“I’m hoping I can buy my daughter a decent size condo in Vancouver when she graduates from UBC next year. Even if she finds a good job, she will never be able to afford home ownership without my help.”

“When prices become unaffordable, demand should come down. At least that is what I’m hoping for, in the short to medium term, so I can buy my daughter a decent size condo in Vancouver when she graduates from UBC next year. Even if she can find a good job after graduation she will never be able to afford home ownership without my help. Renting is obviously a viable alternative if condo prices in Vancouver don’t come down. Or she can just return home and stay with me, my wife and our dog :)”
- comment by Simple Living at The Globe and Mail, 11 Dec 2012, 12:54am

Later on in the same thread ‘Simple Living’ adds:
“If I can afford to pay cash up to $1 million for a condo for my only daughter, it’s my choice and it still is simple living by my standard.” &
“$200,000 a year combined income will not buy you much of a condo in Vancouver at present, let alone a house. That’s why property prices in Vancouver right now are beyond what most working class people can afford. As soon as mortgage rates go up, a lot of over extended home owners will be in serious trouble.”

57 responses to ““I’m hoping I can buy my daughter a decent size condo in Vancouver when she graduates from UBC next year. Even if she finds a good job, she will never be able to afford home ownership without my help.”

  1. Intergenerational wealth destruction.

    • Yes, exactly.
      In this case, they may be able to tolerate some destruction. ‘Simple Living’ may have enough economic resources that his daughter’s condo value falling by 50% or more may not significantly threaten his family’s financial future well being. This only applies to a small number of Vancouver owners.

      • Ralph Cramdown

        I disagree. The intergenerational wealth destruction is when the parent lends/gifts a DP and the child maxes out borrowing to spend the next 5-10 house poor on the assumption that it’ll all be worth it. This guy is apparently rich enough that he’s not even worried about the opportunity cost. A $1mm condo isn’t entry level, so he’s buying her a place that’ll last for as long as she wants.

        Cash buyer, personal use, long term. This guy is among the very few in Vancouver not speculating, not that I’m saying it’s a good idea.

        It’s a sad commentary on what the Mop&Pail’s formerly excellent comment boards have become since the paywall though, as a fight breaks out between a guy who says “$200,000 a year combined income will not buy you much of a condo in Vancouver at present” and an airline pilot.

      • The question is who gets the proceeds when the condo is eventually sold? If it’s the dad, then it’s not “intergenerational”. If it’s the daughter, then I’d say it is. Like a family business that is inherited and then goes bankrupt. Doesn’t really matter though; wealth is destroyed either way.

        Also, can we surmise it’s for the long term? Is a condo for a 22-year old going to be suitable for her ten, twenty years from now?

  2. Wow, there is so much wrong with that. This person is going to forgo first time buyer credits and the primary residence capital gains exemption in order to keep his only daughter on a short leash. She, in turn, is tied to Vancouver (note he’s getting her a condo when she graduates, not when she finds a job) but without the discipline that needing to make the monthly nut or save for a DP instills. And he’s educating her about a pre-nup to protect her lack of assets from the husband? And what’s with putting the condo in his wife’s name, instead of his name or jointly? Who’s HE got to protect assets from?

    Failure to launch? Helicopter parent? Trust-me fund baby?

  3. Simply living trust fund babies:

  4. 4SlicesofCheese

    His second statement does not make any sense at all.
    But I am sure someone will chime in and say something about foreign buyers.

  5. Here’s my prediction…

    When ‘Simple Living’s’ daughter graduates next year, prices will still be in the very early stages of descent. ‘Simple Living’, however, is sure to interpret this initial decline as a good time to buy. Then, a few years later, his daughter will either become frustrated with the lack of career opportunity in Vancouver, and will want to change cities, or she will get married and want to move. By this time, the market will have bottomed. Alas, things aren’t so simple.

    • It won’t matter, unless she wants to move to a place where prices are higher than Vancouver’s will be at that time (NYC? London? HK?) There’s no leverage so the losses aren’t magnified. The place is paid for, so she’d be able to trade it for an equivalent place most anywhere else. This isn’t her retirement fund. Unlike virtually everyone else in the city, she’s not really at risk.

      • Oh, but it will matter. You are forgetting about opportunity cost. Rather than tying up capital in a depreciating asset, it could be productively invested elsewhere. Then, rather than trading it for merely an “equivalent” place, she could afford a much nicer place!

      • Ralph Cramdown

        I never forget about opportunity cost. I just think that this guy has probably gone supernova — he’s accumulated enough assets that he can live on a portion of the income and reinvest the rest so that his capital keeps up with inflation or more. Once you hit that point, you only need ‘more’ if you want to leave an even larger legacy for your heirs, get your name on the side of the new hospital wing, or increase your consumption. This guy’s saying “I need a jar of peanut butter. I hope it goes on sale next week.”

