OT: Moving Out West

[ginner classic]

You're technically right that the "world-class city" label is qualitative, but it is a factor. Vancouver has virtually every single "lifestyle" offering that you could want, and IMO those are even going to be more important when people decide on a place to live. A place like Regina has a pretty robust economy and affordable housing, but that's because not many people want to live there. It's the whole "work to live vs. live to work" mentality.



You also technically gain wealth by paying down the mortgage and reducing the liability each month (as long as the property's not declining in value).

That aside, though, do you really think that the average homeowner cares about how much money their real estate makes them? The average, historic homeowner buys a home that he can afford and pays down the mortgage over a period of 20-to-30 years. They don't care about median incomes, interest rates, asset values, any of stuff. That's part of why a real estate "crash" in Vancouver is just not likely. Very few people are real estate investors - most are just homeowners. As long as they're gainfully employed and able to make their monthly payments, what's the motivation to sell? And for a crash to happen, you'd need a whole slew of these homeowners - of whom the vast majority are single property owners and not investors with big portfolios - to sell, basically all at once.



There's no such thing as a perfect investment. The problem with renting is that you have a guaranteed 0% rate of return on those dollars spent.

And regarding your last sentence, again, not really. The holding period on real estate should be measure in decades, not months/years. There will be ups and downs, but the historic trend by and large is that it's tied pretty closely to inflation. And if you're getting a 2 - 3% increase in property values annually, that's called leverage working in your favour.

Any 'it's different here' metrics like 'world class city' whatever that means, are irrelevant to the bigger issues. If they were relevant then rental incomes in those cities would similarily be higher. There is a massive disparity between rental incomes and house prices in Vancouver. That is not sustainable.

It's different here..........Calgary and Edmonton have oil (and a real, albeit narrow, economy), Saskatchewan has Potash, Halifax had shipbuilding, Toronto has actual jobs, Victoria has old people, Kelowna has sunshine.....and so on....yada yada yada.

There is no such thing as it's different here. Ignore the qualitative. Focus on the data. If you can't explain that, there is no point looking further. It tells the whole story with all the touchy feely stuff built into the numbers.

Rate of return on renting..........what about the return on the down payment? What about the difference in cash flow rent vs buy in Vancouver?

Do you know what % of housing units are owned by the actual resident? If not, wouldn't you like to do some research before you claim that there is no speculation in the market and thus no potential for speculators to flood the market? I gave you a link to literally the only data on the subject previously. Do us a favour. Read it.

I can trot out endless supportive data from Canada Mortgage and Housing, Stats Canada, BC Stats, Demographia, or articles from The Economist, The Globe and Mail, Robert Shiller, Rosenberg, and yes, even CREA themselves. You respond with 'World Class City'.

 

[King of the ES*]

There is no such thing as it's different here. Ignore the qualitative. Focus on the data. If you can't explain that, there is no point looking further. It tells the whole story with all the touchy feely stuff built into the numbers.

If that's the case, then I guess you'd be on the next plane to Regina if you were offered 10 - 20% more in compensation to move there?

Rate of return on renting..........what about the return on the down payment? What about the difference in cash flow rent vs buy in Vancouver?

What about it? It's a homerun if the RE market moves at the standard, conservative 2 - 3% per year. Why? Leverage.

Say you buy a home worth $500,000. You put $100,000 down. One year later, conservative estimates have the home worth $512,500, a 2.5% annual increase.

That means that you've just earned 12.5% on your $100,000 down payment, not even taking into account mortgage paydown. Not bad, right? Of course, these gains are paper, but they are still valid.

I can trot out endless supportive data from Canada Mortgage and Housing, Stats Canada, BC Stats, Demographia, or articles from The Economist, The Globe and Mail, Robert Shiller, Rosenberg, and yes, even CREA themselves. You respond with 'World Class City'.

Supportive data for what? What are you trying to support? That a crash is impending? The numbers are out of whack - yes, I understand and agree. That doesn't mean that a crash is soon to follow. Hong Kong's twice as expensive as Vancouver. Is everything going to come tumbling down there, too?

