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39 thoughts on “Renter or Owner?

  1. That’s my plan. Born and raised in Vancouver. Bought a thousand square foot condo in 2002 and will likely never do better than it as long as I stay here. The city is getting busier, but not necessarily better. Hoping to hang on to the condo and use the equity as a substantial down payment on a house in Victoria. I know 2 couples who have done the same in the past 18 months.

  2. Or maybe if there is a credit crunch and banks tighten lending like in 80’s,90’s and late 2000’s. As HSBC head economist said, there won’t be bailouts by any governments next time the markets crash, and they will. A few Vancouver buyers won’t make a difference here, they have always been buying in small percentages, price gaps are nothing new.

    It’s a new world out there with historical lending to Canadians never seen before and the global bond markets will come into play in a big way when things do unravel. Especially since the rest of the world is short Canada.

  3. I had a giggle from the big question posed in that huffington article:
    “the big question is what happens if there’s an unplanned setback…a rise in interest rates.”

    Could the answer be they rise…and rise quickly??

    I admit after seeing past behaviour, I now have one foot in the rise camp. Sure Victoria may not be Vancouver, however I believe we will now follow our big Sis’ considering the record gap between our prices. Sooner or later I would think enough Vancouverites would trade across for half the price.

  4. No secrets here, the average Canadian looks to have doubled their real net worth (assets minus debts) since 1999. Not bad considering the dot.com bust. That’s about 5% per year ahead of inflation.

  5. So you’re saying all the Alberta oil companies are closing up shop and moving to Vancouver for a 2% saving when they are laying off workers left and right ? Not sure what other “firms” would have any effect on BC housing when most Vancouver workers can’t afford to live there and many are leaving.

    This link states BC corporate tax at 11%.


  6. About as objective a report as you’re going to find when it’s written by the former chief economic analyst with Statistics Canada for 36 years.

    Here are two charts that may open your eyes to how good of shape Canadians are in regarding their debt.

  7. When the chief economist of HSBC says we’re in dangerous waters, I think I will listen to him than a Harper government backed think tank.

    “We’re in a “Titanic” economy. ”

    “The world economy is like an ocean liner without lifeboats.” As we have been warning in recent months, when another recession arrives, governments do not have the ability or the reserves to prop up the economy like they did in 2008.”


  8. The Fraser Institute ? That right wing think tank has it’s head in the sand. Debt is debt no matter how you spin it. Defending the government’s political motives to flip the mortgage bomb to CMHC and taxpayers and is a joke. What about the 93 million unemployed people in the US that don’t count anymore ? I am sure the number in Canada is proportionate especially after the oil crash is said and done.

  9. Canadians have higher debt to income ratios than the U.S., but much lower than some European countries, including Norway which has debt to income ratio of 201 per cent…
    “The problem in the U.S. wasn’t their overall level of debt. The problem was a small number of people were holding a lot of debt and they couldn’t repay it. It’s the distribution of debt, not the overall level that matters,” Cross said.


    He says there is no sign of banks lending in risky ways – to people with low incomes who cannot manage their debts.

  10. I see the next price boost coming compliments of the Alberta NDP. Firms and high earners will now shift their headquarters and capital to BC. Here is the easy tabular explanation as to why.

  11. The problem with expectations and forecasts is that like the weather they can change in a heartbeat. The chart that matters is the Canadian debt to income versus the US which you can drive a tanker truck or ten through. The percentage difference is massive.

    Fewer people are finding full time employment, and governments are now trending to replacing retirements with 2 year terms. The banks will not look at this as permanent employment and could have a serious effect on borrowing power.

  12. Understanding all of the points of Nash theory isn’t important. The crucial underlying concept is that what you’re thinking is not important but knowing what the other person is thinking that you’re thinking is important. And that’s what Nash theory is doing. The theory is telling you what the other person is most likely to do, so that you can do it before them.

    Luckily, here on this blog, we have shown some tools that will tell you what the other guys are doing in real estate market. Distinguishing between a buyers, sellers and balanced market as well as the extreme ends of the market with irrational bids as opposed to a dysfunctional and shallow market.

    However, according to Nash theory most of us will not list our surplus properties in a sellers market. Nor will we list in a balanced market. We will wait until the market is in favor of buyers to list. For Victoria that would mean more than 8 months of inventory of homes like yours, a low sales to new listings ratio under 40 percent and a days on market over 90.

    If you wait too long – then you’ll be trying to sell in a market that is shallow of prospective purchasers and lacking consistency among market prices. Possibly one that is dominated by duress sales. That makes you the dead guy in the dual.

