The Decline of Vancouver.

OMG, he wasn't losing money. If he bought a house in Squamish he was making money. End of story.

Just want to address this. At the time I was renting the owner was trying to sell, but the market was shit and it wasn't worth what he paid (because in contrast to what your sentiments are, housing doesn't always go up), and the rent I was paying would not have covered the mortgage. So yes, they were losing money.

And in reference to your comment about your landlord not having a mortgage… then they have huge opportunity cost. This is not irrelevant.

Regarding your assumption that houses always go up faster than inflation; throughout history this has only been true in bubbles. If this one bursts right after you move into your new condo, I'm sure there'll be plenty of renters who will not give a shit about your situation, and probably think you were stupid while they sit pretty, protected from market forces.

EDIT: Also want to add, that you are making me think about my position and I'm enjoying this debate.

No shit eh? In '80/'81 I was living cheap in one of 4 house a group of doctors bought on west 5th. They managed to renovate and flip 3 of them before the bottom dropped out.
I remember one of them, my landlord, moaning "we were gonna' retire and move to Birch Bay"…… :crybaby:

Place was a dump had to put up with Quebecois hippie chicks wailing and banging tambourines in the basement.

Rents are not tied to housing costs. They are tied to supply and demand. Landlords cannot jack rent beyond what people are willing to pay, and what people are willing to pay is based on scarcity. It's easy to see this is the case because rents fall just as quickly and easily as they rise and it is independent of the cost of the housing stock.

This seems true on the surface, but the root of the problem is total aggregate lack of supply. The investor/owner situation would naturally balance itself if the aggregate supply side was more dynamic and could adjust to demand in a more timely fashion. If there were a surplus of housing stock and too many investors bought to rent out, then rents would fall. If too few rentals would available, rents would rise and make owning look more affordable so more people would buy and free up rental units. Clearly there is a supply side problem. And this really is the root of my argument; that it's not the landlord's fault that rents are high, it's the total supply of housing falling short and this is the problem that needs to be fixed.

Bottom line, we are not seeing high prices because of landlords.

I agree with you and I agree with most of your points. Lack of housing relative to the demand in Vancouver/Squamish is what drives, to some degree, the high costs. I'm still here because I like it and I have work here. I accept I pay more here and make less than if I worked in Calgary (although that may not have been true in 2015). I would ideally move away to a smaller community in BC but then my investment in my education (masters) is a waste as there isn't work.

You idealize a free-market economy but you also point out that it isn't in reality free. Landlords do however set the price (and I'm not against landlords, I'd like to be one someday) and they know there is a cost to the tenant if they leave. It is not free, nor easy, to leave where you have work and to possible move where work isn't as available. The landlord is effectively charging this cost whenever they get to renew a lease.

What I find perplexing is how much rent is for a city that pays shit, relative to other expensive cities. No doubt people here make sacrifices to enjoy the city/mountains that wouldn't be made in Saskatchewan. However, it isn't only just sacrifices. Rather than have the old people say we should move, make some money then move back, the opportunities just aren't what they used to be. In today's dollars, average salaries are down and costs are up which simply means we can't live as generous a life as people older than us. There are several factors, known and unknown, that contribute to this but an interesting observation is how GDP per capital has grown much more than average salaries (median incomes) so this does show how the rich get richer (not trying to bash on the rich here)

One complaint I have is I kind of wish I did a trade rather than engineering. A trade would allow me greater flexibility to work in smaller communities. A graduate degree, particularly in STEM, leaves you with most of your work in the city, or some glamorous hole like Ft. Mac.

I think you have one fundamental part backwards. You see capital gains as being the reason for the investment, and assume that it is a guarantee. I see this out of control capital gains as a huge problem, and believe that it is government manipulation that has caused it in the first place. And I certainly don't see any guarantee that it will continue and I'm almost ready to pull the trigger myself because I'm starting to think it's going to all come crashing down in the next couple of years.

We need more housing stock. I think we could both agree on that point, right?

I think we agree on more things than not. I agree that jacking someone's rent by 20% after one year is a dick move, I already said that. I showed you what action I took to satisfy my tenant. I see you agree that the tenancy act needs to be revisited and that 5% annual might be a better amount.

On health care, I think the same way as housing. There is social housing available, and other social programs for those in need. Health care should be the same. But I think the system in Australia trumps Canada, where there is a lot of private health providers to balance the system. If I need an MRI in Canada it takes months. If I need one in Australia I can have one tomorrow. I'm certainly not a 100% free market evangelist and there needs to be safety nets for those in need.

