What I don't understand is the mind set that these rates will stay the same for the next 10, 15 or even 25 years when these mortgages would mature and be paid off. Very few are making the kind of salary to be able to afford 1 million dollar mortgages if interest rates were to go above 5% or more.
Vancouver housing bubble?
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- JustAPilot
- Member
- Sep 15, 2011
- 213 posts
- 45 upvotes
- mudd_stuffin
- Deal Addict
- Jun 11, 2005
- 2823 posts
- 459 upvotes
Everyone is entitled to a view on interest rates.JustAPilot wrote: ↑What I don't understand is the mind set that these rates will stay the same for the next 10, 15 or even 25 years when these mortgages would mature and be paid off. Very few are making the kind of salary to be able to afford 1 million dollar mortgages if interest rates were to go above 5% or more.
FWIW, interest rates staying the same is not a completely unfounded view. The 2008/09 financial crisis has resulted in uneven growth across many parts of the world, and it would be very difficult to get synchronized growth that can result in interest rate increases on a uniform basis. In addition, the US is the only country where a major economic powerhouse is in a position to raise rates, and a high USD is deflationary for many parts of the world.
Something like US$12 trillion of government bonds are now yielding negative rates, and we are truly in unprecedented times. Interest rates, currently, seem to be heading lower rather than higher.
- craftsman
- Deal Expert
- Jan 27, 2006
- 21844 posts
- 15620 upvotes
- Vancouver, BC
Forget about interest rate moves... even if the interest rate stays the same and the 'normal' calculations of how much 'house' you can afford stays in place, very few of us (considering the average household income is just under $50,000 per year and the vast majority earn under $100,000) can afford a million dollar mortgage for any long length of time.JustAPilot wrote: ↑What I don't understand is the mind set that these rates will stay the same for the next 10, 15 or even 25 years when these mortgages would mature and be paid off. Very few are making the kind of salary to be able to afford 1 million dollar mortgages if interest rates were to go above 5% or more.
- dahlsom
- Newbie
- Oct 24, 2013
- 17 posts
- 1 upvote
- East York, ON
You're neglecting inflation. When rates go up to 5% inflation will be higher, and the CAD will lose value at a faster pace. So 1 million dollars won't be as much. In addition to this when people negotiate their renewal they can extend the amortization period. They will also have less than 1 million to pay off, since they would have bought 5 years prior and at the current rate of housing price increase they would probably have quite a bit of equity in the house.JustAPilot wrote: ↑What I don't understand is the mind set that these rates will stay the same for the next 10, 15 or even 25 years when these mortgages would mature and be paid off. Very few are making the kind of salary to be able to afford 1 million dollar mortgages if interest rates were to go above 5% or more.
That's not to say it can't crash. But, in our current environment (high inflation with low interest rates; government telling us inflation is low and trying to create more) buying hard assets is not a bad idea (historically). It's currently just as likely that the money will be worth nothing in 5 years, as it is that the house will be worth 50% less. The only hiccup currently is wages, but since Canada has 70% home ownership it would stand to reason that this will only impact 30% of the population. We will need to give them free money from the government to make everything balance, but the home owners will still come out ahead, so it's okay.
Right now we need deficit spending and tax reductions to keep the game going and make sure Canada comes out ahead at the end of all this. When your house gets too expensive I would suggest borrowing against it and diversifying (buy land somewhere else, some gold/silver, some equities, and hold some cash). Wealth transfer coming up. Then once we've all bought a house or two or three, let the immigration start back up and we can rent to the new Canadians and let them go to work lol.
- vivibaby
- Banned
- May 15, 2016
- 7020 posts
- 2490 upvotes
What's the housing market like in Edmonton? I want to move to Victoria but my bf wants to stay. :/
- noodles
- Deal Addict
- Apr 5, 2003
- 1005 posts
- 407 upvotes
- White Rock, BC
15% Property Transfer Tax for foreign buyers.
http://www.cbc.ca/news/canada/british-c ... -1.3694167
http://www.cbc.ca/news/canada/british-c ... -1.3694167
- Ironcat
- Member
- Sep 1, 2013
- 403 posts
- 97 upvotes
Too little too late. Unless you get the foreigners to sell the existing properties, the prices aren't coming down. The prices are beyond the reach of Vancouverites already.noodles wrote: ↑15% Property Transfer Tax for foreign buyers.
http://www.cbc.ca/news/canada/british-c ... -1.3694167
On another note, that marginal demand may redirect itself to Toronto.
- ADRiiAN`
- Deal Addict
- Aug 7, 2007
- 4795 posts
- 3847 upvotes
- GTA
On one side, that's great that they are finally trying to cool down the amount of foreign money coming in now.noodles wrote: ↑15% Property Transfer Tax for foreign buyers.
http://www.cbc.ca/news/canada/british-c ... -1.3694167
On the other side, will this stop the Chinese or will this drive home prices even higher?
Also, will they now be looking at other locations now? Toronto could be next.
- ccyk
- Deal Addict
- Nov 26, 2005
- 3214 posts
- 387 upvotes
- Vancouver
most likely the main flow will go to toronto, some flow to victoria. extra 15% tax does add more risk to buy new higher end properties in matro vancouver for foreigner.
from now until it becoming effective next week, buyers will rush to buy, sellers will rush to sell...
