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Laneway living: one year later

IMG_9424I can’t believe its already been a year since we moved into our little laneway house in Vancouver. The appeal of living in a tiny house is still strong, and I feel really fortunate to be in a fantastic neighbourhood for such a reasonable price. Our one year lease is up at the end of the month, and after discussing it with our landlord, we are happy to stay here on a month-to-month basis.

Now that we’ve been living together for a year, we’ve discussed what the future holds for us, and where we think we’ll be in a few years. Unfortunately, the reality is that we’ll probably be in Vancouver for the foreseeable future. RD’s job is very specialized, and there are really only a few places we could move to in Canada where he could find work. We’re happy living where we are for now, but if we plan on being here for the next 10+ years, the idea of buying a home down the road begins to make sense (again).

Related: We will never be homeowners in Vancouver

Because for all the pros that renting and specifically laneway living provide, there are still definite cons to our current situation:

 

  • We are paying a very reasonable price for rent. If we wanted to find a new rental in this neighbourhood for whatever reason, we’d be looking at paying $400-600 more per month for something similar.
  • The people renting next door are sometimes very loud. Because we live in the alley, in the summertime when our windows are open, we’re often subjected to their cigarette smoke, loud talking in the middle of the night, and constantly hanging out just feet from our front door.
  • The layout of our house isn’t the best. Because half of the downstairs is actually a garage, the layout is such that our TV/living room is actually our second bedroom upstairs. Which wouldn’t be so bad, except that there is wasted space downstairs that is too big not to use, but too small to be constructive.
  • 685 sq.ft. split on two levels is just a *tiny* bit too small. We stayed in an AirBnB in Dawson City on our vacation, and we both agreed that it was our dream house with the perfect layout. The 2-storey house couldn’t have been more than 850 sq.ft. total but it was absolutely perfect for what we would want.
  • There’s no outdoor space. I miss having a balcony or a porch where I can just sit outside and relax.
  • The inability to customize our space or have pets. Not that we’d want to do any major renovations, but it would be nice to have the option if we wanted to. We’ve also discussed potentially getting a pet in the future, but it is extremely challenging to find rentals that would allow pets in the city.

Related: The crazy Vancouver real estate market

That being said, we wouldn’t even consider buying anything for 8-12 months. Even though we have a nice down payment ready to go, we both want to get a good sense of what the real estate market is doing here in Vancouver (and the suburbs). We are both perfectly happy renting for however long we need to (perhaps even forever), so if we did decide to buy, it would have to be in a neighbourhood with a similar feel to our current one, and the purchase really shouldn’t have any impact to our current lifestyle and budget. Meaning early retirement and lots of traveling will continue to be the priority. And for that reason alone, I think it will be very difficult to take any real estate listing seriously.

The crazy Vancouver real estate market

houseWe lovingly refer to our laneway house as the servant’s quarters, as it sits on top of a garage in the alley behind what is essentially a $3 million home. I’ve never been inside the main house, which looks very big and lovely from where we are. But we’ll never buy a home like that in Vancouver.

Related: We will never be homeowners in Vancouver

That’s why when we saw a piece of property in our neighbourhood being developed into multiple units, we were intrigued. I pass it every day on my way to work, so it’s been interesting to see the progress and speculate on how much it would cost to buy. From what I can tell, the property is divided into one stand alone unit (the laneway), and the main house is being sold as four separate units (two 1-bed units, and two 3-bed units). This is the only way in Vancouver to actually buy a laneway house – you’re essentially buying into a small strata, where you have to pay monthly maintenance fees towards the upkeep of the common property. You can’t buy a laneway house outright.

Related: I live in a Vancouver laneway house

Anyway, I was mostly interested in how much the laneway house would cost, as it’s the kind of place we are living in now. And since neither of us are interested in a big house or a big mortgage, we both agreed that the perfect sized house for us in the future would be about 900-1000 sq.ft.

Okay, so the new laneway house is nicer than ours. It’s 2 bed + den/2.5 bath and 1,077 sq.ft. Ours is 2 bed/1 bath and just under 700 sq.ft. Our home is nice, but their offering is bigger, has a secure parking spot, and comes with a second floor balcony (which I wish we had). But is it worth $1,400,000? 

