gary17

i think no... you should start a Poll ! be curious to see the poll on this from COBF members !

i think a lot of people likely have quite a number of visa and master cards -- probably one from the bank, one from walmart, one from sears / the bay , one from the airlines... etc. on the other hand people tend to just have 1 amex card. Gary Do people really hold 10 credit cards? Why would you have more than one from each company? I use my AmEx, unless it isn't accepted, then I use my Mastercard. Why would I need 5 AmEx cards and 5 Mastercards(or Visa cards)? Liberty's explanation makes more sense to me now that I think about it. If you make less than $50K/year before taxes, you can't possibly spend $2K/month on your card (without quickly getting to your credit limit).

i think the odds of RE going up over the next 30 years as being higher than it going down... if I am wrong then the cost should be not significantly different from renting - just my view... But that's assuming that you will have capital gains. If you assume capital losses over the next few years, it might look a lot less attractive.

Nothing wrong , my brother is renting. I may rent if I sold my condo.... But just that i would rather pay down mortgage in a low rate environment, and with the prospect of free capital gain.... Vs. renting (building landlord's equity)....

Agreed. But the alternative is paying rent. So I look at it as paying rent is almost he same as paying for mortgage in this low rate environment and if there's inflation the odds of house price going up are better ,.. Free option. You could also just buy a 800k condo... And as your income goes up, trade up and take advantages of dips in housing prices along the way. I think interest rate will be very low for a very long time ! But if you buy at the top and a $3m house is worth $3m in 20 years (not adjusted for inflation), that's not such a great deal. People who bought in Toronto at the end of the 80s had to wait almost 15 years to break even.

I really think US is well positioned for a decade or more of growth. As the planet population doubles.... I think Canada and US are the two developed countries with the infrastructure and capacity for growth. I'm very bullish about the US!

If the $3m home becomes a $6m home over 20 years... That's a lot of tax free in Canada... In Canada it's the best way to shelter taxes

So a $3m home is really like $6m of pre tax earnings ?

don't forget we have parity or close to parity which is why we feel things are cheaper in the US! Rewind a few years back when we were at $1USD: $1.25 CAD I think most thought then things were reasonable in Canada ! My personal view is our dollar should be valued at about $0.80 - $0.85 --- Gary

This is the latest 'high end' condo being marketed right now in Vancouver I stopped by there -- a 2 bedroom condo at the lower floors with no view starts at $1M... For $800K you can buy a 1 bedroom or a studio... http://vancouverhouse.ca/ (PS. This was 80% sold - ) Or a working couple could spend $500K for a 600sf condo downtown Vancouver http://jamesonhouse.com/2904-gallery

Oddball - I think may be I am mistaken with my English When I said a couple makes $60 - 100K --- i mean the COMBINED earnings of the couple. I.e., may be 30K + 30K = $60K Or $50K + 50K = $100K. Average salary for engineers working in BC : https://www.apeg.bc.ca/Careers/Compensation-Survey Gary

Got it - no it is a problem - look, i'm not dilutional - there's a reason why i haven't got a house - I am hoping the resources here and a correction would help me afford a house eventually - and it is unfortunate when the premium product keeps on getting more expensive, the regular stuff gets inflated too! This is mainly because there's a shortage of trades here -- when they are all hired at $30/h or higher to work on luxury homes in the good areas; nobody is left to build the 'affordable' housing... so we end up with condos in the metro Vancouver area being more expensive than they should've been - it makes no sense; but the shortage of labour is the cost of brining the products to the market. The cost of concrete construction is about $300 /sf and wood-frame is $200 - single family is about $150 for entry level and $200 - $250 for high end and $300 for luxury. And then there's the land. So these developers are still pocketing about 50% ($300 + land @ $150 - $200? = $600 - but pre-sell them for $800 - $1500/sf) I'd say there's still enough margin for the developers to let them go at a discount. That'd be interesting to think about if the developers need to let their inventories go at cheap prices. My point is we could see a correction; but don't hold your breathe for the $8 WFC or BAC shares type of deal in VancouverRE --- I really don't think that'll happen. Gary

You think in 2020 interest rate will be 10%?