- rdecartus
- Newbie
- May 29, 2015
- 44 posts
- 2 upvotes
- Surrey, BC
Does this affect PRs?noodles wrote: ↑15% Property Transfer Tax for foreign buyers.
http://www.cbc.ca/news/canada/british-c ... -1.3694167
- noodles
- Deal Addict
- Apr 5, 2003
- 1005 posts
- 407 upvotes
- White Rock, BC
- JamesA1
- Deal Fanatic
- Mar 20, 2009
- 8862 posts
- 2693 upvotes
- Vancouver
And I'm sure there won't be any fraudulent activity like using proxy buyers to avoid the 15% tax...
The government solution to everything: let's add another tax!
The government solution to everything: let's add another tax!
- Sanyo
- Deal Guru
- Feb 9, 2009
- 12381 posts
- 11307 upvotes
This is a tax that justifiable... foreigners who want to park their cash here need to pay a premium.
Im sure Toronto will introduce one soon... they almost have too since some of that money may come here.
- craftsman
- Deal Expert
- Jan 27, 2006
- 21844 posts
- 15620 upvotes
- Vancouver, BC
Arguably, they are using proxy buyers now but generally not to avoid our taxes but to avoid their local laws (like the Chinese one on outflows of funds)!
At the end of the day according to the current process (which probably doesn't account for foreign proxy buyers), 7% of the purchases are foreign for that 3 weeks in June - I suspect that it's higher but let's use that number for argument sakes. What that number doesn't show is how many transactions were affected by foreign buyers - ie. the ones that they were the loosing bidder on but the local buyer was forced to pay more. I suspect that even if the 7% number is completely accurate, the number of transactions affected is a much larger number! How much larger we don't know but I would not be surprised if it's in the 20 to 30% range.
- craftsman
- Deal Expert
- Jan 27, 2006
- 21844 posts
- 15620 upvotes
- Vancouver, BC
Ontario will probably introduce one but not necessarily to slow the transfers down but as another source of income!
- atomiton
- Deal Addict
- Dec 14, 2007
- 3105 posts
- 1530 upvotes
The most important thing is perception. If people PERCEIVE that foreigners aren't buying houses with gusto, then they won't be able to justify the prices...
Remember, the REAL number of foreigners buying regular joe properties in Coquitlam, East Van, and Surrey is very small. The PERCEPTION is that China's buying up everything. The reality is that they're not.
If perception is altered, the locals ( who are the REAL people responsible for the run-up ) will stop bidding and start waiting. Sellers who need to sell will be faced with a glut in the market.
If 95% of the market is local, how do we allow 5% to control the price?
In a place recently sold by someone I know, there was 1 born-in-Canada Chinese family ( I'm sure the neighbours thought they were from Beijing, though )
In a relative's house, they sold the place to a White Single guy. A trucker.
It's all about perception, and ANY chance people get to point the blame outward instead of inward, they will take it.
Remember, the REAL number of foreigners buying regular joe properties in Coquitlam, East Van, and Surrey is very small. The PERCEPTION is that China's buying up everything. The reality is that they're not.
If perception is altered, the locals ( who are the REAL people responsible for the run-up ) will stop bidding and start waiting. Sellers who need to sell will be faced with a glut in the market.
If 95% of the market is local, how do we allow 5% to control the price?
In a place recently sold by someone I know, there was 1 born-in-Canada Chinese family ( I'm sure the neighbours thought they were from Beijing, though )
In a relative's house, they sold the place to a White Single guy. A trucker.
It's all about perception, and ANY chance people get to point the blame outward instead of inward, they will take it.
- ccyk
- Deal Addict
- Nov 26, 2005
- 3214 posts
- 387 upvotes
- Vancouver
best guess is that housing is just like oil price very elastic in economist term. A small % deficit of oil supply-demand balance push it up to $150 from $50 and a 3% supply surplus crash price to 1/3 from peak.
5% in RE may seem low, but could be big if it is very elastic. Plus bidding war generates snowball effect on psychology of buyers.
- spike1128
- Deal Expert
- Oct 7, 2010
- 15536 posts
- 5790 upvotes
- hmm
- Member
- Mar 9, 2009
- 448 posts
- 189 upvotes
- Toronto
For those saying just use proxies. The CRA is going to tear them a new *******. "So can you please explain again, how on a $60,000 income you bought a $4,000,000 house in cash?". It's game over, everyone knows it, the ones who don't are in denial. Liberals have their eyes on the upcoming election, and came out swinging today.
There is going to be so much pain when this house of cards comes crashing down.
There is going to be so much pain when this house of cards comes crashing down.
- 604nation
- Deal Addict
- Aug 31, 2014
- 1505 posts
- 564 upvotes
- YVR, BC
yeah no - the latest numbers had foreign money at 1 billion in 1 month and 86% in the Metro Vancouver area......just a few months ago there was no problem and everyone was racist?atomiton wrote: ↑The most important thing is perception. If people PERCEIVE that foreigners aren't buying houses with gusto, then they won't be able to justify the prices...
Remember, the REAL number of foreigners buying regular joe properties in Coquitlam, East Van, and Surrey is very small. The PERCEPTION is that China's buying up everything. The reality is that they're not.
If perception is altered, the locals ( who are the REAL people responsible for the run-up ) will stop bidding and start waiting. Sellers who need to sell will be faced with a glut in the market.
If 95% of the market is local, how do we allow 5% to control the price?
In a place recently sold by someone I know, there was 1 born-in-Canada Chinese family ( I'm sure the neighbours thought they were from Beijing, though )
In a relative's house, they sold the place to a White Single guy. A trucker.
It's all about perception, and ANY chance people get to point the blame outward instead of inward, they will take it.
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