It’s almost conventional wisdom: young people are leaving (or not coming to) Vancouver because they can’t afford to live here; appropriate housing is unavailable, especially for families; there are no jobs or at least jobs that pay well enough; opportunity is elsewhere; fill in blank with appropriate reason.
Is that true?
Hard to know what will happen, but at least we know what has happened. Here are some data, put together by a PT researcher. Read the notes carefully; it’s more complicated than it looks.
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20-24 AGE GROUP IN SELECTED CITIES
2001 to 2011 (US cities 2000 to 2010)
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25-29 AGE GROUP IN SELECTED CITIES
2001 to 2011 (US cities 2000 to 2010)
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The first columns are the absolute change over 10 years. Everywhere except San Francisco added people in both those age groups over the decade. The percent change is as a percent of the 2000 or 2001 number – so, for instance, we added 13.5% 25-29 year olds, while the total population increased by 10.6%.
However, in the rest of the Metro Vancouver area, while the entire population rose by 18.6% that age cohort only increased by 8.1%. Vancouver was more attractive to move to than the rest of the region if you were aged 25-29 – although there were still three times more people in that age group added in the rest of the region than in the city because Vancouver can only accommodate a small proportion of the region’s growth overall.
The next column looks at the number aged 20-24 (and 25-29) compared to the number 10 years younger, 10 years earlier. It gets to the net growth over the number already in the city (if they all stayed in one place. Obviously they don’t – some left, but even more arrived). You’ll see that there’s a big increase in all the cities in all the age groups. Cities are where you move when you’re young.
But you’ll see the story for the rest of the CMA is very different from the City of Vancouver. It’s way more attractive – and proportionally it’s between Seattle and Portland and almost identical to Denver. San Francisco is easily the biggest number, and proportion. It looks as if that was even more true a decade earlier, which is why the number of 25-29 year olds are slightly lower in 2010 than in 2000. Seattle adds more 20-24 year olds (# and %) – in part that might be the University of Washington having an impact.
It’s a complicated story. But is the sky falling and all the young people leaving Vancouver? Not so you’d notice – at least, not in the city. It might be true in White Rock or West Vancouver, of course.
Gord, am I missing something here, this is only current to 2011? That’s 5 years ago, alot can happen in 5 months nevermind 5 years. I personally know 2 couples who have left in the last 2 months alone. In my personal observation, younger people 18-24 ish are still moving out here from other parts of the country probably because they are broke anyway and it’s all starting scratch after college etc, wherever you are. But once the rubber hits the road in your late 20’s early 30’s the region is just too expensive. This is the group that is leaving.
Oh the irony……..we have all the data on the millennials leaving but not the data why (Foreign Buyers)
It’s from the census. I don’t believe there’s a question there about foreign ownership.
I realize that, I’m saying we are really good and capable of collecting data except on Foreign ownership
http://www.vancouversun.com/opinion/columnists/Australia+real+estate+data+about+offshore+investment/11151872/story.html
Interesting and thanks for the data, but this looks to be only part of the picture. The bigger concern in my mind is what happens in the 30s when you are starting a family, want to start saving money, and living in a 2 bedroom apartment with a roommate doesn’t cut it any more.
In my limited and anecdotal experience, I see many parents in their early 30s with a single infant or toddler who leave metro Vancouver for better jobs and cheaper housing. This is a bigger question for me. Are young families leaving Vancouver? (I think so but have no numbers to back it up.)
Well Gord, I’m sure as hell planning on leaving. As a financially literate 27 year old urban professional making just under $100K/yr, I’m still not seeing how I’m going to able to comfortably afford kids without taking on a huge mortgage for a house or moving to a bland suburb. So, I’d rather relocate.
$100K/yr is about about the top 2% for my age group. If I can’t buy a family appropriate condo or small crappy house in East Van without 6 times my salary in debt, then who can?
The figures improve when you add in my partner’s income, but the prospect of having a kid or two and not necessarily having a maternity leave means that income isn’t going to be reliable atleast into our mid-30s.
Two years ago,I couchsurfed with 1 unemployed person and 1 underemployed person in Portland. Together they had a house, with a real yard and a garden 10 minutes (by car) from downtown. The house cost $150K. It was nothing fancy, but it was a house. Why can’t we have that?
Very good points. As Andrew pointed out, there are still many twentysomethings willing to head to this city as a great place to enjoy their youth, but when it comes time to settle down and start a family, Vancouver loses it’s appeal.
@urbinflux; A couple of clicks tells us that the median earnings in Vancouver are more than double ($60-70,000 [2011]), what they are in Portland, OR, ($31,800 [2009-2013]).
