‘Millennials Fleeing Vancouver’ – Over 40 years household incomes static but housing costs tripled

“For Jennifer Fox, 37, life in Vancouver has not turned out as she’d hoped. Despite having three university degrees and dreams of a West Coast home and family, she finds herself caught—like thousands of her contemporaries—with none of the accoutrements of success. She lives in a no-bedroom, 380-square-foot West End shoebox and is happy if her income as a research assistant at UBC leaves her $100 extra at month’s end. “I feel stupid not leaving in 2010,” she admits. “I’m young and live in Vancouver: my glass is half-empty.”

Discouraged by the few job opportunities, massive education debt, and the conviction that life is passing them by, 10,000 members of the newly coined Generation Squeeze—ages 20 to 40s—have left the city in the last five years, according to Statistics Canada. Too expensive. A career black hole. In fact, every one of Fox’s dozen closest friends has moved away.

This sentiment is familiar to Paul Kershaw, a professor at UBC’s School of Population and Public Health. Kershaw, 40, invented the term Generation Squeeze four years ago, and has spent the time since studying the economic and cultural trends that have led many of Canada’s frustrated millennials to ask themselves: “What am I doing wrong?” His conclusion? Nothing, but 21st-century demographics and economics—and their own political apathy—have conspired against them. This is particularly true, he knows, in Vancouver. Security based on higher education, job opportunities, a good income, affordable home ownership, manageable debt, and optimism about the future—touchstones of the boomer generation—is elusive in one of the world’s most expensive cities.

The economic and demographic statistics Kershaw has gathered provide vivid comparisons between what boomers faced in 1975 and what their millennial counterparts encounter today. Adjusted for inflation, the average household 40 years ago earned $65,000 (one family member working)—virtually the same as today’s $68,000 (two members working). But the average adjusted cost of housing in Metro Vancouver in 1975 ($251,000) is over three times higher today, at $813,000.

– from ‘Why Millennials Are Fleeing Vancouver’, Daniel Woods, Vancouver Magazine 28 Aug 2015

60 responses to “‘Millennials Fleeing Vancouver’ – Over 40 years household incomes static but housing costs tripled

  1. But according to the predictions of this board, this will all fix itself in due time correct? Just a matter of time when Vancouver average real estate prices will crash hard. So why are we bothering to protest anyways? Generation boomers will be looking stupid for not selling their single family homes when they could have. Generation squeezed will rejoice and take advantage of the carnage. No need to worry, just a matter of time.

  2. You expect the good life because you took out loans and got degrees? You are owned by billionaires and “royals”. Welcome to wage slavery. Off with their heads say I.

  3. YVR Housing Analyst (@YVRHousing)

    You won’t like my response. Move. Not because I want you to — we need good people accepting below-rate wages in lieu for an aspirational lifestyle — but because life will treat you better elsewhere.

    • “Vienna waits for you” comes to mind.

    • Absolutely. My spouse, two kids and I left Vancouver in 2007 and in hindsight it was the best thing we could have done for our careers, our lifestyles, and the kids. We each have Master’s degrees and were just squeaking by monthly for the privilege of living in a 500-sq-foot shoebox in Vancouver. The constant financial struggle seemed endless.

      We now have almost 9 years in to good careers with great pay, and were able to buy a beautiful home for a reasonable sum (less than 3x income). We have money left over to travel often and to put into our kids’ education funds. We can live and enjoy life. No, leaving family and friends wasn’t easy, but staying wasn’t an option for us.

      We visited Van this summer and were able to visit with some friends- still living in their shoeboxes, unable to save our travel, just scraping by on 100K, but man, are they happy to drone on about living in Vancouver! I just don’t get it.

      • i bet you cant be kayaking, snowshoeing and ice climbing all in the same day where you live…..while your vancouver friends can

    • Yes, move. Like jenct below, our family of five left lala land in 2007. We are not “native”, but having worked and played here almost exactly five years, we made many friends . While we enjoyed the mountains and the ocean, (though not the skiing, it was out of our budget due to the cost living.) the 2007 move to Ottawa was right for us.