But lets get right to the crux of this. How do you stimulate an increase in available rental stock? By capping returns? Jacking costs to putting suites in new builds?

I don't assume that anything is a guarantee. This is the risk that you mentioned before. What I don't understand is why you have such faith in the market yet blame the government for out of control capital gains. That is the free market.

As for the rental crunch in Squamish the council needs to get the developers to build rental only apartments. They can do this when they are seeking approvals for their variious projects. The BC gov could also impose the protection on rent increases in the tenancy act to fixed term leases so that newcomers with more money can't displace current residents. Seeing as it is the people that can afford the least that are being squeezed this should do a lot to help, but at the end of the day Squamish has become more expensive and there will be some pains. All I am saying is that with the protection of the tenancy act people that rent would have not be forced out in the first place and there is still plenty of opportunity for the landlords to make money. You keep mentioning the 20% mine was increased, but it was 25% and if they listened to Century 21 it would be 40%. Hell it could be 100%, there is nothing to stop them from doing this and these people actually use the basement suite on weekends and have to face me so I imagine that is the only thing that stopped them from going with the 40%.

Just want to address this. At the time I was renting the owner was trying to sell, but the market was shit and it wasn't worth what he paid (because in contrast to what your sentiments are, housing doesn't always go up), and the rent I was paying would not have covered the mortgage. So yes, they were losing money.

And in reference to your comment about your landlord not having a mortgage… then they have huge opportunity cost. This is not irrelevant.

Regarding your assumption that houses always go up faster than inflation; throughout history this has only been true in bubbles. If this one bursts right after you move into your new condo, I'm sure there'll be plenty of renters who will not give a shit about your situation, and probably think you were stupid while they sit pretty, protected from market forces.

EDIT: Also want to add, that you are making me think about my position and I'm enjoying this debate.

1 - I didn't make any of these assumptions.
2 - Housing value rarely doesn't outpace inflation.
3 - I don't know what the market was at, but even if you paid 75% of the guys mortgage he was still probably making money and almost certainly would have if he hung on to it. Paying for the house isn't an expense so the rent doesn't need to cover it to make money, You could make the argument that it should pay the interest, but you keep implying that there is a net loss when the rent doesn't cover the mortgage.
4 - If the bubble bursts and my mortgage goes under water what does that have to do with renters? Good for them, they can laugh all they want. I bought what I can afford and will weather the storm.

What I don't understand is why you have such faith in the market yet blame the government for out of control capital gains. That is the free market.

I'm saying the exact opposite. The current situation has arisen out of the opposite of a free market. CMHC protecting banks from risk, instigating 5% down 40 year loans, setting interest rates artificially low. These are all controls that have driven the market out of control and have nothing to do with a free market environment. Australia offering $28K grants, extending amortization; it goes on and on in just about every country. This is why property has created such speculative interest internationally. It wasn't this way prior to this.

As for the rental crunch in Squamish the council needs to get the developers to build rental only apartments. They can do this when they are seeking approvals for their variious projects. The BC gov could also impose the protection on rent increases in the tenancy act to fixed term leases so that newcomers with more money can't displace current residents. Seeing as it is the people that can afford the least that are being squeezed this should do a lot to help, but at the end of the day Squamish has become more expensive and there will be some pains. All I am saying is that with the protection of the tenancy act people that rent would have not be forced out in the first place and there is still plenty of opportunity for the landlords to make money. You keep mentioning the 20% mine was increased, but it was 25% and if they listened to Century 21 it would be 40%. Hell it could be 100%, there is nothing to stop them from doing this and these people actually use the basement suite on weekends and have to face me so I imagine that is the only thing that stopped them from going with the 40%.

I would have to say I am coming around to your idea that having increases capped on fixed term leases has merit. I would argue however, that fixed terms have been popularized just as much because it's way too hard to evict a shitty tenant, and not just so they have the option to jack the rent.

Regarding your suggestions that the developers need to build rental only units, do you mean putting in a % within a larger complex? Who will own and manage these; are you talking state owned social housing here? Are you talking whole buildings? Not saying any of these are a bad idea. In fact, mixing low cost housing within larger projects is a good way to mix demographics. I also think suites are even better at mixing demographics and should be encouraged. But if the developer loses out by making these, then that will push up prices to purchase for the rest and we need strategies to bring prices down. It's a tough situation to solve, but bottom line is we need more housing stock of every kind and I think the best way to do that is reduce barriers to entry. The fact that it's taken years to get the Oceanfront off the ground doesn't help increase stock. And from what I hear, this is how the district rolls.