        Of course, it’s possible we’ve been trolled.

    • For how long have you been predicting a significant decline in real estate will happen ‘next year’?

      • @JTS. In case you haven’t noticed, it has started already.

      • What I noticed is that you haven’t answered my question.

      • J.T.S. -> Most of the Vancouver RE bears voicing opinions on this and other blogs, myself included, have for years been predicting that our city was in a speculative bubble, and that it would top-out at some point.
        What’s your point?

      • What’s your point? That unless your timing is perfect, don’t bother? Warren Buffett didn’t know when the tech bubble would burst, he just knew it would burst.

      • hahaha
        Our identical “what’s your point?” questions were published simultaneously.

      • Yah, I got a chuckle out of that. Crossed in cyberspace.

      • El Ninja –
        “What’s your point? That unless your timing is perfect, don’t bother? ”

        Thanks, I think your prickly response tells me all I need to know about your track record and credibility

        .”Warren Buffett didn’t know when the tech bubble would burst, he just knew it would burst.”

        Then maybe you should stick to predictions about direction and not timing. If I read between the lines of your response it seems that your timing is lacking. Of course, given your evasiveness in responding, I can only speculate and read between the lines.

        vreaa – Not sure why you’re being prickly, when the convo isn’t even about you.

        Maybe questions about track records touch a nerve here? If that’s the case I apologize. It’s not my intention to disrupt. I simply want to see if the model of real estate people on this blog use has any predictive power whatsoever. I feel that if a model has predictive power, then that is evidence that the model is close to reality. Of course, if a model has zero predictive power, well that indicates something else…. Let’s just leave it at that. Like I said, I want to play nice.

      • JTS ->
        My perceived ‘prickliness’ comes from the fact that this whole ‘timing the top’ issue has been discussed many many times on these pages and innumerable other sites, and rehashed back and forth a lot. But forgive me if you haven’t been party to any of those discussions yet.

        Speculative manias can be identified while they are going on, but the timing of tops is extremely difficult. So, yes, the important call is direction (“this market is very overvalued and at some point will revert to the mean”), and the issue of calling the turn involves lots of guess work. So much so that it can be argued that you might as well not try to time the top. This, of course, doesn’t stop folks from throwing out guesstimates in this regard.

        Your reference to positive predictive power is sound. A model for understanding a market is only useful if it’s predictive power is better than chance, such that you can reliably use it to profit or, in some cases, avoid getting crushed.
        In certain markets, such as the stock market or currency market, for instance, things are volatile and move fast, such that most models can be tested over periods as short as days, weeks or months.
        The RE market, of course, moves comparatively very slowly, and it is consequently far more difficult to test models. We’d argue that for a market like Vancouver RE, a ‘model’ really comes down to one big question: Is this a speculative mania or is it not? People position themselves according to their beliefs in that regard. It’ll take many years for the dust to settle and to see who has really benefited from their own calls (i.e. to see who has had the positive predictive capacity to which you refer; to see who ends up being ‘right’).
        So, even though this may result in a frustration vague response, we have to simply say that models haven’t actually been tested yet. The jury really is still out.

        If you care to look at my ‘Prediction 2010-2019‘ sidebar post, you’ll note that in 2009, with regard to timing, I was only prepared to say that, at some point in the next decade, “A Real Estate Bear Market Will Be Vancouver’s Defining Social And Economic Event”. I still believe that that prediction will prove to be correct. And, even though that timing may seem preposterously vague, the implication of the call is enough to make the difference between different market participants surviving, thriving or being destroyed.

      • Oh no, my “track record” and “credibility” have been called into question–on the basis of three lines of text–by an anonymous commenter. I think I’m gonna cry.

      • El Ninja – Is the immature attitude necessary? It’s now clear to me that you simply type thoughtlessly into little boxes on the internet. Hoping to possibly ‘one-up’ anonymous posters. Know that I know that I’ll treat your posts accordingly.

      • J.T.S. –> In this short thread you’ve called me prickly, thoughtless, not credible, and immature, while adding absolutely nothing to the discussion at hand. Vreaa works hard to manage this blog; out of respect let’s stay on-topic.

      • Agreed. Inflammatory and unnecessary. On topic please.

        @J.T.S. -> The internet is also a (largely) free place (for now). If you don’t like it here, you don’t have to stay. You’re welcome to stay if you have something to add to the argument, but if all you’re here to do is to provoke that will be frowned upon.