      Living in a $375,000 four bedroom detached bungalow twenty minutes from down town, with three kids attending post secondary education now (Wow, can you say a REAL transit system!), and with retirement no longer that distant a thing, my wife and I realize that if we had stayed in Vancouver, our lives and our kids prospects would have been pretty bleak.

      Vancouver is a lovely place to visit and we have dear friends there. But from Ottawa, a flight to Europe is about the same price. Hmmm…Paris or Burnaby? It may seem counterintuitive, what with BC being the best place on earth, but we haven’t been back there since we left.

  4. Academia just don’t pay well unless you are at the top of the food pyramid unfortunately and that’s just the realities.

    As well, the value of advanced degrees are being diluted with way too many univ grads in industries that have no barriers to entry – unlike trades where the barrier to entry is quite high and helps to maintain high wages for their members. I think this is a common problem in North America, though high living costs don’t help.

    Also, not enough young people are up in arms about things like debt, taxes, and wasteful gov’t programs and services. The current debt piled on mostly for boomers’ benefit and the upcoming pension debt bomb will be paid by the current under 45 generation and their kids.

    • The fact that someone holds 3 university degrees doesn’t really matter to me. Skills are only useful if the market requires it. If you hold degrees in mandarin, swedish and punjabi, I am sorry, there isn’t a need for those degrees here. Clearly, if this person is having issues making any money off of her 3 degrees, she should have scouted the job market before getting them.

      • Market place isn’t always right. Some societal useless skills are valued far more than a lot fo actual useful skills. Market efficiency really only exists in ideal environments, not reality.

        And this argument doesn’t change the basic argument that degrees in general aren’t worth as much as say 30 years, and it is in general harder for young people make a go at it.

      • Royce McCutcheon

        Can’t speak for the people in the article, but the people with two or three degrees I know that have left or are in the process of leaving – and fall in the demographic range referenced by the article – are doctors, scientists, engineers, and lawyers (lots of education, but very few actually working in academia). We are looking at leaving (not urgently) and, FWIW, we earned enough that we got dinged six figures in combined taxes last year. Most of those friends I referenced paid more than that.

        What I’m saying is, if you’re suggesting that theirs is the cause of over-educated but under-employable Millenials, you’re off the mark.

        Regardless of the cause, the high cost of housing in the Lower Mainland is a brain tumor pressing ever harder on the pleasure centres of existing home owners. Hopefully more will start trying to see why things feel so good. But with record participation in the market – and record employment levels related to the market – I won’t be holding my breath.

  5. The departure of these people is not only a consequence of the housing bubble–it will actually help to pop it. The ponzi scheme that is Vancouver RE requires young purchasers so that existing homeowners can move up the “ladder”. After all, the only, repeat ONLY, reason people have been comfortable taking on such epic debt, and paying such absurd prices, is because of the expectation that someone else will come along and buy what they are selling for more than they paid.

  6. Seriously? Vancouver has a property ladder? That’s exactly why we have such a crazy market. Because as you know, apartments and houses all appreciate at approximately the same rate hence why this ladder works. Except when it doesn’t and detached houses appreciate at a much higher pace than attached properties. That’s why there hasn’t been a ladder here for the last few years. Yet our detached properties keep on skyrocketing without the need for this so called ladder. Ever wonder why that is happening? What sounds more plausible, that the detached market is supported by millionaires and wealth migration or by people who can barely save 100 bucks a month somehow moving on this magic ladder.

    • Property ladder only works when different property types are appreciating at the same absolute dollar amount. A $200K condo appreciating at 2%/yr will have no way to catch up with a $400K TH appreciating at also 2%/yr, which in turn will not catch up with a $1M house appreciating at 2%/yr.