    But that seems to be a long way off from now. Ceteris paribus

  13. Like Vancouver, our problem is supply. Speculation taxes are just a way to appease the public – they are of no use at all. The Property Purchase Tax was brought in under the guise as being a tax on speculators. It turned into a money grab by the Province with the Province and municipalities supporting more construction to increase their piece of the pie.

    The problem is supply. Not enough people are listing their existing homes for sale. Only about 3 to 4 percent of the total inventory of housing is listed for sale at any time. That leaves 96 to 97 percent of all properties sitting in limbo.

    To understand this better, you would have to separate home owners into two groups. Those that just own one home and those that own multiple properties to look at the problem. Those that own just one home are neutral in the marketplace, they are not going to list even if you strapped a stick of dynamite to their bottom. It’s those that have multiple properties that are going to be the dominant factor in this market.

    And in honor of John Nash, this requires some Game Theory to understand the market.
    Think of this market as an old fashioned gun fight with single shot flint pistols but walking towards each other. If you draw first but to far away – you’re are likely to miss and lose. Wait too long and the other person will shoot first and perhaps kill you. In order to solve this matrix you have to guess what the other person is most likely to do. At a certain point, both will be in range to make a hit and then it is in both of the persons interests to be first to shoot.

    This is where I would call one of my lifelines to a friend that graduated with honors in Economics and studied Nash Equilibrium. But his phone has been disconnected.

    Okay, then I have to jump to the end and simply say that it is not in the interest of home owners to list their homes for sale until they reach that point when they are close enough not to miss. Up until that point they will not list their properties for sale but it is essential that they be the first to list their surplus properties for sale once they reach that point.

    They have to guess when the other person will list and make sure to list before them.

    North Americans are most likely to shoot too soon. It’s our culture of being over confident in our abilities. That means there would be a precursor to the big fall in prices, followed by a rebound. That first fall determines a fundamental or minimum value. When we reach that maximum price point again – we expect a fall to happen and the more prices pass the maximum point the more nervous people get that the other guy will shoot first.

    The second run up in prices is much shorter than the first because we learnt our lesson of how much there is to lose if we wait too long since we have a benchmark or minimal value to compare the current market to.

    I’ve skipped several steps explaining the above and if you’re lost in the logic you should google Nash Equilibrium and work it through it yourself. Unfortunately real estate is a lot more complicated than the example I’ve tried to use. For instance we have more than one shot to sell our properties. But if we want to maximize our outcome it would be the first shot that would be the most important.

  14. My opinion is two of the better countries to watch are US & UK for where our prices are heading. Victoria and other parts of our country have a fairly good track record of following these two markets.

  15. Another MoM increase in sales. We are good for a 3-5% increase in the core this year. Yikes. Prices are sticky and IMO prices are flat line to upward positive.

  16. Monday, May 25, 2015 8:20am

    MTD May
    2015 2014
    Net Unconditional Sales: 676 714
    New Listings: 1,179 1,509
    Active Listings: 4,051 4,672

    Please Note
    Left Column: stats so far this month
    Right Column: stats for the entire month from last year

  17. I would say it does depend on rates though. Buying a house at 3x your salary is probably insane when rates are 15%, but now only the very high earners could claim they can buy a house at such a low multiple.
    Maybe rates will go up and normalize the market, but as as they say “Markets can remain irrational a lot longer than you and I can remain solvent.”

  18. Gotta say so far there is no sign of weakness at all and only increasing activity. You would be very hard pressed to find bearish signals in the market of the last couple years. Of course everything could change in an instant with a rise in rates but I think that isn’t coming anytime soon.

  19. For those, like Happyrenter, this has been a frustrating spring with the low selection of properties and return to high prices in most of the core districts. And that could be a reason why demand shot up this spring. People that were waiting simply threw in the towel and bought.

    And there just doesn’t seem to be any relief in prices for those looking at buying a house in the core in the foreseeable 90 days. In the world of Hawks and Doves, there isn’t any strategy for Doves when Hawks dominate the marketplace. As a Dove, the only thing you can do is wait until the Hawks financially cull themselves.

    Although you may feel the pang of frustration, It’s much harder on the Hawks these days as they settle for housing that is inconsistent with their income. High income earners are buying homes suitable for middle income. And middle income earners are settling for starter homes. Most of these buyers will be dissatisfied with their decision to buy and that will not make for a happy life for most of them.