Vancouver attracts people from across Canada since the region has the mildest climate in the country and many Canadians do not like the climate where they live. The only urban competition is little Victoria. Whereas, in the United States there are many places where one can find a mild climate. In the west Portland has many competitors, some of which are on the coast which is an added attraction. Portland residential properties have been built in all four compass directions from its centre, Vancouver can’t have that. Portland is number 28 in US urban areas. Vancouver is number 3 in urban Canadian cities.
The market rules.
With a $100,00 income and a part-time spouse that brings in another $40,000 say you can qualify for a $800,000+ mortgage , likely even higher, closer to $1M. With that you can get a starter home in E-Van or certainly further out, say New West, Coquitlam, Delta or N Van. Congratulations. Home ownership is within reach, as any home $1M today will be worth $2M in 20 years, likely earlier.
The question is: what kind of firm pays almost $100,000 to a 27 old ? City of Vancouver ? A private firm ?
What is stopping you from buying now ? Renting is not how you build wealth. It will be far more expensive in 5 or ten years !
Thomas, one thing I always find in your building wealth through real estate lectures (A.K.A Trees grow to the sky, so do home prices) you seem to neglect to mention what happens when people lose their jobs, get injured, or other unexpected events take place. then what? How on earth do you service a $800k mortgage then? What if his partner leaves him and takes half? Happens all the time, ask my friends. Renting is a perfectly smart option, preserve cashflow put it to work in the stock market, bonds, commodities, start a business, invest in yourself. Better liquidity and you are not tied to an asset. In the uncertain times ahead you need to be flexible and ready for a whole range of unforeseen events.
In short, to hell with that plan. It’s nothing but dogmatic bs. In taking out a stupid huge mortgage I’d be amplifying the risk I’m taking just as I start a family.
Anyways, lets play out some contingency scenarios. I buy a $800,000 fixer upper in East Van since I’m a handy guy. Dump all my liquid funds into a down payment and have a $640,000 mortgage.
If I lose my job, I have no liquidity. It’s all in a house. If I don’t like my job, I can’t quit and risk big downtime.
If I need to move for a project, I have to pay for transaction fees and hope the market is good.
If RE normalizes to price, I’m underwater.
If interest rates normalize, my interest costs double. (640K at 3% = $19,136/yr plus insurance, etc.) If the rates hit 5%, literally all my disposible income is going into a house in East Van. Add in 2 kids and I’m not doing so hot financially.
That plan leaves me no retirement savings until the house is paid down, or my income grows.
Or I go skip town and can afford to retire at 40…
Your world view is overly gloomy. How about: interest rates will stay low low LOW for 20+ years due to demographics. House prices will double in 20 years. You can become a multi-millionaire, by living in your investment.
Remember: you’re paying a mortgage anyway, either your own, or your landlords ! Your choice !
Of course, if you envision moving soon, then yes, buying makes no sense. But if you envision staying 5 or so year, or more, and you can afford to buy a house and you’re handy then you should buy.
It is rather incredible that a family in their twenties bringing in 140 grand is complaining! It will be tough to find sympathy.
Nevertheless, a 700k mortgage, locked in around 6% for 10 years (I think rates will increase at the end of this year, so hedge) will cost you around $4,500 per month, including disability insurance.
Get the bigger mortgage because Vancouver permits fees for your reno are going to bleed you and you’ll need that cash. Even removing a small tree will cost you many hundreds in permits and consultations.
Even if rates go up and prices come down there will be a trade off. Lower cost to buy but higher monthly costs for the loan. It will be even. Get in the market and start building equity in your ‘home’. Over time it will go up in value, even if there’s a 20% correction for while.
Mortgage rates will stay low low low. Get a variable rate, currently prime minus 0.75%, ie 2.1% for five years. Don’t lock in, certainly not for six percent.
House prices in Vancouver are normal. What is not normal is expecting a nice house in your twenties in a big city. Canadians are very blessed here, and the main reason is lots of land, cheap interest rates, a conservative government, low energy prices, low enough taxation rates and free cash from oil & other resources. Most S-Americans, Asians or Europeans are not so lucky here !
Urbanflux, you have too many advantages over your peers to be bitching at 27.
Some suggested choices:
A detached home in Vancouver is out of reach for a single family. This is not Portland or Calgary, for that matter. Suck it up and get more creative.