  7. I just love “wealth migration”. Vreaa, can you please add this fluff to your running compilation of Vancouver bubblespeak? It’s right up there with Best Place on Earth, Swiss Bank Account of Real Estate, and so many other gems that escape my memory at the moment…

  8. While you are at it, maybe we should start a best bubble prediction blog. I am having so much fun scanning the archives here. Btw, where did this guy named Jesse go? He was like El Ninja, except disappeared after predicting 50 percent drop in 2009. A 50 percent drop of 2009 prices would make a single family home in the east side 350k. How many are there, I would buy them all at that price myself. I guess 25 years later we would still be here with the Bears claiming that a crash will happen someday.

    • They gave one the impression of being academicians or in the academia, hence their knowledge-based. comments were not wrong. If they were the Olivers, then the artful dodger characters had manoeuvred skilfuly in the game during the last 10 years or so.

      • Their comments were not wrong? Based on what? I am sorry but when you predicted a 50 percent drop based on 2009 levels while we were having perhaps one of the greatest migration of millionaires in North American history, then you really weren’t paying attention. Like I said before and I will reiterate, no one ever paid attention to the movement of Chinese money and how it all went. We just merrily assumed that purchases were local. For the first three years or so, people had no clue. But I think anyone with a clue in the Vancouver market now can see how wrong those comments were.

      • Btw, David Ley, a geography professor from Ubc actually wrote a well researched book called millionaire migrants. I think everyone should read it to understand why this issue with Vancouver real estate is much more than what meets the eye.

    • I think he stopped reading all Van RE blogs. Part of the reason was the racism and hate he sees spewing from BPOM & others on VCI that is not only unchecked / moderated by the blog owner but being actively cheered on.

      • I do have to say that the racism is pretty crazy on VCI. Seems like bunch of racists all got pretty fed up with the asian invasion and decided to meet on a real estate board. But the issue is still relevant, our best properties are being bought out by people who make much more money than locals and can do it in an environment that is much more favorable.

    • Nor were any of the bloggers telling you to buy along Cambie, prior to the fact – or that East Van prices would catch up, prior to the fact.

      Bears condition themselves to miss opportunities.

      Meanwhile, I was on here telling people to buy East Van properties with income suites, but I was laughed at for owning vertical duplexes or something. Anyhow, I followed my own advice, and now I too, am laughing.

  9. Even with huge real estate prices, what little there is for sale is largely rubbish. 90% of what gets listed is on traffic streets – garbage like Nanaimo, or First; King Ed. or Rupert. A decent home on a quiet street, especially south-facing, is gold. Got a view – name your price.
    Master marketer Rennie was particularly insightful about SFD’s – that there are 47,000 of them in Vancouver and that during his lifetime there will be no more. If anything, the supply will decrease with the push to tear down and build stratas – ergo, the law of supply and demand.
    When you have massive demand and diminishing supply, esp., with global players using this city as a hedge or investment play and cultures like Filipinos, Vietnamese, Russians, etc. scrabbling to do whatever it takes to get a house (F. this strata crap.) – “You ain’t seen nothin’ yet.”

    • That’s what I have been saying for years. Now we are finally starting to see it, but I think we are seeing the tip of the iceberg.

  10. We Chinese people love coming over to your country and take all your houses and at the same collect free medical & social services while claiming to live under poverty and drive our BMW & Mercedes. White people are fools I tell you. They have loopholes created for us to exploit. People don’t understand what true Asian wealth migration and takeover means. The Caucasians serve all of us and soon every Vancouverite will be down on their knees kissing Chinese feet. People just don’t get it. We don’t tip white people, they only tip us. Get it?

  11. To Blammo, Brian, and other smug, self-proclaimed RE geniuses: Keep some perspective. You would have made more money in a Canadian index fund. Less headache, too.

