Yesterday I went to the bank to see about mortgage options.
My current apartment is a small one bedroom. It is adequate for a single person, but it is tight. It is not big enough that I feel comfortable having non-family guests over. I am also paying a lot per month. So I would like to know what it is possible for me to afford if a place comes available.
Part of the problem is that when I look at real estate prices, the numbers don’t translate into the real world. They are huge, unfathomably huge, but because they are all huge, I am looking at them relatively instead of absolutely.
Next door to work a condo building is being constructed. Many of the places were sold out when I first investigated, (I assume to Chinese people trying to park their money in foreign lands) so all that was left was a 1500sqft. one on the 22nd floor for $2.7 million. Then I heard that a smaller one on a lower floor had become available. After asking, I found the price for that one was $1.9 million. That was high but due to the illusion of comparative prices, it was starting to feel more affordable.
However, I decided to go to the bank to find out what sort of mortgage I could qualify for. While waiting for an advisor to become available, I saw another property listed. This one was a block further from work, but only one million. That was looking promising. Pictures made it look nice too.
I have now had sense driven into me.
The bank made life clear to me. In an ideal situation, I can afford a fraction of that. A significant fraction, but definitely not a whole number. The amount I qualify for would get me a property about the size of my current apartment over a 25 year period. I would have the benefit of increasing my equity.
Vancouver has a property bubble. Everyone knows this, but it has been increasing for 30 years and doubts are surfacing that it will ever stop. The best way to make money here is to own property and just let its value go up. Having a job is optional.
The advisor was impressed with my investment history and that I had been investing for a long time; she was jealous. But then she described that she had bought a house ten years ago that has gone from half a million to $1.4 million in value since then. So even though I am a “good” investor, her purchase of a house destroyed any investments I had done.
One of the more interesting things to happen in the conversation with the advisor was her advice to get my parents’ to help me with the purchase. She even showed me the paperwork that would be needed to make it happen. I never brought it up; she just assumed. Which implies to me that this is the route most people have to go through here. It reminded me of this article which describes the concept of “Landed Gentry”.

For most of the past several years, the B.C. government has explicitly avoided doing anything that might cause a decline in home values. We were apparently supposed to celebrate the windfall that foreign capital flows had on our markets. Again, this was a policy direction aimed at funding the retirements of Boomers at the expense of the future of Millennials, or as one B.C. MLA told me, this windfall can be used by Boomer parents to help out their kids. Many will and some won’t, but what this MLA was unwittingly endorsing was the move away from meritocracy and toward the creation of a landed gentry: if your parents were lucky enough to win the property lottery, you can hope for a piece of it.

As always, if you ever want to start a conversation with a Vancouver resident, just bring up the topic of real estate prices.