taxes are used.

      • [NoteToEd: Historical memes, rather like Couture’sWorstExcesses, have an uncanny habit of resurrecting themselves at the most importune times…]

      • Fair enough, Bally.
        On a relative basis, Canada is NOT a country of tax evaders. And even though I called Canadians “tax cows”, I am being milked too, most likely more than most, despite my best efforts to legally minimize my tax burden. However, I do not think that there is anything moral about paying taxes…
        As for “just address how those taxes are used”, good luck with that. Politics is dominated by sociopaths, always was and always will. The worst rise to the top. The last thing those people care about is you (or me) and your concerns about the details of tax policies.

      • A lot more people than you think don’t declare their full income. I’d guess most people renting out their basement, assignment flippers, people involved in illegal activities, all sorts of people that like to be paid in cash – farming / cleaning / construction, how about waitresses with their tips etc etc. Obviously the minority of people but still a large element.

        What I don’t agree with is that this is any different than the US in fact I’m guessing they have more of an issue with it due to the number of illegal workers in the country

    • Real Estate Tsunami

      Not the newly minted Canadians.

    • “Obedient Cows”
      That’s why we’re not on the same boat as those Greek idiots 😛

    • stop posting john galt, mommy’s calling you for lunch

    • Don’t confuse state with society.

    • What the hell are you people talking about? Tax avoidance is your responsibility as a citizen with the rule set laid out before you. If you aren’t avoiding as much tax as possible then you’re an idiot, period. Perhaps you are talking about evasion?

      • Ray -> Thanks for the comment.
        Okay. Semantics. Call the one avoidance and the other evasion, if you like (and I do realize that that nomenclature is commonly used to differentiate). You know what I’m talking about.
        Obviously tax law has to be set up assuming that all knowledgable individuals will take all legal measures to pay as low taxes as is legally possible. Those are the rules of the game.
        What I’m talking about is people who break the law in various ways to, yes, evade taxes.

  6. Most only pay taxes because they are forced to, as through payroll taxes. All self employed folks, physicians, lawyers, builders will do all they can, legally or othewise to avoid paying taxes. However, immigrants are used to being shafted by one and all, including government, so tax-avoidance comes more naturally to them!

  7. I was born and raised in Vancouver. I can tell you that a lot of 30-early 40 somethings that live in nice homes and drive beautiful cars made their money through nefarious activity (obtaining a “medicinal marijuana” license from the gvmt but growing and selling 20x the allowable amount), or through shady mining / stock deals, building shell companies and selling them. LOTS of people have participated in the latter…some not very smart but have figured out how to do it. They are not my friends but acquaintances once or twice removed through friends. All are male who seem to attract gold-digging girlfriends that will latch on for the lavish lifestyle. These people are not unassuming about it either: BMWs, porsches, Land Rovers, etc, which always struck me as dumb when they are walking such a fine line with CRA. They spend half their days hanging out in cafes or working out at the gym. They don’t work! It’s hilarious. They hire accountants and lawyers who somehow help them manage their funds. (This is a polite way of saying “money launder” as they pay cash for a lot of things – condos, cars, etc.) I have a girlfriend that used to work at Brian Jessel BMW and she said half the clientele was “old money”, the other have was “nouveau riche”, unrefined 30-somethings who walk into the dealership to pay cash for cars. Having attended some of the dealership events, I would say these “nouveau riche” looked like the drug dealer types. Money can’t by taste and these folks, despite their money, look trashy, out of place. The others with money, are trust fund babies. There are a surprising number of them in Vancouver, particularly on the west side. There is a very very small percentage who are self-made. My hats off to those who are – good for you. You’re my heroes.

    • Don’t assume that medical marijuana growers are selling by choice. You need to have a serious disease before you can get a license, and often that serious disease prevents you from holding a regular job.

      Medical marijuana growers often sell their surplus because it is very hard to get by on just disability payments.

      • i became aware of severe abuse of the medical marijuana license program – grower and smoker side of it – i was really disappointed in the people that told me what they were doing. like it never occurred to them that THEY THEMSELVES are the bad apples in the barrel, spoiling the lot.

        I GOTZ TA GET MINE B4 U GET URSZZZZ UNNGGGHHH slanging product driving bimmers fucking skanks on an 8 ball yeah yeah whut whut

  8. Alot of the self-made clients I work with have multi-million dollar portfolios and personal pension plans and whatnot but they are driving around Vancouver in PT Cruisers and Nissan Altimas and the like. Humble and no flash needed.

