While they mostly talk about Vancouver, there are three charts that are quite interesting.
The biggest loss in real estate in real terms ( inflation adjusted) was Vancouver in the 80's at a 44.4% loss. Calgary came in second at a 40.9% loss.
Thursday, April 26, 2012
RBC: Biggest loss in historical RE prices was Vancouver at 44%, Calgary 2nd at 41%
RBC has an interesting report tabling housing bubbles and busts in Canada's major centers here.
While they mostly talk about Vancouver, there are three charts that are quite interesting.
The biggest loss in real estate in real terms ( inflation adjusted) was Vancouver in the 80's at a 44.4% loss. Calgary came in second at a 40.9% loss.
While they mostly talk about Vancouver, there are three charts that are quite interesting.
The biggest loss in real estate in real terms ( inflation adjusted) was Vancouver in the 80's at a 44.4% loss. Calgary came in second at a 40.9% loss.
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It's strange that they would release a report from the past. Maybe they want to see if we can top the bust from the 80s? There is a lot of potential though!
ReplyDeleteSome markets like Vancouver and Toronto could potentially beat previous records when using inflation adjusted prices. The real kicker is that Canada does not have the luxury of lowering interest rates this time.
ReplyDeleteDo you have your rent money ready?
ReplyDeleteYup, let's see, rent a condo ( built in 2007) for $1100 a month since 2008 or buy like the neighbor did and shell out $1700 a month in mortgage payments plus $200 in condo fees plus $200 in taxes. Oh did I mention these condos have not recovered in prices since 2008? Add in realtor fees...., yup housing always goes up!
DeleteThe problem I have with renting is that the house is not yours to do what you want with it. Meaning if you want to paint, finish a basement, etc. you must get your landlord's permission to do it. You can't switch out light fixtures, appliances, etc. without permission either. If something breaks, sure the landlord pays to fix it (if it wasn't caused by you) but you have to wait for the landlord to fix it.
DeleteSure you pay more for owning a home, but you also get a place that you can call your own. Also, when you pay your rent you are essentially paying someone else to increase their equity in your home. Landlords also will charge you more for rent than their mortgage+taxes+condo fees will be combined (otherwise why rent it out as they will be taking a loss on the property).
In 25 years that condo is paid off while you are still paying rent and have no equity. You cannot say that you will "invest" the difference from rent to owning: at 2% return, forget it.
DeleteEven for $1000 monthly that means less than $300 yearly.
In 25 years, that $300K condo should increase in value, right?
In 25 years, that $1K monthly adds up to $300K plus interest. Still not as much as owning... And you still pay rent.
Verdict: renting is NOT a long term solution.
In my situation, the condo I am renting was worth 320k in 2008 and today.... about the same. Some have sold for less and some have sold for more, but the ballpark is 320k. Instead of renting money from the bank to have a mortgage, I am renting from my landlord. Factoring in a 5% interest with 5% down I am ahead by about $60,000 because in my case it is cheaper to rent than to own. ( My landlord bought this in 2006 before things went stupid, so they are not losing money). Yes, I am not factoring in "forced savings" but I do not believe in being house poor just so I have forced savings.
ReplyDeleteI have heard the argument that in 25 years the condo will be paid off and if I am still paying rent, I would nothing to show for it. Where do you think the money I save each month from renting compared to owning goes? Into thin air? The savings I get each month from renting go into two pots. One for investing in myself, mostly trips ( 4 outside the country since 2008, no heloc here) and wants. I don't believe in stay cations, which I would have to do if I owned a mortgage right now. The other pot is for saving for a house. There will come a time to pull the trigger and I will buy.
Renting is not a long term solution but neither is buying at the peak of a bubble. Looking at the graphs above, buying in Vancouver or Calgary in the early 80's was a huge mistake.
Even with that, I do not believe everyone needs to rent. If there is a 'soft landing" anywhere in Canada, Saskatchewan is most likely the best choice. More Regina than Saskatoon, though.
As long as buyers are 1 not highly leveraged, 2 not house poor WHEN factoring in higher interest rates, 3 can save for retirement, kids education and other pleasures in life 4 are not planning on moving with the next few years, then buying is not a bad thing. But too many people ( many first time buyers) are buying on emotions and are not looking at the whole picture.