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Baby, we got a bubble!?

A modest bungalow in Vancouver sold for $2,480,000 -- $192,000 above the asking price of $2,288,000. The previous selling price in 2000 was $488,000. The house has a great view of mountains and downtown Vancouver. (Jimmy Jeong/www.jimmyshoots.com)

This Vancouver bungalow sold for $2.48-million


Canada’s most expensive housing market has become a city of real estate millionaires.

The average price of new and existing detached houses sold within the city of Vancouver has topped $1.9-million, Brent Jang reports.

That’s up 173 per cent from a decade ago, when the price averaged $701,094 in 2005.

Indeed, a recent study found that 66 per cent of the nearly 68,600 detached properties within the city were conservatively assessed at $1-million or higher last July.

And last month, a Vancity report found the average price for all housing types within Vancouver could theoretically exceed $2.1-million in 2030, based on recent pricing growth.

That means first-time buyers are going to have to accept smaller spaces. But even resale condos averaged a price of $465,225 last month.
 
Low-rise segment going bonkers still due to lack of supply and bidding wars. 10% year-over-year...still not as good as the stock market but pretty good. :p

Condos in the 416 are barely beating inflation. Investors would have been far better off in equities over the past several years in most cases.

You're assuming people pay full property prices with cash. 1% property value growth on a 10% downpayment flips out to be 10% ROI.

People who buy houses in areas of 10% growth with 10% down make 100% their equity every year tax free.

You can borrow money to invest into the equity market as well. But good luck getting a 2.35% interest rate.
 
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You can borrow money to invest into the equity market as well. But good luck getting a 2.35% interest rate.

You can get 3% on a secured multi-year fixed-length loan; security might be the bond portfolio sitting inside your RRSP account, or (more obviously) your house. Most margin accounts are unsecured and have very short loan periods, so should have higher rates.
 
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You're assuming people pay full property prices with cash. 1% property value growth on a 10% downpayment flips out to be 10% ROI.

People who buy houses in areas of 10% growth with 10% down make 100% their equity every year tax free.

You can borrow money to invest into the equity market as well. But good luck getting a 2.35% interest rate.

Yes, it is easier to apply leverage to real estate than securities for your average investor. However, the difference is not that big, especially when you consider moves like the Smith Maneuvre. Investment loans are tax deductible whereas the mortgage on your principal residence is not.

Also, leverage works both ways. Obviously it's great to be levered when markets are going up but it's terrible when they're going down. The same real estate investors that are making a "100% ROI" can just as easily lose 100% (or more!).
 
Both are good

Yes, it is easier to apply leverage to real estate than securities for your average investor. However, the difference is not that big, especially when you consider moves like the Smith Maneuvre. Investment loans are tax deductible whereas the mortgage on your principal residence is not.

Look, both are attractive. Tax deductible loans for taxable investments AND non taxable interest mortgages for tax free principal residences. The choice is in the details.
 
Definitely No No under the Income Tax Act. Your RRSP plan will automatically be de-registered.

Yeah, it's not a good idea to specifically tie it to a loan.

Showing the lender a full range of assets, which include RRSPs, to show that you're low risk for a favourable loan rate isn't uncommon.
 
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You're assuming people pay full property prices with cash. 1% property value growth on a 10% downpayment flips out to be 10% ROI.

People who buy houses in areas of 10% growth with 10% down make 100% their equity every year tax free.

You can borrow money to invest into the equity market as well. But good luck getting a 2.35% interest rate.

this is one of the dumber things ive read in this forum. and there is a lot of dumb stuff being said. didn't you take high school math? Do you have any idea what a mortgage even is?
 
Uh...

Buy condo for $500K with 10% down = cash investment of $50K and mortgage of $450K
Price increases to $550K, mortgage remains at $450K
Equity in condo = $100K
Return on Investment = ($100K/$50K) - 1 = 100% return

It's pretty simple math.
 
Uh...

Buy condo for $500K with 10% down = cash investment of $50K and mortgage of $450K
Price increases to $550K, mortgage remains at $450K
Equity in condo = $100K
Return on Investment = ($100K/$50K) - 1 = 100% return

It's pretty simple math.

lol.

on a 500k purchase with 10% down, assuming 2.35% interest (lol again) in the first year you pay:

required 2.4% for cmhc insurance, you are now financing 501,076.

11,650 in interest in your first year
plus city of toronto property tax = 3,615.04 (lol @ tax free)

congrats, you're in the hole by $10765 in year 1. Not even going into maintenance fees, costs, and the eventual land transfer taxes and sale fees.

Financial genius.

100% return!!!!!!111
 
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lol.

on a 500k purchase with 10% down, assuming 2.35% interest (lol again) in the first year you pay:

required 2.4% for cmhc insurance, you are now financing 501,076.

11,650 in interest in your first year
plus city of toronto property tax = 3,615.04 (lol @ tax free)

congrats, you're in the hole by $10765 in year 1. Not even going into maintenance fees, costs, and the eventual land transfer taxes and sale fees.

Financial genius.

100% return!!!!!!111

1. I don't think you understood my post.

2. $10765 in interest comes out to be a little less than $900 per month. Plus maintenance of the property you are likely to be near $1500. Plus property tax you are maybe near $1800. Rent on a $500K property in the city will be anywhere between $2000 to $3000 per month. Call it $2500 to be even and you are Saving $700 per month or $8400 a year in rent. I won't calculate utilities cost because it's not that material towards my point.

3. In year one land transfer tax is $12,200 on a $500K property and that is assuming the buyer is NOT a first time homebuyer.

4. I'm going to be fair and add mortgage insurance premiem of 3% due to the downpayment being less than 20%. So 3% of $450K is $13.5K

5. Calculation. $50K down - $13.5K mortgage insurance - $12.2K land transfer tax + $8.4K savings on rent + $50K equity growth is a 65.4% growth inequity in the first year. And that is tax free.

6. However if the buyer is on their second year, that growth becomes 117%. And that is also tax free.

7. Let's not confuse income tax with land transfer tax, property tax, etc. No reason for sarcasm on this topic I think the meaning of tax free income has a fairly common base of awareness.

8. let's disregard the fact that my post involved some very quick math to quantify a situation and made no specific mentioning that the hypothetical buyer was on their first year of property purchase, How does the difference between a 65.4% ROI and 100% ROI that is driven by transaction costs in year one, given th context of the discussion, make my post one of the dummer posts on the forum?
 
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