    • That’s probably me. I do have a nice BMW (paid off a month adter i bought it) but I rarely drive. I bus or bike most of the time. I think the west side has a lot less per capita luxury cars than the east side, because we kind of know how and when to spend our money, and not get into debt for appearances sake.

  9. The MJ business is huge and BC would benefit from legalizing and taxing it. Many acquaintances and family members who are FOB have paid off houses with revenues from growing MJ. They look like very respectable from the hardworking class but in reality, far from that. They do not buy fancy clothes, cars etc. But they have a house, family cars, children education funds 100% paid off. A lot of them are not legally married so they collect welfare while collecting tax free money on growing MJ. Got to love this city….. how many people make their living illegally?

    • this is a joke right? if not, all the mj games would just move to the reservation … tax-tax-tax … is that all anyone knows how to do? no wonder the economy is so wilted

  10. Good news! Home affordability rises! “The cost of owning a home took a smaller bite out of household pocketbooks in the third quarter as home prices fell — most notably in the Vancouver area ….” The typical Vancouverite now expends only 82.3% of their gross income on their mortgage.

    http://www.cbc.ca/news/business/story/2012/11/22/rbc-affordibility-index.html

  11. Donny — I concur with your observations about self-made clients as I too work with a company that caters to high net worth business owners and incorporated professionals. The reason why these people are humble and not flash is for the simple reason that they understand the value of a hard-earned dollar. They worked hard and know what it takes to make money. Sweat, blood and tears. Sacrifices. Dedication. A belief in themselves.

    Many of these self-made folks are not what you would think either. They are not your “downtown, suit & tie” crowd. Rather, they have blue collar professions with offices in the suburbs (plumbing company owners, roofing company owners, food manufacturers, etc).

    Also, they have done well but their neighbours and friends are still moderate income levels. They want to be low-key on purpose and not stand out in anyway; in part because they still don’t believe they are wealthy themselves! They still live with a frugal mindset for the most part. I see it all the time. Blue collar millionaires who spend weeks on end searching to buy a used speed boat on Craigslist and is thrilled to get new lawnmower on sale. My dad is in this category. You gotta love it.

    • I’m a doctor and work hard for my money. I’m not flashy (I bike to work) and have a net worth over a million by my early 30s, achieved through good, low key, steady investments made at different points in my life. I have however seen docs who squander all their money and are in huge debt, much like the couples that make 120k a year squander it on car loans, mortgages they can’t afford, etc.

      • Does your net worth also include Vancouver Real Estate that can potentially go down?

      • No, he just likes to brag about his wealth in a subtle way. A more sophisticated arrogance, but still the same showoff attitude as those flashy type that he likes to despise….

  12. Rejoice, the Financial Pest says homes are getting more affordable:
    The index in Vancouver stood at 83.2% of income, followed by Toronto at 52.4%, Montreal 40.2%, Ottawa at 38.7%, Calgary at 38.3% and Edmonton at 31.1%.
    http://business.financialpost.com/2012/11/22/canadian-homes-are-getting-more-affordable/?__lsa=0c296734

    When home prices are 83.2% of income, double the 3rd place finisher, isn’t the obvious conclusion house prices have become divorced from local incomes?

  13. “that offers so much opportunity”

    This is the only part of the original post that I don’t agree with.

  14. Real Estate Tsunami

    My guess is that RE is not a significant contributor to GDP in Nova Scotia.
    Here in the Lower Mainland it is substantial (estimates are about 30%).
    This gives a lot of cloud to the RE lobby here, making it hard to change anything.

  15. I posted on this earlier but I guess it got caught in the spam filter because of the link.

    REBGV is looking for a new CEO. Must have “a high tolerance for ambiguity (in the statistics) and stress (that RE never goes down)”.

    • Actually a high level of understanding of stats would be an asset. REBGV is one of the most progressive and transparent boards in the country.

      The MLS-HPI was started by REBGV/FVREB and provides a decent gauge of market movements.

  16. BC’s household saving rate in 2011 was -4.2%. This was the fifth consecutive year posting an annual negative savings rate. If that’s not bad enough, BC’s household debt to provincial GDP is 96%. Table

    Thanks to IFRS accounting changes, the real figures are finally being revealed.

  17. 4SlicesofCheese

    Anyone know what the average sale price is down this year so far in Vancouver?
    I have heard numbers like 10-12% but I checked on crea site and it says Vancouver down 4% in Oct yoy.

  18. “What are people’s exit strategy when they can no longer pay their debt?”

    – bankruptcy or death would be my guess.

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