BC Budget: Taxpayer Debt To Support The Construction Industry – “Every young person out there today understands the challenges of getting into the housing market.”

“Every young person out there today understands the challenges of getting into the housing market. As parents and grandparents, we worry about the struggles our children and grandchildren have trying to save for their first home.
Even with the relief we provide to first-time buyers from the Property Transfer Tax, it is still difficult for many British Columbians to save up enough to make a down payment and still have money left over to cover all their other costs.
That is why, as part of this budget, we are introducing the B.C. First-Time New Home Buyers’ Bonus. It is a temporary, refundable income tax credit for first-time buyers who purchase newly‑built homes effective today until March 31, 2013.
They will receive a cheque for up to $10,000. Just think of the difference that’s going to make.”
[Yeah, it’ll almost definitely result in the prices of New Homes purchased by FTBs rising by an effective $10K, resulting in absolutely no net-savings to the purchasers, who will continue to purchase at the very limit of their monthly-payment ‘affordability’ level. -ed.]
“It complements the measures we announced last week — which included raising the threshold for the existing HST rebate to $850,000, and making a similar grant available for new secondary homes outside the Greater Vancouver and Capital regional districts. Over 90 per cent of all new homes in the province are below this threshold.
Together, these measures serve the dual purpose of giving consumers a break, while supporting the new-home construction sector.”
– BC Finance Minister Kevin Falcon, Budget Speech, 21 Feb 2012

This in a budget that will come in with a spending deficit of about $1 Billion.
Taxpayers are spending borrowed money to support the construction sector.
And note the glib assumption that “every young person” needs to “get into the housing market”.
Next up, assistance for toddlers interested in buying their first condo.
– vreaa

Addendum:
Find the ‘fact sheet’ regarding this bonus here:
2012 First Time Home Buyer’s Fact Sheet
[And see the end of the sheet for the hilarious example that some government wag came up with: a home for $150K! Unfortunately the home has to be in BC, Canada. – ed.]

Inventory Up A Lot, In Some Areas. And Kids Are Uninformed – “Ask any kid who bought their downtown box in the past 2-3 years how they’re doing with their fantastic ‘Equity Building’ exercise. Many wish they were still renters. Most of my friends in that position do.”

“Inventory stats on the Vancouver Market
Overall, starting the year much over last year – however – almost all of this is concentrated in 4 areas.
1.) Richmond Detached – up close to 100% over last year – Epicenter of the crash.
2.) Vancouver West Detached – up 70%. Not too far behind.
3.) Richmond Attached and Apartments – Up 25%. This is also a major problem area with close to 1,000 units for sale already at this early start to the year. This is pretty much 10 months of inventory and we have not even seen the listings flood yet.
4.) Coquitlam attached and apartments – up 20%.
Other than these four areas, inventory is at a normal opening level. There are no other detached areas which are really significantly changed..
—
The big chunk of the market which is Vancouver attached and apartments is pretty much starting even with last year – – showing that government policy of low interest rates and easy credit access to the banks has continued to fuel the number of first time buyers coming into the condo market. Kids are so uninformed. I feel sorry for this generation that may never see their property worth more than what it is today; it is likely to fall. Ask any kid who bought their downtown box in the past 2-3 years how they’re doing with their fantastic ‘Equity Building’ exercise. Many wish they were still renters… most of my friends in that position do.”
– posted at greaterfool.ca and forwarded to VREAA by ‘ZRH2YVR’, 9 Dec 2012

Spot The Speculator #62 – “You have to make a decision – bling or buy. We saved a 20% deposit, and now own our first place. Bling or buy baby.”

“We lived for 5 years in a 450 square feet bachelor, with a bathroom across the hall, paying $725 a month rent, and did not buy any new consumer items. We purchased only thrift store furniture and bought cheap cars (old run down VWs) and mostly consignment clothes. No bling. You have to make a decision – bling or buy. We saved a 20% deposit, and now own our first place. Bling or buy baby.”
– ‘Bling or Buy’ at VREAA, 27 Oct 2011 12:40pm

Speculative mania = Bonfire
‘Bling or Buy’ = Twig
– vreaa

Bartender’s Parents Buy Her A Condo – “A lot of my friends are like: “You’re just paying your parents back”.. I’m like, “No it’s not that simple, they are pretty strict”. You know, they’re just like a bank.”