I’ve thought about this a lot, and I can’t figure out how anyone could afford to pay $1.4m for a laneway house (and that’s not even considering a multiple offer or bidding war scenario which would drive the price up). It’s not like you have a basement suite to rent out to help offset the cost of the mortgage! If you were to estimate monthly costs at $5,800 ($5,000 mortgage + $50 hydro + $350 maintenance + $400 taxes), you’d need monthly net income of about $16,500 to stay within a 30% housing cost budget. Ha!

So then I ran the numbers through a mortgage calculator using the list price of $1,398,000 and a 20% down payment of $279,600 to see how much interest you’d pay in the first 5 years of ownership.

mortgage

The interest alone is more than then $19,800 we pay per year for our place. And that doesn’t even take into consideration the $4,080 in maintenance fees (which can only go up), or the $4,900 in property tax – which would mean whoever buys that home would see $36,425 disappear in the first year alone … and pay $128,794 in interest over 5 years. Which makes me wonder – why would anyone buy real estate in Vancouver when you can rent a similar home in a similar neighbourhood for a fraction of the price?

Related: From home ownership to renting

It seems crazy to invest so much money into one single asset – an “asset” in a market that is so unstable. But I’m pretty sure that all 5 units of this property will sell this weekend when they have their first open house (they’ve probably already received offers!).

I’ve always loved following the real estate market in Vancouver because it’s so fascinating. Even now that I’m renting and even though I know we’ll never buy a house in Vancouver, it’s still so interesting to me. I’ll be keeping an eye out on more multi-unit houses going up for sale in my neighbourhood, as well as other laneways. And in the meantime, we’ve both been looking online at vacant land on Vancouver Island, as well as the cost of pre-fab houses, tiny homes, and even yurts. :) It’s a fantasy for now, but could become reality in the future since the money we’re saving from renting could potentially pay for land and/or a home outright elsewhere in the province.

We will never be homeowners in Vancouver

We will never be homeowners in Vancouver. Combined, RD and I will gross about $165,000-175,000 this year. Our housing costs are relatively low ($1,650/month rent), and we are both good savers with enough in the bank for a decent down payment. The problem is, we live in Vancouver. And according to a recent Globe and Mail article, the average price of detached houses sold in November 2015 reached $2.53-million – which is up 27.7% from November 2014.

More than 91% of 66,752 detached homes surveyed within Vancouver had assessed values of at least $1-million on July 1, 2015, and prices have jumped at least 10% since then.

I just quickly plugged our numbers into a mortgage affordability calculator. Even if we spent a year or two saving a bit more money, we will still be forever priced out of the detached housing market here in Vancouver.

scotiabank_mortgageaffordability1

Based on the above numbers, the bank says we could afford a maximum purchase price of $982,000 (LOL), but we’d also be responsible for almost $20,000 in CMHC mortgage insurance (LOL x2). And our monthly mortgage payments would be $3,800? Hahaha just, no. But I went to Realtor.ca anyway and plugged in a search for detached houses in the Vancouver area that were less than $950,000 – and this is what I found:

housesinvancouver

A boat. In all of Vancouver, we could afford to live on a 480 sq.ft. boat. Sure that boat only costs $300,000 – but you also have to pay $9,700 in moorage fees each year, as well as an annual $1,870 licensing fee. And even still, you’re living on a boat.

As depressing as these numbers are, I’ve never pictured myself living in Vancouver forever. Neither has RD. Even though we both love our neighbourhood, our tiny house, and our jobs right now, I’ve never considered putting down permanent roots in this city. Vancouver is amazing, and I can absolutely see why it is so appealing. But it was always my plan to spend 10 years here gaining experience, and then move back to Victoria where I could use that experience to get a well-paying job. I don’t know if I’ll make it back in that 10 year time frame, but I think long-term living somewhere outside of this city is going to happen. At some point.

In conclusion, it’s obvious we will never EVER be homeowners in Vancouver. And I’m okay with that. Really. Because even if we could afford something, it doesn’t make sense to forfeit everything else in life that we love – like travel and early retirement and living a comfortable life with plenty of disposable income – just to own the roof over our heads. It’s also a very unsettling thought to have so much money tied up in a house that will drop in value when a housing correction hits Vancouver. So we’ll happily continue to pay 10% of our gross income towards rent, and maybe one day we’ll be ready to buy a home in another city … where we can afford more than a boat. :)

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