    • I don’t think anyone is arguing this. However, which bank will lend you 4 times leverage to invest in a index fund? How do you, as someone who say makes 100K a year convince a bank to lend you 800K to buy an index fund with 200K down? So while the real estate return is highly leveraged, the index fund is not.

    • If you were on this board in 2009 telling people to follow your lead and lever up 10x on the SPY and hold for 5+ years I’d be patting you on the back.

      But nay, you were not. And did not.

      • Actually in multiple posts, going back years, I have noted equities superior performance. What I haven’t advocated is the use of leverage, which is dangerous as it cuts both ways.

  12. is it a good time to buy a cambie house now???…..especially if its walking distance to the world famous Oakridge Center Mall

  13. Problem with comparing stock index fund returns after the fact is also that most people don’t actually buy and hold for the periods in question. If people can actually buy and hold during a bull market then more people would have made money and be rich. However, facts indicate that most people tend to do the opposite and lose money in both stock bull and bear markets. So saying that holding an index fund would have beaten real estate ignores that little inconvenient fact that most people don’t actually end up buy and hold.

    As for leverage, nothing prevents you from getting unsecured line of credit, buy the index fund, then use the margin in the margin account with the ETFs you bought with borrowed LOC money as collateral to leverage up and buy more ETFs. Off course, any interim market drops will likely kill you on margin calls as well. Or you could always use that over-valued house you bought with 20% down as collateral to get a HELOC and leverage up even more via margin accounts.

    Anyways, hindsight is always 20/20 as well. The value you bring is not tell us what happened in the last 10 but what will happen in the next 10. So far, the bears don’t have a good track record on the housing market.

    • That a given individual may be emotionally unfit to handle stock market fluctuations does not remove from the fact that equities have delivered a superior return. The problem you cite is one of individual disposition, not of investment performance.

      In terms of track record, I would argue that 10 years is way too short a time frame. As horizons shorten, market movements become increasingly random, and vice versa. Only when you look at 20, 30, or more years do investment returns start to become statistically meaningful, and does reversion to the mean exert itself.

      Bulls have recency bias. To them, the past few years alone are indicative of the future. The 90s, 80s, and earlier periods are ignored on the hopeful but inadequate notion that “it’s different this time”.

      Time will tell!

      • I understand the unsecured line of credit. However, one, I tried and no one will give me that kind of credit despite the fact that I have a top tier t4 and am actually considered under leveraged in housing (my debt to asset ratio is maybe 20 percent right now). Also two, the rates on an unsecured line of credit is significantly worse than mortgage rates. So an insecured line of credit is not really an option for this play.

      • Here is my take on this point here. I don’t argue that you are correct in terms of investment performance. But that to me was never the debate. If you remember correctly I always narrowed the debate into something very tangible: which was, do we expect a crash in the prices of Vancouver Single Family homes or do we expect their value to keep on going. So i am really only interested in the performance of about 100,000 plots of land in Vancouver, Burnaby, Richmond and West Vancouver. Now, some may say this is pointless as an academic discussion to which I fully agree. But this question is very pertinent to a great deal of Vancouverites right at this moment. Frankly, if you don’t live in Vancouver, you can look at this issue with an academic eye which I think you have. But for those who live here and have to put up with this, it is frankly useless for us to be discussing the investment potential of real estate versus the stock market.

        Like Space said, most locals will not play the stock market using the same leverage that real estate affords them. So even if the expected return is greater, it is not an option to them. Even the unsecured line of credit suggestion that Space gave is mostly useless to about 99% of people in Vancouver because of the high cost of the line and of the perceived risk of the market. I for one, am trying to leverage my properties and put it in the market because as you said, markets have outperformed real estate. However, again, I don’t believe that was the debate.

