Real Estate

Vancouver housing bubble?

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  • Apr 8th, 2020 1:42 pm
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Deal Fanatic
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Sep 8, 2007
7938 posts
7911 upvotes
Way Out of GTA
It's interesting the data on the first page. The move from $363k in 2002 to over $500k in 2004 would have prompted bubble labels even back then. Also the Jun/08 peak of $906k to Nov/08 trough of $745k was in the middle of a meltdown.

A bunch of the rise 2005-2008 was actually during a period of tightening in the US back when central banks did stuff like tightening and rates in Canada weren't falling either.

Hard to know what to think about this going forward. But difficult to bet against given the global money flows looking for a home. If I were living there I'd either look for a value add opportunity to get a house or move to where job prospects plus RE prices are reasonable.
Deal Guru
Jan 27, 2006
12637 posts
5775 upvotes
Vancouver, BC
ccyk wrote: to be fair, you should only count 1 set of commission and 1 property transfer tax, plus legal and other small fees, say 80k in total.
That's basically what I said when I stated - "commissions and taxes of $159,000 without lawyers or bank fees split between the parties involved (ie. seller and buyer of each property)"
Member
Sep 1, 2013
402 posts
95 upvotes
craftsman wrote: That's basically what I said when I stated - "commissions and taxes of $159,000 without lawyers or bank fees split between the parties involved (ie. seller and buyer of each property)"
I take it you haven't ever bought and sold a property? Nobody pays anyone $160K. The buyer pays the land transfer taxes, the seller pays the real estate commission. Total roundtrip transaction cost is max of 5% these days, and if you can negotiate with your agent, it can be brought down further, esp. for high-value properties.
Sr. Member
Jan 30, 2006
857 posts
286 upvotes
Ironcat wrote: I take it you haven't ever bought and sold a property? Nobody pays anyone $160K. The buyer pays the land transfer taxes, the seller pays the real estate commission. Total roundtrip transaction cost is max of 5% these days, and if you can negotiate with your agent, it can be brought down further, esp. for high-value properties.
for toronto even at 3.5% commission will be 62k
and land transfer 63 k for a total of 125
add moving , lawyer etc. ok maybe 5k
let's pretend new house doesn't require any new spending at all

so loose cool 130k to move from 1550k to any 1750k

anyone see any sense in this transaction?

btw from what I heard most Canadian cities will introduce double land transfer like Toronto in the next few years
Member
Sep 1, 2013
402 posts
95 upvotes
kashirin wrote: for toronto even at 3.5% commission will be 62k
and land transfer 63 k for a total of 125
add moving , lawyer etc. ok maybe 5k
let's pretend new house doesn't require any new spending at all

so loose cool 130k to move from 1550k to any 1750k

anyone see any sense in this transaction?

btw from what I heard most Canadian cities will introduce double land transfer like Toronto in the next few years
5% include the land transfer taxes.

This discussion is about Vancouver. Vancouver is mulling reducing and eliminating property transfer taxes. LINK

These taxes come out to be about 1% - 2% of the value depending on the province.

5% of $1.5mm = $75K ~ $80K is all that's gonna cost you to buy AND sell a property. $125K, $159K, $200K are just fictional figures based on a pure lack of knowledge.
Deal Guru
Jan 27, 2006
12637 posts
5775 upvotes
Vancouver, BC
Ironcat wrote: I take it you haven't ever bought and sold a property? Nobody pays anyone $160K. The buyer pays the land transfer taxes, the seller pays the real estate commission. Total roundtrip transaction cost is max of 5% these days, and if you can negotiate with your agent, it can be brought down further, esp. for high-value properties.
I take it that you didn't read post carefully before... I said (and let me bold and underline this time as bold didn't seem to work) that it's split between the parties involved (ie. seller and buyer of each property). I didn't say how much each party pays or if the real estate agent cut their rates (and if they did, then realistically, they paid part of the fee as they didn't keep it for themselves).

Besides, not everyone is as good of a negotiator as you obviously are; and the whole point of the example was to keep things simple for people to understand hence, lawyer fees and possible bank fees for a mortgage transfers or bridge financing was excluded from the example. Heck if you are a really good negotiator or if one party is motivated enough, they might even pay all of the transaction cost. And yes, it's a simplistic way of looking at it but there are too many variables involved to get an exact number on a fictitious transaction.
Sr. Member
Jan 30, 2006
857 posts
286 upvotes
Ironcat wrote: 5% include the land transfer taxes.

This discussion is about Vancouver. Vancouver is mulling reducing and eliminating property transfer taxes. LINK
I would bet a farm those taxes never be eliminated
and 80k is still not trivial amount to waste for a minor property upgrade
Member
Sep 1, 2013
402 posts
95 upvotes
craftsman wrote: I take it that you didn't read post carefully before... I said (and let me bold and underline this time as bold didn't seem to work) that it's split between the parties involved (ie. seller and buyer of each property). I didn't say how much each party pays or if the real estate agent cut their rates (and if they did, then realistically, they paid part of the fee as they didn't keep it for themselves).