 

[mr gib]

Hawaii.

i'm here right now ... cheaper than vancouver ( but ya better have a virtual job ... ya can't work here or be here more than 6 months at a time ... if you're a canadian )

 

[Wheatley]

Kelowna and Kamloops are beautiful + they're not too pricey, stay away from the island if cost is your main issue.

Kamloops is NOT beautiful. In fact I have trouble going there without commenting about how ugly the scenery is. Just way too much brown.

 

[ginner classic]

If that's the case, then I guess you'd be on the next plane to Regina if you were offered 10 - 20% more in compensation to move there?



What about it? It's a homerun if the RE market moves at the standard, conservative 2 - 3% per year. Why? Leverage.

Say you buy a home worth $500,000. You put $100,000 down. One year later, conservative estimates have the home worth $512,500, a 2.5% annual increase.

That means that you've just earned 12.5% on your $100,000 down payment, not even taking into account mortgage paydown. Not bad, right? Of course, these gains are paper, but they are still valid.



Supportive data for what? What are you trying to support? That a crash is impending? The numbers are out of whack - yes, I understand and agree. That doesn't mean that a crash is soon to follow. Hong Kong's twice as expensive as Vancouver. Is everything going to come tumbling down there, too?

http://www.financialpost.com/m/wp/p...post.com/2013/04/05/canadian-housing-downturn

 

[Zombotron]

Don't come here. Too many malls and shopping plazas for a city of 85,000.

 

[Angry Little Elf]

Don't come here. Too many malls and shopping plazas for a city of 85,000.

And conference centres with a hole next to it

 

[Zombotron]

And conference centres with a hole next to it

Nanaimo has been horribly developed and could be so much better than it--

Seriously. What were they thinking putting so many malls here, the biggest one of which is on the outskirts of town?

 

[Tanevian*]

This is a great but totally useless thread. I do like the doom and gloom though, reminds me of the last 5 years of McLeans magazine. I am starting to think there is a secret club of people that can't afford Vancouver who are trying to start a panic. To the OP, you do not care about housing prices. They do not matter to you. Here is my 2 cents, I assume 4 of you will try to show some data proving that it actually isn't worth 2 cents. I am ok with that.


I live just off the Drive, I own my home with the bank as a majority partner. However, if I had about 300,000 more to spend when I bought, I would have gone with Mount Pleasant/Riley Park/Main Street. It's a great neighbourhood with access to transit everywhere. The West End is also quite nice.

I lived in Victoria for 3 years, I wouldn't wish it on anyone unless you were a young family or a senior. Nice place to visit.

If you choose Alberta, I am sorry for you.

 

[Tanevian*]

Nanaimo has been horribly developed and could be so much better than it--

Seriously. What were they thinking putting so many malls here, the biggest one of which is on the outskirts of town?

Kelowna is a strip mall with a lake nearby.

 

[KillerWhale]

Strip malls are the worst. That's one of the reasons I decided to move to New Westminster.

 

[Lawzy]

If you are interested in learning more, I'd suggest checking perhaps some of Ben Rabidoux's commentaries.
http://theeconomicanalyst.com/content/primers

It's a big topic that can consume a lot of your time if you get interested in it though.

Few things:
1) Terms like "world class", "best place on earth", etc. cannot be measured and offer you zero insight into how Vancouver will behave relative to other places. Look for actual data. And I mean actually look them up. Median incomes, sale prices, monthly rent rates, immigration rates (people make lots of assumptions in this area), months of inventory, interest rates, dates when CMHC changed mortgage insurance rules on minimum down payments, maximum amortization lengths, etc. (superimpose the dates of interest rate and CMHC changes on ginner classic's graph above - and on graphs for other Canadian cities - and you may come to a different conclusion on what's caused steep increases in prices over the last decade or so).

2) In simple terms, a house/condo makes you money in 2 ways: 1) through the rental income it generates for you and 2) on the day you sell it. Two part-time wage slaves born at the right time for getting into this market may have a house theoretically worth 1.2 million today but if they don't sell, how rich are they?