Tanja Beja, Global TV Reporter: “Vancouverites already have the highest debt levels in the country. Average Vancouver Income is $45K, but it takes almost $72K to qualify for a standard condo. So how are first time buyers getting in? This mortgage broker says that about half are turning to ‘the Bank of Mom and Dad’.”

Ryan McKinley, Vancity Mortgage Broker – “It seems there has been more of an increase… as property values have risen.. parents are definitely involved in helping their kids out in any way they can.”

Beja: “That’s how bartender Jenny Fong got her place. Lacking the savings she needed Jenny’s parents bought her this condo. She now pays them monthly rent.”

Jenny Fong: “I don’t have a lot of lee-way… a lot of friends are like: “you’re just paying your parents back”.. I’m like, “No it’s not that simple, they are pretty strict”. You know, they’re just like a bank.”

VO: The difference is there is no interest, which can add hundreds of thousands of dollars.

– Anecdote extracted from ‘Generation How?’ clip on Global TV, 4 Oct 2011 (3:00 onwards). [Thanks to Greenhorn, for the video archive]

Let’s hope that Jenny’s parents aren’t overextended. It would be interesting to know their ages and their total net-worth:RE ratio.  – vreaa

What You Get For $325K In Vancouver – “Maybe a very small, really old, wood-frame apartment, maybe, on the bottom floor, looking at a dumpster, maybe, I’m not sure, but, yeah, really nothing.”

Tanja Beja, Global TV reporter:  “To minimize her payments, Catherine Green is moving out of downtown and into New Westminister, where she got a two bedroom and den for $324K. In Vancouver, that wouldn’t have bought much.”

Catherine Green:  “Maybe a very small, really old, wood-frame apartment, maybe, on the bottom floor, looking at a dumpster, maybe, I’m not sure, but, yeah, really nothing.”

Beja: “Instead of a dumpster, she’s now looking at the Fraser River.”

– Anecdote extracted from ‘Generation How?’ clip on Global TV, 4 Oct 2011 (3:00 onwards). [Thanks to Greenhorn, for the video archive]

Financial Planner Looking For $400K Condo – “I expected the Vancouver market to be really tough to get into, but the reality is hitting me even harder. I may need to rent while I earn more money for a bigger downpayment.”

Announcer: “Susie Shin is looking for a place to call home. The 33 year old moved to Vancouver from Toronto. She works downtown and would like to live nearby. But Shin knows in this city her money isn’t going very far.”

Susie Shin: “I’ve been working for awhile, I’m a professional, I figure at this age I should be able to afford a decent place downtown, but in Vancouver it’s a bit tough.”

Realtor: “So this is a one bedroom and den…”

Tanja Beja, Voice Over: “On Shin’s wish-list, about 700sqft, and a view. Her budget of $400K won’t get her both. But Shin isn’t spending a penny more: she’s a financial planner, and she’s calculated what she can afford, something her realtors says young buyers don’t do often enough.”

Shin: “I expected the Vancouver market to be really tough to get into, compared to Toronto… the reality is hitting me a little bit harder, you know, that I may need to rent for a little while I earn more money to get a bigger downpayment on a property.”

Tanya Beja: “So, for now, the house hunt in an overheated market continues.”

– Anecdote extracted from ‘Generation How?’ clip on Global TV, 4 Oct 2011 (3:00 onwards). [Thanks to Greenhorn, for the video archive]

It doesn’t look like this prospective buyer is anticipating any price pullback.
She is putting off buying in part out of being sensible (she has set a hard ceiling on what she can afford).
Her unplanned and forced delay, to save for a “bigger downpayment”, will likely, by complete chance, work in her favour.
It’ll be very interesting to see how buyers such as Ms Shin behave when prices drop by 10% or 15% or 20%. Will they jump in, or will they start questioning the wisdom of overextending themselves to buy what will still be very expensive RE? – vreaa

Quick Snapshot Of Potential First Time Home Buyer – “We were hours away from closing on a townhouse in Port Moody when we decided to walk away from it. I’ve never been happier with that decision. Thankfully logic trumped emotion.”