Besides, not everyone is as good of a negotiator as you obviously are; and the whole point of the example was to keep things simple for people to understand hence, lawyer fees and possible bank fees for a mortgage transfers or bridge financing was excluded from the example. Heck if you are a really good negotiator or if one party is motivated enough, they might even pay all of the transaction cost. And yes, it's a simplistic way of looking at it but there are too many variables involved to get an exact number on a fictitious transaction.
Here is what the poster above you wrote:
Kashirin wrote:so you say someone will go out of his mind and buy something for 1772k taking 8x leverage and you conveniently forgot 200k in transaction cost. they won't be able to buy anything because transaction cost is 200k.
This is what you wrote following up from that:
craftsman wrote:$200,000 to transact two real estate deals might be a bit much but there is value in what is being said as there are additional cost to any transaction that should go into the buying and selling price.
....
To move from the $1,557,000 to the $1,772,000 property would have a total transaction cost of just commissions and taxes of $159,000 ... you would probably approach $200,000 in transactional cost split between the parties.
Your post's executive summary is in the first line. Then, further down, you actually reconcile the other poster's nonsensical numbers, using a two-party $159K spend and then 'banking/legal fees of $41k', to $200K.

It is clear from that other post that he/she somehow believes that, for an owner to upgrade from one property to the other, it would cost the owner $200K in transaction fees/costs. Yet, you find 'value in this statement' by doubling up the fees for the two parties - not one as he/she used - and adding on 'legals/banking/assorted fees' of $41K.

The fact is, it won't cost you more than $80K for that upgrade (unless you are doing it for the first time) and that this upgrade path confirms the genuine SFH queue that is present in all markets.
Sr. Member
Jan 30, 2006
857 posts
286 upvotes
Ironcat wrote:
The fact is, it won't cost you more than $80K for that upgrade (unless you are doing it for the first time) and that this upgrade path confirms the genuine SFH queue that is present in all markets.
it actually confirms nobody in his right mind except you would do minor upgrade wasting 80k
this path is clearly closed
Deal Addict
Jun 11, 2005
2619 posts
302 upvotes
Ironcat wrote: 5% include the land transfer taxes.

This discussion is about Vancouver. Vancouver is mulling reducing and eliminating property transfer taxes. LINK

These taxes come out to be about 1% - 2% of the value depending on the province.

5% of $1.5mm = $75K ~ $80K is all that's gonna cost you to buy AND sell a property. $125K, $159K, $200K are just fictional figures based on a pure lack of knowledge.
BC has it good for now... PPT is maxed out at 3% on portion of purchase price > $2M. R/E commissions are generally in the 2.5% range plus GST.

Compare that to Toronto where LTT is maxed out at 4% pretty easily, and R/E commissions are usually 5% plus 13% HST. In Toronto, it is not inconceivable that you lose 10% by trading properties.
Member
Sep 1, 2013
402 posts
95 upvotes
kashirin wrote: it actually confirms nobody in his right mind except you would do minor upgrade wasting 80k
this path is clearly closed
Of course, if we believe $200K in transaction costs, we can believe anything. Based on your logic, no one would ever sell a $1.5mm house.

$80K over 10 years on a $250K upgrade only needs a ~2.5% price increase per year to break even. Meanwhile, you can live in a better neighbourhood/closer to work/among better schools, yada yada.
Member
Sep 1, 2013
402 posts
95 upvotes
mudd_stuffin wrote: BC has it good for now... PPT is maxed out at 3% on portion of purchase price > $2M. R/E commissions are generally in the 2.5% range plus GST.

Compare that to Toronto where LTT is maxed out at 4% pretty easily, and R/E commissions are usually 5% plus 13% HST. In Toronto, it is not inconceivable that you lose 10% by trading properties.
A $1.5mm property will cost ~1.5% in LTT/PPT at the province level, ON or BC. Toronto the municipality excluded. And, no, your own agent shouldn't charge 2.5% on both sides of trade for trading properties.
Sr. Member
Jan 30, 2006
857 posts
286 upvotes
Ironcat wrote: Of course, if we believe $200K in transaction costs, we can believe anything. Based on your logic, no one would ever sell a $1.5mm house.

$80K over 10 years on a $250K upgrade only needs a ~2.5% price increase per year to break even. Meanwhile, you can live in a better neighbourhood/closer to work/among better schools, yada yada.
most likely outcome for Vancouver is -2.5% per year in the next 10 years and on top of that you suggest to waste 80k after tax income which is equals to 1.5 year of work for free for an average person
so your math definitely can't work here
Member
Sep 1, 2013
402 posts
95 upvotes
kashirin wrote: most likely outcome for Vancouver is -2.5% per year in the next 10 years and on top of that you suggest to waste 80k after tax income which is equals to 1.5 year of work for free for an average person
so your math definitely can't work here
As I wrote elsewhere and this post confirmed it:
A couple of the renters on this forum just quoted me a $200K transaction cost to buy and sell a $1.5mm home. The more they post the more I realize how lacking an understanding of the basic financial math is among large swaths of population. Those foreign buyers deserve those houses - if only for knowing how buy, selling, and levering up actually work.
Deal Addict
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Sep 23, 2014
1722 posts
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Toronto, ON
kashirin wrote: it actually confirms nobody in his right mind except you would do minor upgrade wasting 80k
this path is clearly closed
How many people "upgrade" from a $1.5M to a $1.7M house? That is barely an upgrade at all so why focus on the hypothetical. Those looking to upgrade from a $1.5M are mostly eyeing properties in the $2M+ range before it is worthwhile and to them $80K or $100K is just pocket change. Oh you conveniently left out realtor rebate in your calculation which are tens of thousands.
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