3) Ever had someone say renting is "throwing away money" or "paying someone else's mortgage"? If that happens, ask them to do this simple thought exercise: assuming you had 2 million dollars in the bank and you were given the choice between a) buying your dream house for a million bucks cash or b) renting that same house at $50/month, which would you pick. In simple terms, the rational answer to pick every time is b). The interest on $2mil in a boring savings account way more than covers annual rent from scenario b) and rents are not able to soar fast enough to overcome the difference in what you'd gain. The moment it's acknowledged that renting > owning in terms of personal finance for this situation, then that means you should calculate which is more favorable in your present situation. My spouse and I make good money. We rent. Prices may continue rising, they may not. It doesn't matter. Renting leaves us enough money each month to save for our kids' education, retirement, other investments, a very nice lifestyle, Canucks jerseys, etc. Assuming we wanted to part with a 10% down-payment on the place we rent, I don't know that we could afford food and utilities at month's end. That's not a joke. My point is: I believe real estate speculation will unwind here but even if it doesn't I can continue living as I am (i.e. getting ahead). If I owned here and now - and had bought any time recently - I NEED things to stay up or else my family would be hosed.

I'll have to put it on the back burner, but thanks for the link! Have exams to study for, but for the time being I'll check back on the thread for smaller interesting debates.

It's interesting indeed, although some of it is going over my head, I am a few intro econ courses away from getting the big picture.

i'm here right now ... cheaper than vancouver ( but ya better have a virtual job ... ya can't work here or be here more than 6 months at a time ... if you're a canadian )

You're on a work visa?

I always figured if I was going to leave the country, I would set my sights on a new home and spring for a green card from the company hiring me. Easier said than done of course.

 

[express]

I'm a through and through Vancouverite, but I live in Calgary because it just makes so much sense.

With the extra money I make, with the job I actually have, I can go to Vancouver any time I want.

Honestly, aside from the fact that it isn't situated as nicely as Vancouver, Calgary is only a few years away from being a 'world class city'. The arts, culture, food scene is on the verge of a major breakthrough. Arguably, the class of restaurants is already better than Vancouver's. Though I do miss cheap sushi.

... and Banff is only an hour away.

 

[Hi-wayman]

I'm a through and through Vancouverite, but I live in Calgary because it just makes so much sense.

With the extra money I make, with the job I actually have, I can go to Vancouver any time I want.

Honestly, aside from the fact that it isn't situated as nicely as Vancouver, Calgary is only a few years away from being a 'world class city'. The arts, culture, food scene is on the verge of a major breakthrough. Arguably, the class of restaurants is already better than Vancouver's. Though I do miss cheap sushi.

... and Banff is only an hour away.

Come on guy. Have you looked out the window? It's April and it's snowing out tonight.

I'll be at the game Wednesday helping as a volunteer for TELUS night. Vancouver 6, Calgary 3. I've grown to like Calgary except the weather, but no, Calgary's food scene still has a long climb ahead to match Vancouver or Toronto. No chance it will ever match Montreal.

 

[mr gib]

I'll have to put it on the back burner, but thanks for the link! Have exams to study for, but for the time being I'll check back on the thread for smaller interesting debates.

It's interesting indeed, although some of it is going over my head, I am a few intro econ courses away from getting the big picture.



You're on a work visa?

I always figured if I was going to leave the country, I would set my sights on a new home and spring for a green card from the company hiring me. Easier said than done of course.

internet business

 

[604]

Looking to move out West. Trying to narrow down where to live. Any recommendations based on living expenses, job opportunities, and night life? I have worked in the automotive sector, retail, office administration, and in a restaurant. looking to make some decent coin. Any feedback or advice is greatly appreciated. Please disregard the fact I'm a Leafs fan

I'd suggest the best non-executive coin is probably working at a nice restaurant or high end retail. There is a lot of money floating around downtown and the trickle down in high-end places seems quite good.

