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Vancouver Real Estate – All Income Stream

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Is it affordable to buy a house in Vancouver? Vancouver is the second-most-expensive city in the world after Hong Kong, though I am lucky to live in this beautiful city. 

Vancouver Real Estate Affordability

Quick google search showed up that

  1. Employees in Vancouver, British Columbia make an average salary of $56,342.

  2. The median total income for households in Metro Vancouver was $72,662 in 2015.

Perhaps some families have uncounted cash income, but for Vancouver families with two salaries, I am going to assume that an income of $150,000 is above average. 

What can you buy with $150,000 in annual income? The rule of thumb is that you can afford a house that costs three times your annual salary (e.g., $150,000 * 3 = $450,000). Having an average annual salary of $150,000 means that $450,000 is the highest price you should consider when buying a home. Even if we consider a family income of $200,000, still, a $600,000 home is the limit. This is far from the current price range ($1,000,000 +) of detached homes in the city. 

My point here is that even for those who have above-average salaries—for example, a nurse and an electrician—buying a home is not affordable in Vancouver. Stretching mortgage payments to thirty years and paying the whole paycheck for it each month is not affordability. It is, financially, the wrong decision.     

What Are the Main Drivers of Vancouver Real Estate Prices?

1. Low Interest Rates

Interest rates have been low for a while, and, in my opinion, they are the main reason for the high real estate prices. Such low interest rates exist all across Canada, but the price jump occurs mostly in Vancouver and Toronto.

2. Hype

Real estate is always in the news. Of course, it is one of the main industries in British Columbia that fills the provincial coffers with money. You have certainly met or spoken to somebody involved in real estate—whether a realtor, a mortgage broker, a flipper, or a homeowner. It is the most popular topic at the poker table, at least at the one where I am playing. 

3. One of the Most Livable Cities in the World

Good parks, public transportation, and climate and low crime make this city one of most livable cities in the world. Wild nature just an hour’s drive from the city makes it a very attractive place for nature lovers. 

4. Need for Shelter

This point is relevant to any city. Most people buy a home not as an investment but as a place to live, and the desire to have a high standard of living pushes people to take on a lot of debt to buy a home. A house is a tangible object—unlike investment in a business, where growing earning per share is merely something on a sheet of paper. 

Who Is Buying?

Foreign buyers? I am not sure. I think that foreigners’ contribution is smaller than that of locals. Locals are the main drivers of high prices. Low interest rates have contributed a great deal to the real estate prices, loading debt on the shoulders of borrowers. 

As for me, I will be waiting for prices to go down to what I can pay. One scenario in which this may happen is when the global economy significantly slows down. In such a situation, it will be very hard for homeowners to keep paying those huge mortgage payments, and somebody will need to sell. Flipping houses, another contributor to high real estate prices, will not be a good business the way it has been during times of economic growth. 

This has become a messy post with all my thoughts and feelings about real estate in Vancouver. I feel torn between the rationale of not buying at these prices and the wish to have a house big enough to accommodate our family of five.  

Dear reader—what do you think about Vancouver real estate?



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