Remain a renter and look for the three-bedroom apartment or townhouse. They are out there, albeit rare, but the market is starting to respond to the needs of urban families in multi-family homes. Over 5,000 kids live downtown. The schools are bursting and the demand is high for more. SFU’s UniverCity has rentable self-contained mini studios with separate hallway access contained within the footprint of apartments.
While accepting that single family detached homes are out of the picture, look for your East Van house with an existing or fairly easily buildable basement suite (i.e. duo family home) or a duplex. A good quality two-bedroom self-contained legal suite with a good landlord-tenant relationship with perhaps a shared laundry and garden / kid’s play area can pull in $1,200-$1,800 a month, perhaps topping $2,000 depending on the size. Unlike the other advice about avoiding City permits, do some actual research into what is required for a legal suite. Most of it will be internal systems, finishes and appliances, not major structural work if you’ve done your due diligence with a pre-purchase inspector. Many electrical contractors hate pulling wire and will allow you to do your own wiring under their instruction with the proviso they will do the main panel and apply for the permits. The rules for suites are not as strict as for new structures; this was part of the grandfathering of 50,000 then illegal suites into the rulebook a decade ago. The cardinal rule must be to declare all rental income with Revenue Canada and put every nickel onto the mortgage principle, perhaps carving off 15% for a Replacement Reserve Fund. A decade at $1,800 / mo will get you a net total income of over $150,000 by your kid’s 10th birthday. If placed on the mortgage principle, that will double to $300,000 in interest savings at the end of a 25-year amortization, depending on the rate, and several years of payments lopped off the mortgage.
Trade up from there until you have your desired home, or possibly start out in partnership with another family under a good contract that covers the proportional distribution of mortgage costs, succession and sharing renovation / upgrading costs. A second family in the basement suite could cover a third or more of the mortgage, and you won’t feel like you’re living on a commune.
While my partner is getting her Masters, I’m stocking away $30-40K per annum. Following her graduation, we’re going to bail on the city.
We’re thinking California, since there’s a similar to slightly higher cost of living in California, but with 40-50% higher pay.
Re-evaluate the city in 5-10 years as employment opportunities become available. If things have normalized, I’ll probably build something.
Pretty hot down there at present. I hope you don’t invest in agriculture or have too many brownouts from AC-induced overextended electrical grids, or are forced into toilet-to-tap severe water conservation.
You are young enough to probably not worry too much about getting your (or a loved one’s) private medical insurance cut off once a major illness is diagnosed. And you can always come back to a public healthcare system you may spend years not paying for.
You may be right about Vancouver’s housing prices “normalizing” but normal could be a long, high plateau in price, especially for that detached house you so desire. I don’t believe apartments and rentals will experience the same steep price curve outside of the luxury market. And by then Vancouver may have gotten real about its land base, which has now all been developed, and allow more efficient forms of single-family housing like attached rowhouses with suites.
Vancouver prices for single family homes are normal. They will be higher in ten years, far higher. We expect less Asian immigrants ? More land for single family houses ? Less red tape ?
CA might pay more but taxes and healthcare deductions are high. Prices are also very high unless inland, with lower wages. I had the chNce in the 90’s to move to CA and chose not to as prices were high then. I understand they are far higher now, closer to emoyment centers with high wages.
I’d say focus on your career and earning first, as houses will always be there to buy .. And will always be expensive on attractive cities. Loads of Asian money in those cities there too. That is why Vancouver is not abnormal. I was told on the late 80’s when I first moved here that Vancouver had a real estate bubble .. At a quarter of today’s prices.
So get in, and ride the wave as money borrowed is cheap cheap cheap. Would you not rather pay your own mortgage down rather than your landlord’s ?
@urbinflux, P.S. $150,000 in Vancouver might get you through the City fees for construction. The other thing to remember is that in 2012 Vancouver city council adopted the plan written by an associate from St Louis, Missouri at Nelson Nygaard of San Francisco, for TransLink, which specifically and repeatedly sets out the objective for high transit use, requiring very high density modes. Take a look at the documentation, it’s all tall high-rise blocks. The objective in Vancouver is dense living conditions. If you want that garden for your kids then Vancouver is not for you unless you are very rich. This is Visions’ plan. Remember Visions’ plan for 20 high rises at Commercial & Broadway that was shelved just before the election? For you there are the ‘burbs.
It’s not realistic to talk about $100,000 salaries for 1 wage earner annually. That is not the majority of wage earners in Vancouver…nor in Calgary.
Here is my take: I challenge you to offer to young Vancouverites, a full time job in Calgary. How many would leave a lower paying full-time job in Metro Vancouver for Calgary? Especially if they’ve lived in Metro Vancouver for 5-10 years?