        As for the timelines that you outline, it is not realistic for people who live here to wait for a crash that may happen 20 years down the road. Imagine that you are renting in a desirable location yet the house that you rent is constantly being sold. Your family will never get the stability that ownership affords. So waiting for a crash that might happen 20 years later is not an option to just about anybody except those who don’t actually live here. While you are right that it is more statistically significant to look longer, a decade is a large chunk of someone’s life already, I doubt they can take comfort that some crash might happen some day long in the future because academically we look at investments over 30 year horizons. And if you happen to be wrong, then the human cost of waiting is far worse than the financial cost.

      • You missed my point entirely. I am not saying that people should wait a decade or more to buy RE. I am saying that, in assessing expected returns, the appropriate reference point is not the past ten years. It is the past 20, 30, 40+.

      • I disagree for two reasons:
        1 – What is important is the actual returns achieved, not some theoretical possible returns. if nobody or a very low % of investors can achieve the theoretical return then I would say that theoretical return is irrelavent. It is the same reason why you can’t present model portfolio returns are achievable returns, but rather you have to use actual portfolio returns for performance reporting. If people on average can’t trade / invest properly with the stock market but can with RE market and end up achieving a better realized return via RE market then RE market wins.

        2 – You say 10years is too short? Well, if you are a fund manager and you underperform for 3 years, you will likely be fired. Very very few managers can survive 10 years of slight under-performance, never mind big under-performance like the RE bears. Second, risk actually goes up the longer your time horizons, but your accuracy at predicting the adverse outcome goes up. It is kind of contradictory but that’s what it is. This is why the VAR is scaled by the square root of time horizon. If risk goes down then you would scale the VAR.

      • No I understand your point quite well. I am saying your point is largely useless to someone trying to answer this question: “should I buy this house at this address at this time.” Because to you, it is entirely an investment question. To most of these people who ask me this question just about everyday, the investment options that you and I understand, know, used, aren’t an option like Space says. So to them, it is a very simple question like I phrased, do I expect this house’s value to appreciate, depreciate, stay even, and if the answer is prices will crash, then when. Me telling them stocks have in fact outperformed real estate over a 20 year horizon doesn’t help them. Like I said, I myself actually am trying to leverage my net worth accumulated through house investments to diversify into stocks because I recognize the fact that over the past say 20, 30 years, stocks have outperformed real estate. However, I do this because I can get the kind of leverage needed now using my real estate holdings at a very efficient term. Without these holdings, I can’t do this. Btw, when you say use options as a leverage tool; been there done that, but issues with any leverage tools that I use is the overhead cost, the most cost effective way of leveraging is still real estate because the mortgage rates are ridiculously low.

      • Space: depends how you define risk. If the definition is losing money, then risk diminishes the longer the holding period.

        Brian: the only thing I’ll add is that leverage is dangerous. Nice on the way up, devastating on the way down. Levering up to buy stocks is plain dumb. But hey, each shall eat his own cooking.

  14. Average investors have a terrible track record over ten years, according to this study and the twenty and thirty year returns are worse. When the market in real estate goes down, homeowners are likely to hunker down and stay in their home, rather than time the market and realize a loss. In the stock market people will bail at the wrong time.

    http://www.forbes.com/sites/advisor/2014/04/24/why-the-average-investors-investment-return-is-so-low/

    • I think part of the issue is that the average investor should really just stick their money into index funds rather than individual stocks. I am a fairly sophisticated investor but I have to admit I am not at all qualified to evaluate any particular stock in the market. It is a better idea to simply stick to index funds and go set it and forget it mode. That’s what I have been doing with my RRSP’s and TFSA’s and the returns are amazing. The market will probably drop soon but I will simply add more and then set it and forget it. I think part of the problem is that many average investors don’t realize that they aren’t very good at it. The really good investors that I talk to know their weaknesses and won’t boast about how this stock they picked did this or that. The good people understand when it is better to simply go with an index.

  15. @Arnie – great comment on supply, if you look at what’s on offer on the east side for under one million for a house, it’s a little terrifying for location and quality.

