Real estate in Calgary - another bubble?

[ben voyonsdonc]

Originally Posted by blankall

A lot of people who are already in the market will have that equity built up. Additionally, many dual income couples who are 35 or so should be able to save that much. You can each take out $35k from your RRSPs.

Are you talking about the Home Buyers Plan (withdrawing from RRSP for a down payment)? It is typically reserved for first time home buyers. In the situation that you describe, you would already have bought a house to have previous equity and therefore probably wouldn’t qualify. Also, you would have to pay back that $70,000 to your RRSP within 15 years so you’d need to factor that in.

[peter12]

So this goes back to supply, Vancouver bidding wars are basically just between the top 5% of earners.

[you&me]

Originally Posted by peter12

So this goes back to supply, Vancouver bidding wars are basically just between the top 5% of earners.

Is it the top 5% of earners, or those with family that have owned property the longest and seen the greatest appreciation?

[Winsor_Pilates]

Originally Posted by Fuzz

Isn't Millertime a mortgage broker? I think I'll take his word on this over your suspicions. I suspect he has plenty of direct experience.

I own a real estate office in Vancouver have sold real estate here for 14 years.
I can tell you Blankall's assessment of people getting family help is very accurate (for our market, not sure about Calgary).

The fact that Vancouver real estate has gone up so much in the past 30 years has resulted in many paper millionaires who can now pass that equity down to their kids & grandkids.
This is how our high pricing still finds buyers, but also the reason it's so difficult for those new to Vancouver or who don't have that leg up.

[MillerTime GFG]

Without a doubt, there are big differences between the Vancouver and Calgary markets, which was one of my points in regards to the Fed’s policies.

I think we’re actually arguing about two different things. I’m certainly not saying first time buyers aren’t getting help from family, because they are. My argument was that most 35 year olds don’t have 160k liquid assets, and most first time buyers are not putting 20% down with the help of a gift. Most commonly gifts are to get someone over the 5% hump. I do some business in Vancouver, but not a lot, so I can’t say for certain, but I imagine this would largely be the same there.

And yes, I do own a small brokerage in Calgary for those wondering and have been brokering for 8 years.

[bizaro86]

Originally Posted by MillerTime GFG

Without a doubt, there are big differences between the Vancouver and Calgary markets, which was one of my points in regards to the Fed’s policies.

I think we’re actually arguing about two different things. I’m certainly not saying first time buyers aren’t getting help from family, because they are. My argument was that most 35 year olds don’t have 160k liquid assets, and most first time buyers are not putting 20% down with the help of a gift. Most commonly gifts are to get someone over the 5% hump. I do some business in Vancouver, but not a lot, so I can’t say for certain, but I imagine this would largely be the same there.

And yes, I do own a small brokerage in Calgary for those wondering and have been brokering for 8 years.

I think the differences between Calgary and Vancouver are caused by the market. If a house in Calgary is 500k, the minimum down-payment is 25k. A professional couple with 2 incomes should be able to save that, imo.

If a house in Vancouver is 1.5MM, wouldn't the down-payment be $300k? Because mortgage insurance isn't available above $1MM, correct? That's a pretty big chunk to save, not realistic for most people.

And since Vancouver parents who own real estate are all paper millionaires, it makes sense they'd help their kids stay in the city.

[MillerTime GFG]

Yes, minimum 20% DP over $1mm.

[Winsor_Pilates]

Originally Posted by bizaro86

I think the differences between Calgary and Vancouver are caused by the market. If a house in Calgary is 500k, the minimum down-payment is 25k. A professional couple with 2 incomes should be able to save that, imo.

If a house in Vancouver is 1.5MM, wouldn't the down-payment be $300k? Because mortgage insurance isn't available above $1MM, correct? That's a pretty big chunk to save, not realistic for most people.

And since Vancouver parents who own real estate are all paper millionaires, it makes sense they'd help their kids stay in the city.

The other thing is most of these buyers are move up buyers, so it's a combination of equity they've made in the market and/or help from parents to buy at those prices.

I have lots of clients selling Vancouver condos for around $900,000 & buying houses in the suburbs for $1.2-$1.4 with a rental suite that will bring in $1500-$2000/month.
And they initially bought that condo around $500,000-$550,000 so they have 500k in equity built up.

