You Keep Using that Word

10 thoughts on “You Keep Using that Word”

  1. A few citations needed. According to this (, Vancouver housing prices went *down* in the mid-90’s. It went up after Expo ’86, though. It only started to skyrocket since ~2002, when the post 9-11 “cheap and easy credit for everyone” policies were brought in around North America. I’d also like to see your sources that indicate massive amounts of foreign real estate investment is still going on.

    Perhaps worth clearing up a few things, since it was I who brought your attention to both the SFU program and one of those housing graphs (sorry for annoying you, but you do realize that you choose your own reaction, right?). I’ve never been the type to say that locals can’t afford to live here. I live here, as do a million others, as you rightly say. What I think is that Vancouver’s real estate is out of whack with economic fundamentals, and unless Vancouver is “special” (which only Vancouverites seem to think), things will correct. Sure you know people who can afford mortgages on one income; the plural of anecdote is not data. A lot of the buying going on right now is on 5% down, 35-year amortization mortgages (i.e. leveraged to the hilt, lowest payments possible so people can afford them – I have seen data on this, but feel free to disregard if you want). When interest rates go up (and they most likely will – the average interest rate over the past 20 years is something 8%), these people are in for a shock.

    In the meantime, sorry that half my tweets seem to annoy you. You’re welcome to unsubscribe, or just realize that people have differences in opinion 🙂
    .-= Chris´s last blog ..Performance Loss due to Project Switching =-.

  2. @Chris, to address your points:

    1. your graph is hard to read, but it looks like there was a steady climb through to 1996, with a dip and fall through the early 2000’s, coinciding with the tech crash, which makes sense. And you’re right, the skyrocketing rates happened after 2002. I still see no indication that there will be a mass correction back down to 1990’s rates – just like post Expo ’86 rates never went back down to pre ’86 prices.

    2. There’s a study here: that uses downtown condo data to try to reach some conclusions on ownership and occupancy. It’s true that foreign ownership, at least of downtown condos, is not as high as I’d have thought – but the majority of those properties are still not owner-occupied, which speaks to heavy investment (foreign or domestic).

    3. I never said I know people who can afford mortgages on one income, I was referring to people who can afford to live in Vancouver (usually renting) on one income.

    4. I do think a correction is coming, but not a crash. Even looking at the correction after the 20% interest days of the early 80’s (on your graph), when people were dropping their keys off at the bank, the correction wasn’t that drastic. Some people will be absolutely screwed, yes. But I’m interested to see exactly how many. I don’t think any of us can actually predict that. I recognize there’s a lot of “agreeing to disagree” around this one.

    5. I am annoyed, but not particularly by you or your tweets. Yes, these happen to be things that were spurred by our conversations, but it’s a general trend I’m noticing. Your tweets just lent some concrete examples to speak to. And I do choose my reaction. It’s generally those who are annoyed by something who are moved to investigate further and act on it – I’m okay with that.

  3. Hey Jen,
    Great post. As a biologist, I’ve seen the sustainability thing being thrown about too loosely a lot. One particular area that I see a lot in my work is the sustainability of fisheries vs. fish farming. Without getting into the whole issue here, I’ll just say that there are numerous hidden costs to both sides, and that as with most things environmental, it’s almost impossible to put values on the costs and benefits, particularly when people (usually the ones putting monetary value into things) restrict them to a given time frame, which is the very definition of sustainable – that there is no time frame. Another issue that Michael and I were talking about yesterday is the new windmill on Grouse Mountain. It’s meant to supply all of the energy that the mountain uses, including the night lights (but excluding the tram I think), which is great since I’ve always thought keeping those lights on all night is a huge waste. Our question, however, was how long does that windmill have to turn to make up for the energy used to get the raw materials for the windmill, build it and then get the thing up the mountain, and is the life expectancy of the windmill factored into that? And those are the calculable factors – one must also take into account the immeasurable factors such as the image of sustainability that the windmill presents, which may promote awareness and somehow influence people’s choices down the road. It gets complicated, and I think in the end you have to be able to be able to make educated decisions on what you personally believe are the most important factors contributing to your decisions. Greenwash is everywhere.

    As for your comments on real estate, I’m in full agreement. It’s a touchy subject among peers, largely because everyone wants to believe that they’ve made the best choice. But, I’ve always maintained that Vancouver is an atypical market, and that, for whatever reason, the amazingness of the city has only really recently been discovered on a global scale. The behavior of the market during the crash of the entire world’s economy is one example, as is the fact that despite the insane prices (for the price of our condo, we could own a very nice, private home with a pool and multiple vehicles with a garage to store them in where I grew up), people choose to stay. From my experience, people have learned to shift their priorities to live here… less space, less money into retirement (with the mindset that a roof overhead is a retirement investment), and less travel because we LIVE in a travel destination. I think the most anyone can hope for is a plateau in prices, which means, given today’s interest rates, now is the time to buy 🙂

  4. I have to wonder whether anything like a modern lifestyle is sustainable for the number of people on Earth right now using the kinds of energy and food sources we do. So much of what we do every day (including eating) is powered by sunlight stored by ancient plants and microorganisms as coal, oil, and natural gas. There are ways to change that, but we don’t seem very close to doing any of them. And I’m no exception.

    As for real estate, I’ve long thought that housing prices in Vancouver simply reflect the city growing up. How many people with normal incomes in Manhattan or Berlin or Tokyo own houses or even condos? Very few: they rent, and they have for decades. It’s the trend in our city now too.
    .-= Derek K. Miller´s last blog ..Telus and Bell go iPhone in Canada =-.