Let's do a bit of math here If an entry level house is $1M in Vancouver - like an old 50 year old house with a basement suite that can be a mortgage-helper -- Let's assume 10% down - so $900K mortgage , 3.5% , amortized for 25 years, my excel formula: =PMT(3.5%/12,12*25,900000) = $4500 / month for the mortgage. The basement suite is probably going to rent for $1500 - so mortgage is $3000. $3000 x 12 = $36000. And if this is 80% of pre-tax income = > the household is making $45000 pre-tax. This doesn't make any sense. I don't believe a family making $45,000 in Vancouver are living in $1M homes - they are more likely to be in $300 - $400K condos. On the other hand, if say a couple earns $100,000 gross and spends $80,000 on mortgage a year = $6666 / month + $1500 mortgage-helper = $8100 => $1.6M house. I'd say I don't know of any couple earning $100,000 living in $1.6M homes. What I see are the rich Asian money in $4M ~ $6M homes , cash deal. Last week a friend of ours came from China and dropped $3M on a lot with a creek - cash deal; and didn't even bother with inspection. They probably have a printing press for RMB in China so they don't give a >>>> if there's a correction in Canada - they just want the money out of communist reach. And be available for their children! --- Now to answer your question: I'd say immigrants are likely responsible for 30% of new high-end houses in West Van and Vancouver West-side. (i.e., $3M+ homes) Then there's the $1.5M - $2.0M range for the successful professionals in town -- (doctors, lawyers, good value-investors, etc) And then there are high end condos $800K - $1.5M for those who are downsizing from their big home in West Van (i.e., after selling it to the Chinese for $3M+) And then you have the working class people (earning $60K - $100K a year) living in $500K - $800K condos As always, when the thing collapses it'll be the working class people getting their equity in condos wiped out while the high-end houses will not likely be affected because there's limited supply & there the top 1% of 1.5B people is a lot of demand. I use Chinese - but don't forget there are a lot of wealthy Canadians from Calgary (oil money), US, Europe, etc. They too likely don't have a mortgage. Gary edit: On debt: I don't know how that's calculated - I think there are a lot of house builders here that leverage their principal home to build a spec-house to then sell to others.... That could be a source of debt.... I suppose if those people get into trouble we could see quite a few real estates up for grabs - but I'd say as soon as there's a 10% below market price, it'll be gone . I'm still seeing a lot of multiple offers at 10% - 20% over asking in decent areas... Every weekend I think about: where do they all print their money????

i suppose the higher debt level is because there are more working class people here who are trying to afford a condo or an entry-level home. i've been waiting for a few years now to buy a house with no luck... and the prices keep on rising faster than income ! perhaps i'm one of those that has changed my view on RE in Vancouver.

I can see big condo correction... Not so much houses ,,, a lot of Chinese people are buying with cash... Excess cash ... And are for their kids. There are also a lot of retired people from elsewhere in Canada who prefer to retire here. WE could see some correction but I doubt it will be significant in the single family market in Vancouver. You can't really apply conventional value investing / relative valuation when it comes to RE. This is a type of asset for family, for status, for a lifetime of hardworking ... There's a reason why only certain cities in the world attracts premium valuation such as HK, Shanghai, London, New York, etc. most immigrants want to live where other immigrants go to , it creates a network effect if you will. So you won't see premium even just 2h drive from Vancouver. This situation is also not like The early 80s when HK people moved because of fear or HK. There's no fear driving mainland Chinese moving here. It's simple for the sake of their well being because china is too crowded ! If you are the 1% in china, you would do what you can to give your kids the best - and that's why they like certain markets. Finally, most Chinese don't take out a mortgage with these houses. Cash. Mortgage is viewed as a bad thing in their culture - Rheas the picture I'm seeing with the single family houses in Vancouver. Condo market is another story. Toronto is another story. I think real estate is very localized.

You think we will see the type of correction in the US here in Canada?

I don't disagree with a correction. But I think those foreseeing a big drop should consider that in the 80s we didn't have much millionaires from China, a country where rich people want to move out of for their wellbeing. It didn't stay flat in the late eighties. House prices were cut in half in the toronto area. Housing bubbles always end badly. Won't be any different this time either. The higher it goes up, the harder it will fall.

just look at Japan - it is still low rates there for many , many years -- rates could rise in the US - i doubt it'd rise in Canada any time soon as our economy is too dependent on the construction industry... and we need the low rates to give manufacturing an advantage. there's no easy way out of this in my opinion...

Has anyone seen star trek?

Thanks - SO can Buffett's words about GEICO apply to BAC? ".... an extraordinary business advantage in a very large industry that was going to continue to grow." "I have been attracted to the low cost operator in any business and, when you can find a combination of (i) an extremely large business, (ii) a more or less homogenous product, and (iii) a very large gap in operating costs between the low cost operator and all of the other companies in the industry, you have a really attractive investment situation."

this is one company i've invested in taiwan that'd slowly replace human labour - http://markets.ft.com/research/Markets/Tearsheets/Summary?s=6206:TAI they pay about 5% cash dividend + 10% stock dividend each year , for most people, however, it'll be difficult to buy unless you have an account in Taiwan. Gary

JEast: What do you mean by non-inflation stuff? Can you give some examples? Thanks Gary

hi Race thanks for sharing - i will read this.... interesting i was just talking to another friend investor about crowd behaviour and confirmation bias ! Gary

I saw a short interview on BNN today - I believe the main driver was the consumer spending at 2.5%, which accounts for 2/3rd of economic activities. Note the 4% is real GDP - nominal was at 6% - which is quite terrific. The economic engine in your country seems to be firing all cylinders :) Europe had better look here for how to solve its problem. there's more explanation here i just found: http://www.bnn.ca/Blogs/2014/07/30/Its-all-about-Uncle-Sam-today.aspx