“My wife and I ‘were’ to become first time home buyers after spending a year and a half living at my mother in-laws saving for a down payment (not typical these days, actually saving for a down payment?, that’s crazy talk!). We were hours away from closing on a townhouse in Port Moody when we decided to walk away from it. I’ve never been happier with that decision. Soon after, we found this site, and have just moved into a new rental unit right next to family (nearby child care). So not only do we have an acceptable rent payment but we have some money to invest, and no loans or debt of any kind.. How is that for a quick snapshot of one potential first time home buyer. Thankfully logic trumped emotion here.”
– SpatialFiend at VREAA 3 October 2011 4:58 pm

“You gotta love a city where $1.5mill is considered a “starter home”!”

4533 W 14th Ave; V883037; Asking Price $1,498,000
1,590 sqft, ‘oldtimer’, 33x122ft lot.
Realtor blurb starts: “Well maintained starter home or build your dream home on this level 33′ x 122′ lot…”
——-
“You gotta love a city where $1.5mill is considered a “starter home”!” – Girlbear at vancouvercondo.info 17 Apr 2011 10:42am

Australian Home Buyer Strike Campaign – “First home buyers have been duped into entering the bottom rung of a nationwide property ponzi scheme.”

For the chronological record, we note this action here, and also note that this is being discussed on Vancouver and other Canadian RE blogs. For an account, see ‘The homebuyer strikes back’, abc.net.au, 31 Mar 2011. [Hat-tip Don.]
Excerpt:
“The housing market has spiralled off into ridiculous pricing that nobody can possibly afford, and it gets to the point where if nobody can afford it the prices must change,” he added. Mr Collyer says first home buyers have been duped into entering the bottom rung of a nationwide property ponzi scheme. “The first home buyers are the greater fools of the real estate market – that is, the entire edifice of land prices in particular depends upon this constant influx of new first home buyers naively entering into outer suburbs, into lower-priced housing to boost the price of everybody else’s housing up the chain,” he explained. “Now, when you remove that first stage of real estate pricing, the whole edifice collapses – it’s the end of the game.”

While we agree with the sentiment, we don’t believe that campaigns like these have a high chance of working directly. They do, however, spread the word, educating more people about the nature of the bubble, and that is a good thing. “Hey, I don’t HAVE to buy!”; “Hey, if I try to sell, there may not be a buyer!”
Simply seeing ‘Housing’ and ‘Ponzi Scheme’ in the same sentence in the national media is noteworthy enough. We haven’t seen that yet in Canada, to the best of our knowledge. – vreaa

Mortgage Brokers Protecting People From Mortgage Brokers

Angela Calla (Mortgage broker, & host of ‘The Mortgage Show’ on CKNW), on Global BC TV, 9 Mar 2011: [regarding mortgage rule changes] “It’s not a bad thing. When you have 30 percent of borrowers in the last three years since they’ve been available going into longer amortizations you have to look at the reason why people get home ownership is for security and affordability, and if a market changes you want to ensure that people can still have control of their home, and that’s why they have their home in the first place. So this protects people.”

And on ‘The Fox’ Jan 2011 (discussing the same mortgage rule changes)–

Interviewer: “Jim Flaherty changed the rules this week, and… the truth is, there’s probably a lot of Fox listeners out there paying $1600 in rent and that could easily be going to a mortgage, right?”
Calla: “Oh, easily.. I mean, you want to own a condo for $300,000? It’s going to cost you about 1,120 bucks a month, and you own a condo… for 300,000.” [recites numbers of listings at these prices in different parts of the city]
Interviewer: “What do you get in Vancouver for $300,000.. you get a shoebox, right?”
Calla: (shrugs) “Ah – You gotta start somewhere… You may be renting that shoebox for a thousand twenty bucks a month, so there’s options out there…”

‘The Province’ Runs ‘Greater Vancouver Home Builders’ Association’ Advertisement As News Item

The Province ran the announcement ‘First-time buyer seminar‘ as a ‘news’ item, 27 Feb 2011. Seems like an ad to us. We hope no innocent FTBs see the ‘article’, or the seminar itself, as anything other. Excerpts follow. [hat-tip joycer at vancouvercondo.info]

“The Greater Vancouver Home Builders’ Association is once again offering a seminar aimed at helping first-time homebuyers sort through the often overwhelming process of making the jump into home ownership.”