  5. Speaking of real estate, how’s the investment property search working out?

    I’d be surprised if you can find a property in the lower mainland that generates a profit (let alone positive cash-flow) even with 35% down payment.

    It’s my suspicion that a portion of these investors will eventually realize there’s higher returns with greater security and none of the headaches or hassles of landlording by investing in something like GICs. Because right now pricing is, by any reasonable metric, into “speculation” territory and by definition that’s unsustainable.

  6. That’s exactly why we don’t have a rental property yet. Lots of properties look good at first glance (at least the realtors will have you believe so), but when calculating the monthly PITH (principal, interest, taxes, heating) and Strata fees; and basing that on the rent one could collect, no way jose.

    I do have to agree with Derek though, that I don’t think prices will drop drastically. I just think property ownership will move further and further into the hands of the wealthy and out of the average resident.

    I don’t know if I agree with it, but it seems likeliest to me.

  7. I was in a Summer Institute in Dialogue class at SFU Harbour Centre in 2007; one of the groups in my class did some of the initial planning and research for the Harvest Food Box. I also researched it personally as an option while I was living in Toronto.

    On the one hand, I think you’ve got a good point about the mixed signals on the market mechanisms. On the other, there are other objectives the program may be trying to meet, so it may not look perfect from the narrow scope of fiscal sustainability. AFAIK, *no* food box program, including the ones I looked at in Toronto, has yet been able to find a model that is entirely subsidy-free.

    I believe the goals of the program extend beyond supporting local farmers, going more towards bringing awareness of issues of food security and the experience of eating seasonally to students, as well as awareness of cooking and health. It’s about attempting to alleviate the food desert problem – that people in lower-income neighbourhoods have less access to healthy food that may be priced out of their range due to issues arising from, oh, say, access to markets due to low population density. I don’t think either the United Way or FHA will let anyone off the hook for knowing that the cost of their food is being subsidized, and universities being what they are, the people who graduate and leave may very well be willing to pay those costs once they’re out. I think it’s a form of experimentation that definitely has to happen alongside asking Safeway and Save on Foods hard questions about their motives – which we also did during the course of my class.

    It’s perhaps analogous to the way the U-Pass is, viewed from actual demand and supply analysis, actually somewhat of a disastrous transit proposition for the system, but also results in a whole cohort thinking about transit issues in a different light. From my reading, the Good Food Box program in Toronto too had a social justice and economic stimulus role as well.

    Again, I think the dangers you point out are valid. The group doing the research on this project, I believe, were leaning at one point to recommend a model resembling a CSA more so than the food box. I figure, if it’s bound to fail, it’s still more information and experience for the people involved in it, than we had before.
    .-= Karen Fung´s last blog ..Today, tomorrow, I am grateful =-.

  8. We initially bought our condo as an investment property. We rented it out for 3 years. The rental income covered the cost of the mortgage, but not the taxes, strata fees and any maintenance. At the time, our rent was insanely low, so we didn’t mind the extra out-of-pocket expenses because we would have been paying more to live in the condo, which is substantially smaller than the house we were renting. Also, as you know, you have to claim the income and pay income tax on it – again, no biggie for us because my student income is not taxed, but if you’re already making a decent income, it could put you in a higher tax bracket and really do some damage. And, if you want to hear horror stories of bad tenants, just ask. Actually, even good tenants are a hassle, as our 3rd set (in 2 years) were great, but we still had to patch about a million holes in the walls (they had a thing for shelves) and just do a lot of wear and tear repairs on the place when we moved in. Tenants will never treat a space like an owner does, no matter how nice they are. Also, if you’re never planning on living there, you have to pay tax on your profit when you sell it. In the end, it worked out well for us because someone else paid our mortgage for 3 years, the property value went up substantially in the meantime, and when our landlord wanted his house back, we had somewhere to live. But since (I think) property values are going to pretty much flatline over the next few years, it may not be the way to go. Buying to live in, however, is a totally different story…

  9. One more thought: the reason rent prices aren’t really reflecting the real-estate prices right now is because a landlord is only allowed to increase rent by 4% a year on existing tenants. If new tenants come in and a new lease is created, the rent can be put up any amount (but it’ll have to reflect the rest of the rental market for the landlord to remain competitive). Tenants are holding onto their rental properties because 1) they can’t afford to buy into the market and 2) they don’t want to move because they’d risk having that jump in rent vs. renewing their current lease, which would assure them a max 4% increase only. Also, landlords are rewarding good tenants by not even taking advantage of the allowable 4% increase as they renew existing leases. So, while the real-estate market has gone up by something insane like 150% in the past 8 years (I don’t know the exact number, but I know it’s about that in some places), rental prices have only been allowed to go up by approximately 4% x 8 years = roughly 30%. What this means? Rental prices will take awhile to catch up, but as landlords are slowly able to increase them, both by the annual 4% and by slightly larger jumps when signing new leases, they will slowly start to reflect the true value of the market. This is good news for landlords, bad for tenants, who will some day soon be looking at a rental market like that of London or New York, where it’s $1000’s a month for a 400 sq. foot flat.

  10. I see you are discovering that realtors don’t work for you.. they work for the deal.

    Who knows where real estate will go in the short term? Only particularly clever investors. (the Aquilinis come to mind).

    It is clear with just a few year’s extrapolation, however, that 10%-per-year price increases are “unsustainable” while salaries continue to rise much more slowly.

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