      • RE Lurker –
        “The internet is also a (largely) free place (for now). ”

        Then why are you acting like you own it? I’ll take a feather from your hat and tell you that if you don’t like my posts, then don’t read them. I won’t be reading yours any more, just as I won’t be reading El Ninjas. I’m sure you don’t care. I’m just telling you so you get an idea of how to rise above it in case you ever decide to take that road.

        I feel I’m contributing, you don’t think I am. Well, I’m going to keep doing my thing, so this is a heads up for you to ignore ALL my future posts. You’ve been warned so don’t expect a sympathetic ear when you bitch about the dirty foot prints on your beautiful white floor.

      • Ralph Cramdown

        I’ll admit that I’ve been “wrong” long enough that, had I bet on real estate, I’d have made a lot of money. Which isn’t to say that my money’s been idle or that I’d have more money today if I’d bet right. I just looked at all the people who were looking at the same properties I was and decided that they had little to their names besides a decent credit rating, and I decided I didn’t want to bid against them.

        The way I see it, mistiming one’s entry into real estate can cost 10-20 years of appreciation (it has before in Vancouver and Toronto), and that’s enough to significantly affect one’s overall life wealth. The costs of not buying and being wrong are far lower than the costs of buying and being wrong. And I’m happily piling up the assets in the meantime.

      • Cyril Tourneur

        “I think your prickly response tells me all I need to know about your track record and credibility.”

        Let me guess…your mortgage is a bit too much for you, the new kitchen cost more than it should have, you need a new car, you have no savings other than what you have in the house, and your job is a bit uncertain. You’re a little worried about the future aren’t you? Your tone says it all.

      • Cyril Tourneur – I don’t have a mortgage. It’s sad that I have state this to keep my credibility in some people’s eyes ( not that you’ll believe me ). Logic and reason should stand on their own, regardless of who is making the statement… or maybe I’m expecting too much of the comment section of vreaa. This is, after all, still the internet.

        It may be hard for some to understand, but real estate isn’t a ideological battle between the forces of good and evil aka bears and bulls. I’m interested in facts and opportunities. I’m not interested in dogma and people who lack the ability for self reflection.

      • Cyril Tourneur

        “I’m not interested in dogma and people who lack the ability for self reflection.”
        Then you’ve come to the right place, but you kind of breezed in here like you had your mind made up and an axe to grind.

        For what it’s worth, I’ve been saying Vancouver real estate was bubbly since 2005. I thought for sure it would crash in 2009 and was obviously wrong. I didn’t see a correction for 2010-12 but I am fully convinced that 2013 is when we will see the big pop. So, I have a terrible track record but I still believe that I am correct and that we will go back to below 2005 levels. I am completely amazed that prices here have been held aloft as long as they have.

      • J.T.S. -> You said: “I’m interested in facts and opportunities.”
        Okay, but then why not just stick to content?

        Look back on this thread:
        El Ninja: “Here’s my prediction…When ‘Simple Living’s’ daughter graduates next year, prices will still be in the very early stages of descent.”
        JTS: “For how long have you been predicting a significant decline in real estate will happen ‘next year’?”
        El Ninja: “In case you haven’t noticed, it has started already.”
        JTS: “What I noticed is that you haven’t answered my question.”
        An objective observer would very likely conclude that you, JTS, threw the first “prickly” stone.

        Regardless, let’s stick to content, everybody.

      • Ralph Cramdown

        The funny thing, J.T.S., is that NOT having a mortgage somewhat reduces your credibility in my eyes. It makes it more likely that you’re a somewhat unsophisticated, undiversified true believer who’s overconcentrated in one asset class. When I buy a primary residence, I’m going to pay cash for it, and I will have an equity take out mortgage for 80% LTV lined up to close that same day. I’ll invest the proceeds at about 6% and pocket the 3% spread. (This assumes 5 year money is still available at 3%ish at that point.) Who passes up the opportunity to make a low risk five figures per year?

        No offence intended by the above, by the way. Obviously ALL I know about you is what you’ve revealed so far, and you’re under no obligation to reveal any more or less than you desire.

        As to real estate not being Manichean, I disagree. Not in the sense that I personally believe that it is, but, from what I’ve seen, most everyone else acts as if it is, so I must factor that into my calculations. Of all the asset classes, only real estate and gold seem to attract so many true believers, nutbars, creators of wacky websites that don’t describe the reality I see, etc. With real estate, I believe that it is because everyone has a dog in the fight (“we all need a roof over our heads,” as they say), and familiar experience with being landlord, tenant or freeholder going back generations. With gold, I haven’t the foggiest idea, but there you have it.

      • ” I’m not interested in dogma and people who lack the ability for self reflection.”

        If you’ve come here for data, maybe you forgot to notice the title of the blog includes the word “anecdote”.