The best place I ever lived downtown was on Marinaside and Davie (1228 Marinaside). Really nice to live right on the seawall if you can swing it (and the rent isn't much more than anywhere else) - if you have an unobstructed water view, heat can be an issue though. Also, it's a nice quiet neighborhood that is only two to five blocks from good bars regardless of what your preferred style is (be it Gastown or Yaletown).

If you do not have a family, I suggest living downtown in Vancouver, not anywhere else. It makes a huge difference.

In regards to Calgary, the biggest issue I have is the lack of a real downtown living environment. Downtown seems to mostly clear out at night but I haven't been there in a few years so things may have changed. People were friendly though and it was easy to meet people.

 

[CascadiaPuck]

What about it? It's a homerun if the RE market moves at the standard, conservative 2 - 3% per year. Why? Leverage.

Say you buy a home worth $500,000. You put $100,000 down. One year later, conservative estimates have the home worth $512,500, a 2.5% annual increase.

That means that you've just earned 12.5% on your $100,000 down payment, not even taking into account mortgage paydown. Not bad, right? Of course, these gains are paper, but they are still valid.

1) By whose standard is 2-3% conservative? All I've seen over the last year is eroding forecasts from banks, realtor organizations, etc. that note that Canada will flatten and BC will do worse. And those are from people with a pretty vested interest in sharing good news about the housing market. Nothing wrong with predicting that rate of gain but after a decade of hyper-growth here, predicting further growth at over inflation and against the expert opinion is not "conservative".

2) Say a 2.5% increase on 500k (12.5% on the down-payment) happened. To determine what this person has actually made, you have to factor in all costs. "On paper" is meaningless. Ask ex-Nortel millionaires. First, let's assume that you brought $100k to the table and borrowed $400k. $500k, all in, meaning that the $500k total price-tag included the realtor fees that needed to be paid (i.e. there wasn't a 1%-6% charge borrowed on top of a $500k sale price). Now let's say the person tried to realize that gain. $12,500 in one year? Great! Sell and put that money in the bank! Wait - what did it cost to move in (trucks, new coats of paint, maybe a day off work, etc.)? Any reason it'll cost less when you move out? Okay - subtract that. No biggie, we're still in the black. Now, what would 1% in realtor fees do to earnings? Take away $5k? Huh. What about a more typical 5-6% in realtor fees. What - things are now 5 figures in the hole? Wow. And What about equity gains from all the mortgage payments made during the year? Practically zero because nearly all the money in the first years goes to mortgage interest and not principal? Fascinating. Maybe you want to treat the realtor fees as something paid by the buyer and not the seller. That's fine. But you either need to increase what the person borrowed to initially buy the house at $500k in the first place if the fees weren't accounted for or, if you're saying it cost $500k with fees included (as we assumed), you're talking about an increase in value of more than 2.5% over that year (i.e. more like 7% in the year if the house cost $476k and there were 5% in fees that the buyer was responsible for to bring the total to $500k).

Also: what's the comparison after one year if the person rented the identical house next door for a carrying cost less than the mortgage and invested the difference diversely?

3) And then there's the hit to your equity - your $100k - if prices decline even little (remember - you are building next to no equity at first because nearly all your mortgage payments are towards interest and not principal). Leverage cuts both ways. It amplifies gains when things go up but it amplifies pain if things go down. A 5% decline would wipe out 25% of your down payment - and then add in all the moving costs, fees, etc. if you wanted to stop the bleeding there. In some categories, prices from Jan and Feb from a year ago vs. the present saw 3-4% declines. And the number of new listings is seriously increasing.

Maybe people presenting things as I am are bitter we "missed out" (by being born to late?). I'd say no but won't expend energy here trying to convince otherwise. All anyone really needs to do is try to ignore the hype on all sides, crunch the numbers in various scenarios for themselves, and, of each advice giver they meet, ask what that person has to gain/lose if real estate keeps growing or implodes.