    • And then you watch shows like House Hunters on HGTV and people complaining about lack of pool, or lack of full basement, or that the master bedroom the size of 1br room condo in Vancouver being too small in a house that costs $300K, or that $300K is too expensive, it really makes you wonder if you really should be spending $1M+, most of it borrowed, on an old rundown moldy house right on a major street.

    • Agreed, did a quick search on south vancouver yesterday. It was like a ring of properties on 49th, marine, main, fraser, and then maybe one or two in the middle. The real quality listings are not there right now. So buyers are queued up more and more waiting for them.

  16. The so-called stability of RE is an easy choice for the masses. So is junk food. Does that mean eating nutritious food isn’t sensible? No, it means people are uneducated.

    • How do you measure the stability of housing versus the stock market. Without any stats, I would say that the vix of real estate is likely to be lower than the markets.

      • Again, missed my point. I’m not saying stocks are not more volatile. They are. What I’m saying is that they have historically offer a superior risk-adjusted return relative to RE. And, yes, there is data for that. Robert Shiller publishes free stats.

      • You said “stability”. Please define it.

      • I don’t believe “stability” = performance. To me, the reason why people choose real estate is inherently in the word that you used which is actually quite apt, it is more stable or perceived that way. It has no real correlation to performance. Stocks are perceived to be more volatile. If Shiller collected statistics on the vix of real estate markets versus stock markets, I would imagine he would have found this to be the case.

      • “Stability”: the opposite of “volatility”, or “risk”, as measured by the standard deviation of annual returns. The volatility of real estate vs. stocks can be calculated from Shiller’s statistics in a matter of seconds using Excel. The result: RE is less volatile. However, it has also offered a lower historical return both in absolute terms, and relative to risk.

      • I understand the risk adjusted return part and I have no problem with it, if I had a million dollars with no way to leverage and you gave me a choice to buy real estate versus the market, I would put it in the market. But again, to me, that isn’t the argument and it isn’t for most people. Even from a pure investment perspective there are two issues with this:

        1. Investments at the vix level of real estate (which isn’t very high until the US market crashed a few years ago), has a perceived lower return than real estate. Whether this is true or not I have no idea but it is perceived to be true. Perhaps one can lower the vix of the index funds by adding in fixed income which would lower its return. The issue is that while index funds can beat real estate in a risk adjusted return, fixed income may not. Just because an investment has a higher risk adjusted return doesn’t mean one will just buy it because it also carries a higher risk.

        2. The issue of leverage / taxation. Cost of leverage I have already expressed and debate with you. Taxation, for example, Canada doesn’t tax principle residence. So in order for you to keep up with the rise in real estate, your investments has to not only beat the leverage, but also the tax rate. This is one of the primary reasons why people in Vancouver have such a hard time buying single family homes that have gone up about 3 to 4 times. Because this increase was tax free while their investment, which may have beaten the rise is taxed as capital gains. So adjusting for these would also skew the calculations.

        So while your argument makes sense in the case I stated in the beginning. It doesn’t really apply to most Vancouverites looking to buy. You say the market would have beaten my rise in property values, that’s true, but the capital gains would have taken 25% off of my return. So when you consider everything together, and then add in the human need to own a place for stability; I would imagine that real estate is a safer bet to most people who are looking to live.

      • Y’all are taking this stocks vs. RE thing too far. I only brought it up because some of the posters here got to bragging about how they’re “laughing” now for having bought RE a few years ago. When you put it in the broader context of the returns that have been available elsewhere, there’s nothing to laugh about. That’s it…

      • It makes for a good debate, why not.

  17. The RE bubble has begun to reflate in the United States. How do I know? Because 2006-style ads featuring annoying couples are back:

    https://video-sjc2-1.xx.fbcdn.net/hvideo-xap1/v/t43.1792-2/11753371_968211006816_1571102733_n.mp4?oh=8620bbecff61f449fd9962b315225c2f&oe=55F8C3CC

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