Here is why I feel that FI In Vancouver real estate, in particular, is bad.
The median annual household(hh) income in the city of Vancouver is 74k.
A recent study on global housing affordability[0], suggests that to be what is historically considered as "affordable", the price of a house should be something along the lines of 3x annual household income.
Once home prices exceed 5x the annual hh income of an area, they are considered to be "severely unnaffordable".
This study ranks Vancouver at a 10.5x annual hh income. This is only slightly behind Sydney,AU for the #2 position on this "ranking" as the least affordable places on earth and still a ways behind the least affordable city on the planet of Hong Kong at 19x
However, The "average home price" that they used for this ranking was 778k CA.
Do you know what kind of a house 778k will get you in Vancouver? Well it certainly wont get you a "house". Perhaps, a small, rundown townhouse in the crappy part of town. The average selling price for a detached home in the city at the end of 2015 was 1.8M. If your thinking that you would/should be getting you into some pretty nice digs for that kind of coin, think again, because you won't be. You wouldn't look twice at that 1.8M house in most any other city in Canada/North America. If you want "into" one of the better neighborhoods in the city, 1.8M won't even get you a "teardown".
I can't say for how long this "affordability" will last as you can already see anecdotal evidence piling up of landlords moving towards "renovictions", "cashing out" and the "air bnbing" of the cities rental property inventory.
The other thing about renting is that you need to find a place to rent. The cities current vacancy rate hovers just above 0.8%, where a normal vacancy rate would be closer to 3%.
Now one would think that this low vacancy, might make for a pretty rosy picture for "traditional real estate investors", aka landlords. Not if your buying property to rent out today's prices. The costs of your property purchase will far outweigh the
- who am i to begrudge any one of my fellow Canadians, some epic tax free capital gains. If you bought a home in Vancouver > 5 years ago you are sitting on a potential windfall. If you are prepared to "cash out" and "move out".
- my only problem with this is that your pushing the Vancouver price escalation further and further outside of Vancouvers borders. I would hazard a guess that a majority of those cashing out and moving out of Vancouver proper are NOT moving to Montreal, but more likely to Squamish, Langley, Abbostford, Sunshine coast, etc. Those once small sleepy little cities and towns within a short drive to Vancouver, have also been seeing double digit annual price gains in their real estate sales along with falling inventory levels. The Vancouver windfall is pushing the homes in these communities out of the affordablity range of their current residents.
- do i stay or do i go? is this the peak?
- If you plan to stay in Vancouver, your not going to be any further ahead with your cash windfall, now depending on your circumstances, you could sell and just rent. Now you just need to answer the question - Is this the peak?.
- If you "sort of" move out, you are going to be somewhat further ahead and still within an easy drive into the City, so it is kinda a win/win assuming your willing to leave the shangri li of living in Vancouver proper. The only problem your causing is driving those once affordable "surrounding cities" into the "priced out" zone, but thats going to take a little while yet ...
- If you do "cash out and move out" well here is where your going make your biggest gains. There are still tons of affordable cities across the country
Petition to the government of Canada on foreign investment - https://petitions.parl.gc.ca/en/Petition/Details?Petition=e-281
i kinda like your theory there. Here's mine ...
I think it will work out great for those who bought a while back(> 3 years) in the Vancouver/Toronto markets and want to "cash out" and "move out" to pretty much any other Canadian city or even head south to Florida/Etcetera. Ka ching, you are in the $$$
Could be some problems for some of the other players in this game though, obviously it's NOT just foreign investors buying up all this pricey real estate, some even say it's mostly "Canadians" buying it.
If || When this "bubble" bursts it won't be "just" them foreign investors left holding the bag, there will be plenty of Canucks too, and if I had to place a bet, my money would be on the foreign investor's for being the first ones to make it to the exit door.
Now depending on how big this "potential" bubble burst is and how far underwater those left holding the bag are when its over. If enough of them are deep enough to walk away from there once perpetually rising properties, now leaving the bankers on the hook for some hefty losses.
And if you think there's any chance that the bankers are going to be taking any kind of a hit, well I've got two words for you "government bailout".
So now, even though you may have never even, so much as looked at a listing in either of Canada's 2 most sought after markets ...
... somewhere down the tax line, your going to be paying the price .
Sorry about that !
ID: 6091
NAME: CREATE-article
DESCRIPTION: ] foreign investment - why is it bad for Canadian real estate?
START DATE TIME: 2016-04-17 07:26:12
EST DURATION: 01:00:00
END DATE TIME: 2016-04-17 08:26:12
STATUS: To-Do
PRIORITY: -5
OWNER ID: 1