If the job offers career advancement…or relevancy to their education/former work experience, then that will be the attraction. The ONLY primary attraction.
Since living here in Calgary since late 2010 after living and cycling in Vancouver for 8 yrs., I can vouch a lot of Calgarians do love visiting Vancouver. They do get bored of the flat prairies,etc. and head for mountains, greenery, etc. They know that Vancouver offers a lot of cultural activities and more outdoor fantastic experiences… they would move to Vancouver if offered a job and maybe try to finding housing, no matter what.
People moving to Calgary in past few years whom I’ve met come here because:
a) offered a job (or their spouse). This is the primary driver for everyone I’ve met who has moved to Calgary from British Columbia, Ontario, other provinces, including Maritimes.
b) be with a family member/relative (if they are aging, etc.)
c) that’s all they know, if they are born in Albertans or from the other prairie provinces.
d) foreign born. People who have immigrated directly to Calgary from outside.
Cheaper housing is a reason, but it is not the only main reason. In fact, there are Calgarians who’d rather move to Okanagan, etc. And some have already.. Quality life rules and a slightly milder climate than Calgary.
Also in Calgary: lower taxes, no PST, more sunny, more $s in your jeans, lower gas prices, bigger house, far less road congestion .. but of course if you can make $100,000 in Vancouver or in Calgary many prefer Vancouver .. but private sector jobs that pay that kind of money are not so common for folks less than 30 years of age in Vancouver .. and now with Alberta’s job picture eroding due to NDP and low oil prices, and higher taxes the migration from AB to BC will be stronger, especially for folks semi-retiring ..
If you include MetroVan in the definition of “Vancouver” house prices here are not so bad further out .. especially if you include townhouses or 1/2-duplexes, or certainly condos.
“and now with Alberta’s job picture eroding due to NDP”….Give me a break. Typical, blame it on the party inheriting the mess from the corrupt Conservatives. Conservatives plundered and mismanaged the Heritage Oil fund not the NDP.
The NDP government in Alberta is welcomed by the industrial sector here in BC. The general consensus is that it will be easier to recruit and many experienced workers will be pleased to come ‘home’.
Can’t be worse than the Conservatives, put all your eggs in one (Cyclical) resource and then not even save for a rainy day. I hope those poor rig pigs from Newfoundland and other areas saved their money beyond the booze and coke because that window for high earnin’, she is a closed……..
I know Calgary well. It does NOT have less road congestion. Its looser grid gives out to concentrated major arterials and cul-de-saced subdivisions by the time you get to the 60s suburbs. Its outer suburbs and freeways, like the extension of Deerfoot Trail, are appalling and transit-free despite the moderately higher townhouse density of burbs like Auburn Bay. Its C-train ridership is very good, but that is supported to a heavy extent by people driving from sprawling suburbs to the stations. Very few stations support transit-oriented development of sufficient density. Many of its outer bus routes are very lightly ridden.
Having said all that, Calgary’s inner city just beyond downtown is refreshing and just now is realizing the potential that walking older neighbourhoods should have. Mission, Connaught, Sunnyside, Hillhurst, Beltline, Inglewood, Elbow Park, Lower Mount Royal, etc. are coming of age after 75 years of suburbanization and are engagingly human compared to the Autotopia they have created further out.
Alberta has had a one-piston economic engine for a very long time. This becomes painfully obvious with today’s lower oil prices (which are still 300+% higher than the 90s) and the higher interest rates of the 80s. Both of these events caused massive layoffs, closures of businesses and reduced government revenue to support programs. It is an artificial economy directly and foolishly subsidized by finite resources. Moreover, they have placed an inordinate amount of public resources and oil money into a massively over-engineered road system which will always have a high cost to pit against low value land use. They have put oil money into public hospitals and programs, an egregiously irresponsible fiscal practice that invariably leads to slash and burn social policy by politicos deluded by ideology.
Alberta needs to diversify its economy and bring its taxation up to the standards of all other provinces in order to maintain average public services and programs. Most importantly, it needs to learn prudence and bank the oil revenue, not spend it, to create a large interest-earning cushion before national and international carbon levies start to materialize and to finally address climate change which, on a national basis, it is disproportionately responsible for.
@Thomas Beyer, WTF? A million dollar mortgage on $140,000 income? I think that is the source of the problem in Vancouver, not the solution. I thought you were joking until I looked up your occupation. Perhaps you could offer more obvious disclosure when making comments like that.
Haha. Agreed. Over leverage to the max, thats how you get ahead. MARGIN CALL!!!!!
