We 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.
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.
— Krystal Yee (@krystalatwork) April 26, 2016
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?
Even if you scraped together a 20% down payment of $280k, your monthly mortgage payment would be over $5k! How can anyone afford this?
— Krystal Yee (@krystalatwork) April 26, 2016
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.
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. 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.
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:
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. :)
Vancouver is expensive.
Okay, yes, stating the obvious. I’ve known this for years, yet I never really understood it until I started looking for a place to live close to downtown Vancouver. I’ve always lived in the suburbs – whether it was Burnaby, New Westminster, or Port Coquitlam. Rent and housing is cheaper out here – not by much – but definitely manageable.
Now that I’m about three weeks into my search for a new place to live, I finally understand what people are talking about when they describe how horrible the rental and real estate market is in Vancouver. For $1,300 to $1,400 in rent, I could get a small outdated apartment – that is if I can snap it up fast enough off of Craigslist. It seems like as soon as they are posted, they’re taken down. So after a while, I started increasing the amount I was willing to pay in rent. Because, the lifestyle is worth not having the commute, right? For $1,500 to $1,600 I’ll get a more modern (but definitely smaller) apartment.
And it was at that moment – when I briefly considered spending $1,500+ on rent – that I decided to look at potentially buying a home in Vancouver. With a budget of around what my current home is worth, I got to work with my Realtor to look at my options. I realized right away I wouldn’t get everything on my checklist. Every place I looked at had something wrong with it – no in-suite laundry, too far away from my preferred neighbourhood, sky high condo fees, or needed a ton of work I just wasn’t willing to take on. There are some things I’m willing to overlook (like no parking – I can park on the street, and I’d be willing to do some renovations), but location and monthly condo fees are deal breakers for me.
So now I feel a bit stuck. I don’t want to live in the suburbs. I don’t want a roommate. I don’t want to pay $1,500/month in rent. And I don’t want to buy another condo if I can’t find what I’m looking for.
The good thing is that I have time. I’m in no rush to sell my place. The bad news is that the thought of trying to find a new place to live is making me a bit stressed out at the moment. :)
P.S. I am sorry for coming back to the blog and then disappearing again. Things got crazy for a while with work (summer holidays means a way bigger workload for me) as well as in my personal life, but it has all settled down now.