“The presenting sponsor is the provincial Homeowner Protection Office, branch of BC Housing, and corporate sponsors are The Vancouver Sun, The Province, Canada Mortgage and Housing Corporation, Real Estate Board of Greater Vancouver, Genworth Financial Canada, Scotiabank, Travelers Guarantee, Sheraton Vancouver Guildford Hotel, Shaw Cablesystems, CKNW, Rock 101, AM 730 and 99.3 the FOX.”

“Our property is one of those recent sales. Sold 6.5% over ask. FTB’s or 2ndTB’s looking at current low rates and monthly payments still seem to see value here.”

Purp1 at vancouvercondo.info 11 May 2010 3:43 pm – “Our property is one of those recent sales. On the market for one week. 60+ groups at open house, 4 offers, best was 6.5% over ask. Lots of interest in Vancouver for ’starter’ homes priced well which have a mortgage helper. FTB’s or 2ndTB’s looking at current low rates and monthly payments still seem to see value here.”

Profile of a Recent First Time Buyer – “About a month ago I became a first time homebuyer in Vancouver. I have been living here for about 15 years, and seeing prices triple, or quadruple in some instances, and I just thought “Wow, I need to get on this wealth train”.

This anecdote is extracted from a telephone interview between CBC Cross Country Checkup host Rex Murphy, and a caller from Vancouver named Steve Zimbalatti, 25 Apr 2010, during a program on debt called ‘Living Beyong Our Means’. The segment occurs at the start of the second hour of the show. The whole segment is transcribed here. Thanks to AnonymousAA at vancouvercondo.info 25 Apr 2010 3:17 pm for first alerting us to this story. –

“About a month ago I became a first time homebuyer in Vancouver. I had been a renter and I had money in the bank and quite a bit of freedom actually. It was very liberating the way I was living and a lot of my friends, I think, were perhaps envious of the fact that I wasn’t tied down by debt. I sort of got into that situation by learning my lessons the hard way. As a student in college I got one of those credit cards that you are allowed to sign up for in the foyer and I thought “Wow, this is great. I’m a grown up now, I can take on some debt.” But I just couldn’t manage it. I maxed it out almost right away. I couldn’t really manage the debt, and it gave me a poor credit rating. I did not pay the bills on time and I just thought “Well this is enough of this, I am never taking on debt again”.

So, from that point forward, I was just living pay cheque to pay cheque, able to squirrel a little bit away every time and build up a little nest egg but I was thinking, here in Vancouver, I am watching all this wealth go by in this housing market. I have been living here for about 15 years now and just seeing prices triple or quadruple in some instances, in that time, and I just thought “Wow, I need to get on this wealth train”. So my partner and I decided that it was time to buy and, you know, if we are going to be here in Vancouver, working here in Vancouver, we might as well own something.

So, we bought last month [March 2010]. We just thought it was an astronomical amount of money that we are paying for this little box in a building in the sky and we just thought “Wow, this is crazy because, we’re grown up, we watched our parents pay $12,000, maybe $20,000, for a house and all of a sudden we are paying $350,000 for a tiny box in the sky. And to get anything in the City of Vancouver at that price, you have to compromise. You might not be able to live in the part of town that you want to live in. But we are very, very happy, actually, with what we’ve got, and we think it was, you know, a spot where we can make a good home.

[Rex Murphy: So do you feel now any less free than you did before?]
Absolutely. We find it very confining. You know, we never used to sort of care about the goings on in government or the world of finance or anything now we’re watching the news every day to see what going to happen to the interest rate, or “do we lock in now?”. You know, we got almost free money in a way. When we tell people that we’re got a mortgage rate of 1.95% interest, my parents’ jaws drop. They used to pay 18% or 20% to service their mortgage, and now it is just like its unbelievable to them. You know I think wealth in a lot of ways these days has been transferred sort of to real estate and it seems to be, you know, by design if you ask me. If you look at say wealth, and where most of the money was 25-30 years ago, most of it was in the stock and bond market. Now for Canadian wealth it is in real estate.

Regarding our debt situation, it is not a worry in the sense that we don’t have it under control but we do find it, you know, I don’t want to say “crushing” because, like I say we are quite happy where we are but we do find it is less liberating, we might not be able to take the vacations we want which was great in the past. Yeah it is just, you know, it is a whole new ball of wax.”