1 - I didn't make any of these assumptions.
2 - Housing value rarely doesn't outpace inflation.
3 - I don't know what the market was at, but even if you paid 75% of the guys mortgage he was still probably making money and almost certainly would have if he hung on to it. Paying for the house isn't an expense so the rent doesn't need to cover it to make money, You could make the argument that it should pay the interest, but you keep implying that there is a net loss when the rent doesn't cover the mortgage.
4 - If the bubble bursts and my mortgage goes under water what does that have to do with renters? Good for them, they can laugh all they want. I bought what I can afford and will weather the storm.

1. Maybe I misinterpret you, but when you say

OMG, he wasn't losing money. If he bought a house in Squamish he was making money. End of story.

when referring to a time when there was capital depreciation, not appreciation it makes me think you forget that values can go down. Indeed they always have in the past when bubbles burst, even in Vancouver in the past.

2. Housing values historically have not outpaced inflation. See this chart for US numbers, but the same is true for other countries. Outpacing inflation has always reverted to mean after the bubble bursts. As you can see the values in 1995 are almost the same as 1900 (maybe 20% in 100 years) Nothing like what we have seen post 2000. http://4.bp.blogspot.com/-kjOHoEKbH7A/ULQgiAZ45RI/AAAAAAAABh4/8U-RJx1-pGg/s1600/Inflation-Adjusted+U.S.+Home+Prices+Since+1900.jpg

3. Yes, you are correct. When I say mortgage I really mean mortgage interest. And if it was paid in cash I mean opportunity cost.

4. I am just making a point that renters are protected from loss in such a situation. With tight controls they are protected in up markets and down. Yes, owners have made out like bandits in the last 10 years in Vancouver, and in the last 3 years in Squamish, but this is an anomaly. For the 4 years before that in Squamish they were certainly not. I'm sure everyone has seen this chart and can infer that this is a gigantic bubble and not a normal situation. http://www.mikestewart.ca/wp-content/uploads/2016/02/January-1977-to-2016-REBGV-Price-Chart-Mike-Stewart-Vancouver-Realtor.jpg
It should be noted that these numbers are not inflation adjusted which is why it appears prices have outpaced inflation from 77 to 97.

CMHC protecting banks from risk, instigating 5% down 40 year loans, setting interest rates artificially low. These are all controls that have driven the market out of control and have nothing to do with a free market environment.

Nope

http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_003.cfm

Nope

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2015/12/new-down-payment-rules-time-to-exhale.html

Nope

http://www.cbc.ca/news/business/the-end-is-here-for-40-year-mortgages-1.745656

Nope

Sorry, nope to what?

I realize CMHC has since backpedaled when they realized how stupid they were. Barn door/horse. Those conditions I describe coexisted with a massive run up in housing prices all over Canada.

I argue the rapid rise in prices was started by governments meddling with the market beginning about 15 years ago when the US dropped interest rates (varies from country to country) has created speculative interest far beyond what existed prior. Continuing low interest rates and international speculation is keeping this bubble inflated.

Squamish is just playing catchup, enabled by people watching Vancouver continuing skyward (and no longer believing the bubble will pop), low interest rates and (I assume) a portion of the population growth being people selling in Vancouver to move here.

I agree, the way I see it ^^ changing the rules from what had been 10% down on a 25 year amortization would just alter the market by robbing from the future pool of home buyers and so what happens when they are all used up ?

I agree, the way I see it ^^ changing the rules from what had been 10% down on a 25 year amortization would just alter the market by robbing from the future pool of home buyers and so what happens when they are all used up ?

Yes, it brings in a flood of buyers that wouldn't normally qualify, pushing prices up. People see prices going up and start looking at housing as something to speculate on and next thing you know it costs $1M for a teardown.

So what happens after the pool of unqualifyed buyers is gone …a vacumm?

Suddenly the rules get changed back to what they were, suddenly no one qualifys and they won't for a long time becuz everybody who was in the pipe already bought at a higher price, so anybody who bought during the time the rules were changed might be underwater if they need to sell?

even if I am slightly wrong on what causes what its hard to argue …changing the qualifying rules for mortgages influenced the market in some way which was not good

as for vancover too much/many outside influences …who the fuck knows

So what happens after the pool of unqualifyed buyers is gone …a vacumm?