 

[CascadiaPuck]

I'll have to put it on the back burner, but thanks for the link! Have exams to study for, but for the time being I'll check back on the thread for smaller interesting debates.

It's interesting indeed, although some of it is going over my head, I am a few intro econ courses away from getting the big picture.

You really aren't. You just need to start looking for historical data on immigration, house costs, interest rates, etc. and start playing with it in Excel.

Good luck with exams! The best investment you'll make when you're young is in yourself (i.e. giving yourself the skills and thinking ability that will help you earn).

 

[CascadiaPuck]

I do like the doom and gloom though, reminds me of the last 5 years of McLeans magazine. I am starting to think there is a secret club of people that can't afford Vancouver who are trying to start a panic.

It is a mistake to think that those who suggest buying here is a poor decision right now cannot afford to buy here.

 

[604]

I am a home owner that planned on renting forever. I still believe that renting is better financially if you ignore capital gains but non-financial factors led to me buying a house.

Keep in mind, if you only own over residence, you are hopefully unlikely to reap any rewards from housing going up as your next house should be bigger then your current one unless something goes wrong in life. As a result an increase in housing just makes your next house more expensive. If you rent, its not really an issue.

 

[Alflives*]

Any 'it's different here' metrics like 'world class city' whatever that means, are irrelevant to the bigger issues. If they were relevant then rental incomes in those cities would similarily be higher. There is a massive disparity between rental incomes and house prices in Vancouver. That is not sustainable.

It's different here..........Calgary and Edmonton have oil (and a real, albeit narrow, economy), Saskatchewan has Potash, Halifax had shipbuilding, Toronto has actual jobs, Victoria has old people, Kelowna has sunshine.....and so on....yada yada yada.

There is no such thing as it's different here. Ignore the qualitative. Focus on the data. If you can't explain that, there is no point looking further. It tells the whole story with all the touchy feely stuff built into the numbers.

Rate of return on renting..........what about the return on the down payment? What about the difference in cash flow rent vs buy in Vancouver?

Do you know what % of housing units are owned by the actual resident? If not, wouldn't you like to do some research before you claim that there is no speculation in the market and thus no potential for speculators to flood the market? I gave you a link to literally the only data on the subject previously. Do us a favour. Read it.

I can trot out endless supportive data from Canada Mortgage and Housing, Stats Canada, BC Stats, Demographia, or articles from The Economist, The Globe and Mail, Robert Shiller, Rosenberg, and yes, even CREA themselves. You respond with 'World Class City'.

Say what you want. The west coast has the warmest winter climate in Canada; that's why people come here. Whether it's now, or 100 years from now, that will not change.

 

[CascadiaPuck]

Say what you want. The west coast has the warmest winter climate in Canada; that's why people come here. Whether it's now, or 100 years from now, that will not change.

I absolutely agree that the moderate climate here is appealing and always will be but that doesn't change the arguments presented. Florida will always be warm and people will retire (or spend winters) in that region. That didn't mean they weren't over-built or over-priced or ripe for a fall a few years back. Consider the flip side: Vancouver will stay desirable going forward but it has also been desirable for decades into the past, no? Now look at ginner classic's graph from earlier in this thread (or find one stretching back further to the 70s or 80s). Vancouver has always been desirable and carried a price premium relative to other Canadian cities because of that. What suddenly happened in ~2002 to change things? I mean, outside of a very brief period in the early 80s, this place hasn't seen this kind of rate of hyper-growth. And certainly not for so long. Could it be that word suddenly got out about Vancouver? Or is there something else at play? (Hint: if you look up data for many other major Canadian cities, you see very similar spikes in growth on similar timelines [e.g. Winnipeg prices tripling over the past decade] - something that doesn't seem to suggest a specialness for Vancouver.)

And to the earlier point someone else made about a Canada-US difference being that you could walk away from your mortgage debt in the US, that's not true in a majority of states - including Florida.

Vancouver can be both a desirable place to live AND in a massive real estate bubble at the same time.

