Thursday, November 7, 2013

"If you want affordable housing go to Detroit" - Sauder School of Business


Posts have been few lately due to circumstances beyond our control, but we couldn't let this latest gem go by unreported.


The Sun reports that the simple numbers on housing affordability in Metro Vancouver are unequivocally alarming: It costs just over 8½ times the median after-tax household income of $61,975 to buy a home for the median price of $517,677.34.

Compared to the norm in banking circles just a generation or two ago when low-equity borrowers were likely to be denied a mortgage if the cost of the house they wanted was more than three times what they earned in a year, this seems insane.

But the article argues that if you look at the issue more closely, the message is nuanced and somewhat mixed.
Today's 8.5-to-one ratio is, to be sure, quite a bit worse than 20 years ago when it was 6.6 to one, and even worse still than the 5.9 to one figure in 2003. But ...

These historical ratios, though lower than today's, were still very high by any conventional measure, and they never once dipped to a low or even "normal" level during the entire duration of the last two decades. Yet Vancouverites still coped, and the population still grew by well over 500,000 in that 20-year period...

Half the reason for a high priceto-income ratio is not the cost of a home, but rather the lacklustre growth of personal incomes in Metro Vancouver over recent years to the point where we trail most major cities in Canada. If this turns around - and, once again, there are no guarantees - the affordability squeeze will ease.
The central message?
Robert Helsley, dean of the Sauder School of Business, added an additional perspective when he spoke last week at a UBC-sponsored symposium on affordability. He suggested Vancouver's high home prices are "the price of admission" to this amenity-rich little corner of the world.

Similarly highly priced real estate is found in other places where people really want to live - Hong Kong, San Francisco, London and New York, to name a few.

"If you want affordable housing," Helsley said, "go to Detroit."
Instead of calls to halt the easy credit and low interest rates that fuelled and created the unaffordability to begin with, we get sermons to 'let them eat cake'.

Marvellous.

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13 comments:

  1. That is a bit of disgusting human nature right there. These words have the potential to become the remark that represents the peak of delusional thinking by local yokels.

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  2. We all know what eventually will happen to marie antoinette.

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  3. Robert Helsley is certainly part of the top percentile. I think that can lead to a detachment from surrounding reality.

    $415,000 annual salary

    $75,000 honorarium intended to cover the cost of his move to Vancouver from California

    35 days a year to work on projects unrelated to his duties at UBC

    $600,000 interest-free loan, administered by the UBC Treasury, remaining active as long as Helsley is still employed by UBC and until his house is paid off in full. Payment schedule is flexible.

    http://ubyssey.ca/news/helsley-342/

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  4. Couldn't agree more with the first poster, there will be some classic quotes from this article 10 years from now

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  5. those remarks are disgusting, last time I checked Vancouver was no London, Paris, NewYork or SF. People are so delusional thinking Vancouver is a world class city, guess people think cities that have the Olympics are world class, haha, I'd never even heard of Sochi until this year. I better buy real estate there before HAM does, lol.

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    1. In this day and age, real world class cities reject the Olympics. Munich, Germany, for example. The parasitic IOC has plenty of wannabes to pick from, who are more than willing to get saddled with the costs, environmental and social impact.

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  6. To have a net family income of 61,000 you would need to be making about 100,000 a year gross. Not alot of Millennium Generation making that kind of money. Also when I bought my first house in PoCo in 1984 I paid $88,000 for a nice 1600 sq ft. up with 1200 sq ft finished down. Our net household income was about 38k. So this guy is out of his mind. It was priced about 2.2 times our net. Houses in Van and Richmond at the time were about 110,00 still not quite 3x net.

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  7. "But, he said, the conventional affordability measures don't suit the new reality and need to be changed to reflect what homeowners are actually accepting and coping with."

    Ahh, it's different this time and the old rules no longer apply! Got it! Just like they didn't apply to dot-com stocks or Miami real estate...


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    1. Yup! This time it's different! How often have we heard that before?

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  8. Detroit still has a better economy than vancouver

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  9. Robert Helsley, coming in the from US should know and be well aware of what happened with the US housing market. Why would he think the RE market is different here? As the Dean of a business school he really should know better.

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  10. MR Helsley bought property in Vancouver so its the fear and greed principal with his vancouver boosting, he caught the tsur Sommerville beautiful mountains and ocean fever all realtors have

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  11. Suck it peasants. shut your g.d' mouths and get back to work cleaning my toilet. if you clean the spatter i will give you a 2 dollar christmas bonus. If you save them up for 50 years then you can buy some of my yoga pants

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