You also have couples buying together who each owned a condo before, so they sell both condos (with gains they've made) and buy 1 house/duplex/townhouse.

Can't say I've ever had a first time buyer just save up $200,000, qualify for an 800k mortgage and buy a million dollar property.
People to start smaller and work up the ladder.

[Sylvanfan]

Originally Posted by Winsor_Pilates

The fact that Vancouver real estate has gone up so much in the past 30 years has resulted in many paper millionaires who can now pass that equity down to their kids & grandkids.
This is how our high pricing still finds buyers, but also the reason it's so difficult for those new to Vancouver or who don't have that leg up.

AI have a few co-workers in Vancouver. One guy is an Engineer probably 37'ish about now, originally from Iran only came to Canada about 12 years ago and him and his wife had bought a place about 7 years ago when both were working an no kids. She was pregnant at the time hence the desire to buy a place. In the 5 years after buying the place, they now have 2 kids, and she was not working. When it came time to renew they couldn't qualify to renew the mortgage on his income (I would guess him to make about 160 a year) so they had to stay with the lender they had at a less than ideal interest rate. Basically said they survive and their house has gone up and might be worth 950 now, but if he wanted to move he'd need something more expensive which he can't afford. Can't really downsize because they need all the space they have. So he struggles like crazy to afford the place he has. I suggested he sell it and come to Alberta where he could buy a bigger house quite easily for 300 less than his current one is worth and make the same money...he said no thanks it's cold there.

My boss is also based out of Vancouver but born and raised there. His house is worth about 1.3 million and I think he paid like 400k or something like that in 2003 type of thing. I was telling him there was no way I could ever move there and cited the Engineer's situation..he's like well he was stupid he bought a place for like 750 grand..I countered with what would your house have cost had you been looking to buy it when he bought his? He went silent. If you've been there for a long time chances are you'll fund your retirement by selling your house and moving elsewhere.

[topfiverecords]

Vancouver: Where you keep down with the Joneses

[CroFlames]

I wish I had rich parents.

But I suppose I should be glad they immigrated here and I was born in Canada at least.

I wonder what position my kids will be in 20-25 years from now.

[Calgary14]

The problem with any "booming" market is the number of people who think they've suddenly come across a windfall and sell without considering the buy side. They have to buy at an inflated price as well so they end up not that far ahead when taking into account closing costs, moving costs, realtor fees etc.

Moving to an area with more affordable housing is an entirely different situation, then you can really get ahead. (ie. sell a house in Vancouver for $1.5M that originally cost $700K and move to the interior).

[blankall]

Firstly, I didn't say that people in Calgary were commonly borrowing from their parents. I specifically stated that it was a trend I expected to occur in the future:

There's also the trend of generational transfers. As that trend spreads to other cities, which it will, you'll see more first time buyers jumping in with $1-$300k down payments.

However, I do know many people who gained assistance from their parents in purchasing homes in Calgary. They did so in the higher end market, purchasing $1+ million dollar homes in higher end neighbourhoods or purchasing expensive condos. These were all people with very wealthy parents.

We are talking about two separate things. The heated market vs. the down market. Calgary was formerly the latter, so many of the things I've talked about wouldn't apply to Calgary, YET.

My point was about how a real estate market can become detached from local economics. A major way is via wealth transfer. As people's parents die or provide them with loans, this becomes a major source of equity for people looking to get into the market. And yes, I do expect to see this trend continue in Canada and spread beyond Vancouver/Toronto. The transfer of wealth from baby boomers to their spawn is commonly referred to as the greatest transfer of wealth of all time. This isn't some fringe theory I've invented. Where do people think that money's going to go, if not to real estate?

[blankall]

Originally Posted by MillerTime GFG

Without a doubt, there are big differences between the Vancouver and Calgary markets, which was one of my points in regards to the Fed’s policies.

I think we’re actually arguing about two different things. I’m certainly not saying first time buyers aren’t getting help from family, because they are. My argument was that most 35 year olds don’t have 160k liquid assets, and most first time buyers are not putting 20% down with the help of a gift. Most commonly gifts are to get someone over the 5% hump. I do some business in Vancouver, but not a lot, so I can’t say for certain, but I imagine this would largely be the same there.

And yes, I do own a small brokerage in Calgary for those wondering and have been brokering for 8 years.