 

[Alflives*]

I absolutely agree that the moderate climate here is appealing and always will be but that doesn't change the arguments presented. Florida will always be warm and people will retire (or spend winters) in that region. That didn't mean they weren't over-built or over-priced or ripe for a fall a few years back. Consider the flip side: Vancouver will stay desirable going forward but it has also been desirable for decades into the past, no? Now look at ginner classic's graph from earlier in this thread (or find one stretching back further to the 70s or 80s). Vancouver has always been desirable and carried a price premium relative to other Canadian cities because of that. What suddenly happened in ~2002 to change things? I mean, outside of a very brief period in the early 80s, this place hasn't seen this kind of rate of hyper-growth. And certainly not for so long. Could it be that word suddenly got out about Vancouver? Or is there something else at play? (Hint: if you look up data for many other major Canadian cities, you see very similar spikes in growth on similar timelines [e.g. Winnipeg prices tripling over the past decade] - something that doesn't seem to suggest a specialness for Vancouver.)

And to the earlier point someone else made about a Canada-US difference being that you could walk away from your mortgage debt in the US, that's not true in a majority of states - including Florida.

Vancouver can be both a desirable place to live AND in a massive real estate bubble at the same time.

I am not in disagreement with you. It's a simple fact that the west coast of Canada (specifically along the Straight of Georgia) has the best winter climate in the country, and that will always be a factor in realestate prices there.

 

[Tanevian*]

It is a mistake to think that those who suggest buying here is a poor decision right now cannot afford to buy here.

It was said slightly tongue in cheek, but you can be certain that every $50K a year journalist writing "the end is near stories" for the past 5 years certainly aren't in the market for a home. I was advised by a self styled expert on everything friend of mine that buying 4 years ago was too late, the market had peaked. We make over $200K with our sale last year. I am starting to think that friend is posting here.

none of this however is relevant to moving out for something to do. The OP doesn't sound in the market for a $1M home.

 

[Passthedonuts]

Vancouver will always be one of the most expensive markets in Canada - however it is foolish to suggest that prices will never drop. The fact is, prices go up and prices go down over cycles than can last several years. What goes up must come down and vice versa.

Vancouver's lifestyle does not make it immune from economics, despite the media generated propaganda that things are "different" here. Vancouver has always had a moderate climate, it's had wealthy Asians for several decades now and the mountains and ocean didn't arrive yesterday. In spite of this, real estate corrections have happened - as recently as 2008 - where the median price declined 18%. Speaking from first hand experience, I was caught holding 2 properties that year, both which saw values decline in excess of 20%.

Population growth is only one of many economic fundamentals that determine the direction that real estate prices are headed in. It is still possible to overbuild with a growing population. Demand is a fixed number, and it possible for the supply number to exceed it.

Listen, I love my hometown but the majority of it's residents need a reality check on the shortcomings of the city. It's real estate prices are not as much of a problem as the lack of high paying employment opportunities in the city. You're talking about a city with New York prices, but the population and economy of Pittsburgh. (Both cities have a similar GDP output - don't believe me, look it up).

Back to the original topic at hand, which was where should the OP consider moving. The answer to the question depends on his priorities. If you want the right balance between lifestyle and opportunity, Vancouver has alot of offer young singles. Rents are cheap, there are many great neighbourhoods, and the urban experience is fantastic for a city it's size. If you can find a job that allows you to pay your bills and enjoy the outdoors on the weekend - great. But Vancouver's flaws are seriously exposed when you have a family - when things like housing costs, daycare costs, income and commute times become a greater priority. Significant trade offs must be made for the middle class - there is no way around it.

If earning money is important, pick Saskatchewan or Alberta - and it's not even close. After a couple years there, if you're smart and don't spend it on cocaine and hookers - you should have more than enough savings to live comfortably anywhere in this great country that you so choose - including Vancouver.

I personally believe Vancouver is best enjoyed with some wealth behind you. Moving to Toronto allowed me to double my income, and cut costs by 30%. This will give us a big financial advantage in 3-4 years time when we decide to move home to BC, and getting back into it's real estate market.