    I suppose the one ray of sunshine is that the year over year increase in house buyers in the core is declining as the effect of the interest rate decrease works itself through the marketplace.

    In summary. https://youtu.be/vod9DL4IhBM

  20. Dear Happy Renter,

    It depends on so many variables…. but if you have job security and you can carry a significant debt without feeling stressed, then you may wish to “buy” a home. When I faced the same question in 1969, my co-workers were strongly advocating that the sensible person will always avoid too much debt. The suggested guidelines were; never spend more than 3 times your annual salary on a home. That ratio would apply just as well today and into the foreseeable future.

    If your salary does not equal 33% of the home you are considering, then you simply cannot afford it, no matter what the money lenders and sales agents tell you! Remain a happy renter.

  21. I sold my condo in 2010 and have been renting ever since but aspire to buy a house in the core. I’ve been very hopeful over the last five years that there would be a substantial drop in prices, but I’m starting to feel like I don’t want to wait much longer to find out… Any opinions on whether Victoria real estate prices will drop in the coming 2 years after this newly busy spring/summer market? I’m in agreement with Just Jack’s assessment that the core has reached peak value but I wonder if there’s much chance of a drop in prices now or just a long plateau. (Obviously I’d love to have a crystal ball to tell me the future right about now!)

  22. Thanks! To me, there is a huge financial difference between recently purchased and recently paid off. However, in social circles – both situations are described as owning a home.

  23. Not long to wait now for for the post-election crash!

    Meantime, we’re goin’ nuts here in Oak Bay, with a contractor said to be offering $50 to 100K over assessment for any house next to the envelope home just constructed at 2760.

    In which connection, does any one know what 2760 Lincoln just sold for?

  24. Not only HAM… HUM, HEM, HIM

    I’m from UK and my wife is from Oslo so together we’re ho hum 🙂

  25. In my opinion, Victoria became unaffordable as of 2005 – when a Single Family Home (SFH) was selling for an average of about $463K ($550K in 2015 dollars). Just a year earlier in 2004, the average was $386K ($459K in 2015 dollars).

  26. One more thing to note, I’ve read rumors from US based China market analysts that China government will levy a tax in October on all personal stock market profits. That could really set the wheels in motion as most market participants are retail investors, not to mention the Macau gambling crowd. Again, things to be aware of that could be catalysts that most people aren’t thinking about, specifically if you think HAM are having an effect on the BC real estate market. If not, then fill your boots.

  27. Crikey! We’ve been renting since we came back from Japan…like 8 years ago but still Victoria is not affordable for us. We’ll be renting for the foreseeable future.

  28. Charts are good and all but I am sure there are many other China billionaire owned stocks that went up too high too fast. 60% hits in one day on no news is penny stock type effect, not seen in market leading companies.

    As the derivatives trader said it’s the contagion effect which can hit at any time in any market, especially with the Asian gambling crowd. Where there’s smoke there’s fire when you see stuff like this.

    Toss in tensions with US and China over the South China Sea and that’s a recipe for caution.

    “It’s a contagion effect,” said Nick Cheng, chief derivatives trader at Liquid Capital Markets Ltd. in Hong Kong. Investors “are now rushing to take profit and everyone’s suddenly running for the exit,” he said. The volatility “will damage investor confidence with such a reputable stock exchange.”

  29. “The two Goldin companies traded at more than 130 times reported earnings before the rout, while Hanergy had a multiple of 65. Hong Kong’s benchmark Hang Seng Index is valued at 11.7 times.”

    Probably some manipulation to take those two stocks that high, however Hong Kong and China as a whole are still very cheap. When you take a longer dated view of Chinese markets, it looks as though the rally to go for years as they transition to a consumer led economy.

  30. I’m one of the “renters for the foreseable future”. Too many dark clouds out there for my liking from stock market run over done, to disagreements by economists and ex-BOC advisors on rates directions.

    Seeing stuff like this in the hot Hong Kong stock market is scary how fast things can change and could send the HAM influx into a tailspin.


  31. One of my favourite sayings is “wisdom begins with the definition of terms.” As such I’m glad you differentiated between own with a mortgage and own outright. In my opinion own should mean outright. This would result in three distinct categories: rent, own, and finance. But no one ever asks “do you rent, own, or finance?” 😉

  32. It’s interesting to see how the rent versus own poll results are shaping up. In a future poll I’ll see how many owners are considering buying a second home or considering moving “up” or “down” the property ladder.

    Other ideas for polls are welcomed!

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