        Congratulations on your success, troll. Easy to criticize, sure to fade away when pressed on specific and novel data and analysis. I might take you seriously if you bring your own “predictive” analysis to add to the discussion instead of stinking up the joint.

  6. This is like my cousin in her 20s who got a large down payment from when her grandfather died. She works as an admin assistant, probably makes about 13-14 an hour, and her partner works at a job that pays not much more than minimum wage (I’d say 14 per hour max). They are able to buy a 550k townhouse in burnaby. Kind of insane when two people who make less than what the average person makes can afford a half million dollar home. Yes, even with a substantial down payment (which I gather was around 20%) that’s still a lot of debt to be carrying.

    • Banks and the government have been very accomodating which fuels speculation. I agree that this may be a bad time to speculate in the housing market, but then you never know. I took a big gamble when we bought a house in oakridge area a few years ago for around 700K on limited income and sold it last year because I knew I got lucky and didn’t want to push my luck. Now we’re renting a condo in Vnacouver.

    • If they only put 20% down, the monthly payments on the $400,000+ remainder must be crushing them.

  7. I always wonder how people with such weak logic could have ever accumulated $1 million worth of cash in the first place?

    • Plum government job?

    • Naked Official #9000

      Its Vancouver – no brains required

      Stop signs are optional here

      • UBCghettodweller

        >Stop signs are optional here

        As a motorcyclist, this makes my daily commute extra death defying. I’ve generally stopped expecting Vancouverites to obey any rules or exercise any judgement. The same applies for real estate. Everyone just sort of goes about their day subtly pissed off and passive aggressively taking it out on others. Best Place on Earth indeed.

        I summarise the driving here as: All the aggression and impatience of German drivers with none of the skill.

      • Naked Official #9000

        Most livable city!!

        My favorite hobbies include driving the speed limit and obeying the traffic laws to see who gets angry – boxing in exotics is also entertaining..

        You should wire up a camera!

    • Certainly not through understanding what cash flow and income producing asset are.

    • Because they spent the last 10 years making a killing off buying and selling real estate. In one part of the chain or the other.

  8. “I’m hoping I can buy my daughter a decent size condo in Vancouver when she graduates from UBC …” and then flip it for a profit when she outgrows it :0)

    That’s what they’re really thinking.

  9. Sounds like a good way of efficiently transferring wealth, assuming prices aren’t going to fall 30%.

    • It would be an even more effective way of transferring wealth if they used a shell corporation to buy the condo, like Gregor Robertson did for his home.

      • Nothing wrong with that, I’d be surprised if this wasn’t more common for people with multiple properties. I expect, though, once the weeds are cleared, if there are mortgages, these corporations won’t be entirely limited liability.

      • Wise people know that wealth is not measured in dollars and cents, but in how many anonymous shell companies one controls.

      • So true, rp1. Vancouver shell company schemes seem especially common in Vancouver. A guy I know was recently trying to rope me in to some sort of convoluted shell company strategy involving natural gas exploration. I felt dumb because I couldn’t understand the proposition. When I asked about the underlying operations, or sources of revenue, he said there would be none, but that we would make money when someone else bought us out!

  10. “When prices become unaffordable, demand should come down…”

    The evidence hasn’t really supported that much. The problem is the faith put in the word “should”. How long have we seen fairly solid arguments that Vancouver real estate isn’t affordable (is the year count to double digits yet?) Affordability (the subjective definitions of it, anyway) hasn’t impacted demand. We’ve even seen an effective increase in mortgage rates for new entrants (changes in down payments and amortization periods) yet demand has stayed strong enough to keep prices very high.

    • Data please. The clever ones noticed you use the word ‘evidence’ without providing any. All we ask is that you try a bit harder. Show us how you goto the corners to dig out that puck.

  11. Try a bit harder to do what? Do you need data to show that Vancouver real estate isn’t very affordable? Or that shortening amortization periods and requiring larger down payments is equivalent to raising mortgage rates? Or that prices haven’t cratered, or really retreated all that much? Did I miss the memo? Has real estate around here returned to fundamental valuations?

    • Here’s a memo: Sales in Vancouver are at a decade low. Either supply will have to match demand, or prices will adjust.

    • We need data to show that demand has stayed high. Sales are more than 1/3 below trend, and even Prince Eugen says “Home sellers appear more inclined to remove their properties from the market today rather than lower prices to sell their properties.” Some demand.

      And enough, please, about effectively increased mortgage rates for “new entrants.” If you mean people without any money who need a cosigner to get a loan, say so. Requiring a larger DP and/or a shorter am means these people will be paying less interest, since they get the same rate as before. Your error, if indeed it is, is in assuming that price is the independent variable here. The Minister of Finance, the governor of the Bank of Canada and the OSFI are aiming to lower house prices, and that’s what is going to change in the equation.

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