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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. :)

I live in a Vancouver laneway house

suite1106-img_2824Vancouver laneway houses are becoming more and more popular. Our cute home is one of only a handful of finished and occupied laneways in my Vancouver neighbourhood, but taking a quick stroll around, and you’ll see many nearly completed or under construction.

When we first started looking for places to rent, my ideal place was a laneway house. These little cottages in the city really appealed to me because 1) I love small spaces, 2) tons of privacy, and 3) you don’t have to worry about noisy neighbours. So when this laneway came up in our ideal neighbourhood, we did everything we could to snag it.

Our laneway is a 685 sq.ft. two-storey, two-bed home. It costs us $1,650/month in rent, and is located in our favourite neighbourhood in Vancouver.

The rent is comparable to any decent apartment in the area (we were looking at a 1-bedroom for $1,700/month before we found this place), so the only thing we are giving up is a little bit of space in exchange for renting an entire structure. And as for the space, it’s about the same size as my townhouse – the only difference is the laneway is two levels.

When you first walk into the house, you are greeted with stairs, as well as the kitchen area, and RD’s computer desk. There is also a small laundry closet off to the right of the computer desk.

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The first floor is where we seem to spend most of our time. I love the kitchen island, and think it was a really smart thing for us to buy. Not only can we take it with us anywhere we go, but I sit there to work on my laptop, it’s the perfect size for two people to prep meals, and it adds much needed seating.

If we were going to entertain (which for us would be rare), we could put away RD’s computer and use the desk as a table.

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Walking up the stairs, we have a washroom to the left. It’s clean and modern, and has enough space to hold a trunk full of extra towels, etc.

Photo 2015-11-27, 6 01 44 PM Photo 2015-11-27, 6 02 14 PM

Straight ahead off the upstairs landing is our bedroom. It’s the smaller of the two bedrooms by far, but it fits a queen sized storage bed (which fits all of our sports gear, backpacks, bedding, etc.), night table, and has a pretty big double-door closet for RD’s stuff.

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The last room upstairs is the second bedroom, which we have turned into our living room – with our couch and television.

We ended up having to buy a new-to-us couch off Craigslist. It’s not ideal, but it looks nice and fits the space well.

The only picture of the closet I have is from when we first moved in – but the closet is a semi-walk-in and spans that entire width. It fits a surprising amount of stuff (all of the crap I had in my old walk-in closet fits in the space).

IMG_9257 IMG_9429 FullSizeRender

And that’s our little house! :) It’s small but functional, and the perfect size for us. It took a while to get settled and combine our stuff together, but after about a month of living here full time, it’s starting to feel like home.

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