Simple math: house value goes up, say 4%/year. 20% down, 20% cash on cash ROI. 40% down: 10% cash on cash ROI. 100% down (i.e. all cash) 4% ROI.
I am not suggesting to overlever. I am suggesting to buy the biggest house you can afford. And that is a function of your current and anticipated income.
Staying a renter is a choice, too. In either case, you rare paying a mortgage: either your own or your landlord’s. Your choice.
@Thomas Beyer; We’re all guessing about rates. I suspect that our urban friend does not like to gamble. That’s why I suggest locking-in. 6% is still pretty good.
I completely agree that the expectation of buying a house and garden in the centre of any modern city at the start of one’s career is presumptuous. The world has changed.
Land is still cheap here and we are so very fortunate to have abundant natural resources.
Low interest rates and why: http://blog.prestprop.com/about-us/blog/money-is-on-sale-why-interest-rates-will-stay-very-low-for-a-long-long-time-..-and-how-to-use-this-to-your-advantage
Impact of leverage on your real estate return: http://blog.prestprop.com/about-us/blog/real-estate-investing-impact-on-roi-using-different-leverage
Seven essentials of financial freedom: don’t be a renter ! Key point: you are ALWAYS paying for a mortgage, either your own or your landlord’s ! http://business.financialpost.com/personal-finance/eternal-truth-of-personal-finance-no-4-dont-be-a-renter
Too bad the US Fed just crapped all over your assumption on Friday. Rates will be raised to 1.5% over the coming year, and to 2.75% in the following year. Mortgage rates will likely jump to 4.25% and 5.75%, if Canada follows suit.
Also, if you assume only 4% growth on income, then pretty much any stock index will outperform that. 4% is the dividend rate that banks pay right now, never mind their capital growth. My utility heavy portfolio has been putting out closer to a 12% return about half of which is dividends.
The US will not raise rates quickly as it’s currency would go up too fast and make them uncompetitive .. plus we have worldwide very slow growth .. and demographics in favour of large cash holdings .. thus: low LOW interest rates for 20+ years .. a US or Can $ 10 year bond is about 1.6% and even a 30 year US bond is less than 3%. That indicates to me that long term interest rates will not go up much, or stay flat, more or less where they are. Only if oil is over $100 again will Canada raise prime rate .. a long time off ..
As mentioned earlier: as a renter you pay down a mortgage anyway: your landlords. Why not pay down your own mortgage and retire a multi-millionaire ? You honestly expect house prices to fall in Vancouver over a 20 year time line ? Why ?
Prime rate might go LOWER in Canada if the Alberta oil economy continues to negatively impacts the Canadian economy: http://business.financialpost.com/news/economy/stephen-poloz-may-have-to-drop-rates-to-zero-ex-bank-of-canada-adviser-warns
The debate I am having with my daughter and her future husband right now as they prepare to buy a house this late spring / early summer in Edmonton is on that very topic.
I’d say: go variable, not 5 but 3 years. With 5 years you’d pay a far higher mortgage penalty if they decided to move in 3 or so years which is more likely with younger folks. 3 year variable money is also cheaper than 5 year money, and variable is cheaper than fixed, currently around 2%, whereas a fixed rate is 2.39%. Sounds like a small difference. But 0.39% on a $450,000 mortgage is $1755 a year, or almost $150/month. Two meals out, c/o the bank ! I’d take that any day !
A fixed rate is essentially “rate insurance” and some folks prefer that so they can sleep better at night, but at almost $1800/year or $9000 in 5 that is expensive insurance indeed. The link below argue why rates will not go up for many many years, and as such the insurance premium is not justified. It helps mainly the bank !
2.39% is almost 20% more than 2% money. Also, we expect prime rate to be lowered one more time by the Bank of Canada as early as late spring if oil does not go up to $60/barrel. Since that is unlikely this year, due to the oil glut, I expect prime to be lowered to 0.5% from currently 0.75% and thus, banks will offer variable rates sub 2%, say 1.85% as early as this summer.
2.39% is 29% more expensive than 1.85% money.
Would you buy more shoes or cars or groceries if the merchant said: buy now, it is 29% more ?
Money is on sale, and interest rates will go nowhere for 20+ years. More on this here: http://hubs.ly/y0DzfK0
Urbanflux, my mortgage started at 7%. I suggest you play around with a similar interest rate figure on the amortization tables found on most bank Websites and programs like Excel, add your income and any third party potential suite income, and deduct your downpayment. You may be pleasantly surprised.
I dunno about Thomas’s numbers, but he is pointing out the concept of building equity, a viable topic even in a superheated market.