Suddenly the rules get changed back to what they were, suddenly no one qualifys and they won't for a long time becuz everybody who was in the pipe already bought at a higher price, so anybody who bought during the time the rules were changed might be underwater if they need to sell?

even if I am slightly wrong on what causes what its hard to argue …changing the qualifying rules for mortgages influenced the market in some way which was not good

as for vancover too much/many outside influences …who the fuck knows

Logic would say that the next thing to happen is the bubble will pop. But as you say there's so many factors involved that who the fuck knows is the right answer.

Everyone calling a top in the Vancouver for the last decade (including me) has been so very wrong. But in the back of my mind I have a target valuation of my house where I'm ready to pull the pin. Whether I'll have the wherewithal to actually do it, and whether my wife will agree (we do talk about it) is hard to say.

If Canadian lending practices are to blame for the red hot RE market here in Vancouver why are those same rules not setting RE ablaze across the country? I would say it is the opposite to this and that lack of regulation on foreign investment that is to blame if we are pointing fingers.

Kram, you seem like a good guy that I would like to rent from so if we can take away anything from this maybe it is that you should offer your tenants some assurance so they don't have to go through the stress of not knowing if they can afford their place in a few months or the shock of a large increase they didn't see coming.

Some suggestions:

After the first year give them the option to break the lease (provided there is ample notice) with no penalty. I hated the idea that I could only move on a certain day once a year or face penalties or lost rent and that is the biggest benefit of a month to month for tenants. Flexibility.

Instead of giving them an annual cap, maybe work out a cap for the next lease a year in advance should they choose to stay, then if the market get hot and you want a better return you can tell them next time their lease is up "OK, this year we will stay at the 10% we agreed to last year, but the market is hot so next year I will have to increase it to 25% as a maximum." At least everyone knows what is up and they won't feel powerless.

And now for a bit of a ramble. To to the older people saying that us younger people need to save more and spend less on things such as cell phones, eating out, etc., you're out to lunch. Even if you complain about unemployment, your hourly wage was higher than younger people today. Sure, we could make the same in present day dollars but we have to work more hours for the same pay. This can lead to being burnt out and a lack of enjoyment outside of work (limited time) and no time to do maintenance, repairs on your own gear. As damian has pointed out, the housing price to average salary from now to 20 or 30 years ago is not even comparable.

Remember, the dream for the generation before us younger generation was to own a house. I believe I have a well paying job for a young person (~100k) but the dream of owning a house in Vancouver is dead. I could afford an apartment or I could move but unfortunately my engineering background is most in demand in Vancouver and moving to the Kootenays or Pemberton or Smithers would be difficult unless I changed career paths. As flip said, If i was born 10 year sooner I would be laughing but as soon as I started saving money the housing market got stupid. Even saving for a down payment in Vancouver seems fruitless. Save 30k, houses go up 100k.

I'm 30 years old; I'm part of the young generation. Not to generalize but looking around I can say that the majority of my peers make good money (better than me) but don't know how to save, it's blatant. You make great money; financial constraints that might limit someone who makes mininum wage do not exactly apply to you.

I'm banging my head against the wall trying to figure out how you can't save or get ahead making $100k a year. What kind of car/truck do you drive? Do you have an $8k carbon fiber wonder bike in the garage or are you riding something a couple years old? Do you have an expensive coke habit that's gobbling away all your spare money?!?

re: becoming burnt out and missing out on enjoyment outside of work, yeah that's a reality. Working hard and being burnt-the-fuck out for a few years is totally ok and will not kill you. This is going to be more blunt than intended but, what's your priority in life? Do you want to:

a) enjoy life but never have a chance of owning a house and always say "I could bust my ass, be burnt out for a couple of years, but nahhhh…I'm just going to give a dodgy landlord a huge amount of rent every month for the rest of my life because I don't want to sacrifice my lifestyle for a (relatively) short amount of time in the grand scheme of things to set myself up in the future, maybe someone else will do it for me.

or

b) make buying your own house a priority and make the needed sacrifices to your lifestyle for a (relatively) short amount of time to make that a reality. Maybe for a couple years you won't get to ride your bike very much, you'll be brown-bagging a lunch every day, maybe you're going to be burnt-the-fuck out but whatever, when you're old and sitting on the porch of the house you own (not the one you're paying rent on), you'll probably look back and say "yup, that was worth it".