I never said "most" first time buyers have $160k. However, it doesn't take most buyers to horribly skew a market. You only need a few crazies to set new benchmarks in a neighbourhood. You then fuel bidding wars with cheap credit. People get more and more desperate and start doing things like going in with 5% down on houses well beyond their means. This is when doing things like getting parents to co-sign or provide funds from Helocs on their own property becomes the norm.

I wasn't saying this has happened yet in Calgary. Calgary has, up until now, had one of the most depressed real estate markets in Canada. Of course, this isn't a trend there yet.

My overall point is that we are going to see real estate in Canada continue to rise for 2 reasons:

1. Low interest rates and federal economic stimulus; and
2. Wealth transfer from baby boomers.

[blankall]

Originally Posted by Winsor_Pilates

The other thing is most of these buyers are move up buyers, so it's a combination of equity they've made in the market and/or help from parents to buy at those prices.

I have lots of clients selling Vancouver condos for around $900,000 & buying houses in the suburbs for $1.2-$1.4 with a rental suite that will bring in $1500-$2000/month.
And they initially bought that condo around $500,000-$550,000 so they have 500k in equity built up.

You also have couples buying together who each owned a condo before, so they sell both condos (with gains they've made) and buy 1 house/duplex/townhouse.

Can't say I've ever had a first time buyer just save up $200,000, qualify for an 800k mortgage and buy a million dollar property.
People to start smaller and work up the ladder.

I don't disagree with this at all. However, I do know many people who went straight into detached without jumping up. These were all fellow lawyers, many in a two lawyer family situation. I also know many people who got help from their parents to buy those condos, which now start at around $750k for something descent.

I think Calgary will be different though. Firstly, because there aren't many higher end condos that people can step up from. Secondly, because detached housing, even after it increases in value, will still be within reach. You won't see the step up process. Instead people will largely dive right into detached.

[MillerTime GFG]

Originally Posted by blankall

I never said "most" first time buyers have $160k.

No, but you did say

A lot of people who are already in the market will have that equity built up. Additionally, many dual income couples who are 35 or so should be able to save that much. You can each take out $35k from your RRSPs.

in response to Fuzz saying "and who among us doesn't have 160k just sitting around?"

I'm saying what you think 35 year olds "should" be able to do is vastly different from what 35 year olds are doing.

[blankall]

Originally Posted by MillerTime GFG

No, but you did say in response to Fuzz saying "and who among us doesn't have 160k just sitting around?"

I'm saying what you think 35 year olds "should" be able to do is vastly different from what 35 year olds are doing.

Many is different than most. Once again, real estate markets work by bench marks. You have a few bench marks in a neighbourhood in combination with cheap credit and the market takes off. And by a few bench marks, it can literally just be 3 or 4. So for example, if you have a dozen people, buying real estate in Lakeview bidding each other up, that would be considered many.

And I do think more people than you think will have access to downpayments of $160k or more.

Edit: I also stated specifically that it's going to be middle class people on fixed incomes that get the most F-ed by this. That group includes the bulk of Canadians.

[MillerTime GFG]

Originally Posted by blankall

And I do think more people than you think will have access to downpayments of $160k or more.

Sorry dude, it's not about what I think, it's about what I know. I do fairly high volume, as does our brokerage, and I keep a lot of data for my clients.

[blankall]

Originally Posted by MillerTime GFG

Sorry dude, it's not about what I think, it's about what I know. I do fairly high volume, as does our brokerage, and I keep a lot of data for my clients.

Once again, I've stated many times, that Calgary, which has had a very depressed market for a long time, hasn't seen the influx of major capital yet. However, if/when it does start, it will start very quickly. And as someone who works in an office that does real estate conveyances, I can verify how these trends have worked in hotter markets thus far.

Calgary, for the last decade, has been a relatively unique situation. Very depressed market with relatively high salaries. Things change dramatically once market conditions change and become detached from the local economy.

[peter12]

Originally Posted by blankall

Once again, I've stated many times, that Calgary, which has had a very depressed market for a long time, hasn't seen the influx of major capital yet. However, if/when it does start, it will start very quickly. And as someone who works in an office that does real estate conveyances, I can verify how these trends have worked in hotter markets thus far.

Calgary, for the last decade, has been a relatively unique situation. Very depressed market with relatively high salaries. Things change dramatically once market conditions change and become detached from the local economy.

I'm not sure it will ever happen in Calgary, personally.