Real Estate Rant
So, we've been back in Ottawa now for about a week and a half, and are slowly transitioning back into the cold, and the fact that it is dark by 4:30. Life has been relatively busy, as we are trying to deal with as many issues as possible before we leave for Winnipeg for 3 weeks over Christmas. With the baby due in just over 3 months time, we are realizing that our very small apartment/shoebox will not suffice, and so we've reached that ugly crossroads between signing another rental lease, or making the HUGE leap into real estate.
I have often lamented with my friends to no end about how "real estate" is the topic that seems to hang over my generation. Never fail, the inevitable discussion about how people have become instantly rich, or alternatively, how first-time homebuyers are feeling locked out of purchasing, will eventually rear it's head. It's all very tiresome, because for the most part, people's opinions are highly speculative. This combined with the fact that RE is by it's very nature, seen as just another investment tool, and in fact, could be viewed as rolling the dice on the biggest gamble of your life in some markets. Another sense of shock is generally felt regarding the outrageous year-over-year gains in market value, and the underlying question has to become where this "new money" is coming in from. Essentially - who are these people that continue to fuel this market? Can anyone out there say that they've realized an average salary increase of 20% a year (50% in Calgary). Maybe it's offshore investors, but these investors still require bodies to fill their condo developments. What I find most intriguing, is that studies are now showing the median affordability in homeownership is actually worse in today's market, that it was in the 18% interest rates of the early 80's. This is absolutely frightening considering the massive effect that interest rates have over the life span of the mortgage.
Like many people, I find myself wondering if this is just a market correction, or a general trend towards home ownership in the future. Will Canadian cities transition into a more European model, where detached homes are a distant reality for the working stiff, and we learn to live with less square footage? Or will it reach the point where the long term model is based on some of the most expensive cities in the world, namely, in Asia where mortgages are signed for 50+ years, and you "will" them to your kids. Gee...thanks Mom and Dad.
I also wonder if the idea of raising a family on a single income is becoming an obsolete model. It would seem so when sitting down with financial advisors, and there sense of wonder over our priorities.
Anyhow, for the time being, we will continue to tour the neighbourhoods, note down some possible options, and then return home only to get pissed off when checking mls.ca.
I have often lamented with my friends to no end about how "real estate" is the topic that seems to hang over my generation. Never fail, the inevitable discussion about how people have become instantly rich, or alternatively, how first-time homebuyers are feeling locked out of purchasing, will eventually rear it's head. It's all very tiresome, because for the most part, people's opinions are highly speculative. This combined with the fact that RE is by it's very nature, seen as just another investment tool, and in fact, could be viewed as rolling the dice on the biggest gamble of your life in some markets. Another sense of shock is generally felt regarding the outrageous year-over-year gains in market value, and the underlying question has to become where this "new money" is coming in from. Essentially - who are these people that continue to fuel this market? Can anyone out there say that they've realized an average salary increase of 20% a year (50% in Calgary). Maybe it's offshore investors, but these investors still require bodies to fill their condo developments. What I find most intriguing, is that studies are now showing the median affordability in homeownership is actually worse in today's market, that it was in the 18% interest rates of the early 80's. This is absolutely frightening considering the massive effect that interest rates have over the life span of the mortgage.
Like many people, I find myself wondering if this is just a market correction, or a general trend towards home ownership in the future. Will Canadian cities transition into a more European model, where detached homes are a distant reality for the working stiff, and we learn to live with less square footage? Or will it reach the point where the long term model is based on some of the most expensive cities in the world, namely, in Asia where mortgages are signed for 50+ years, and you "will" them to your kids. Gee...thanks Mom and Dad.
I also wonder if the idea of raising a family on a single income is becoming an obsolete model. It would seem so when sitting down with financial advisors, and there sense of wonder over our priorities.
Anyhow, for the time being, we will continue to tour the neighbourhoods, note down some possible options, and then return home only to get pissed off when checking mls.ca.
posted by Develo @ 7:29 AM
2 Comments:
At 1:12 AM,
Jeremy said…
I keep meaning to comment on this thoughtful post, Greg. As we've discussed before, I am mostly in agreement with your sentiments here.
At some point, though, you just have to figure out how and where you want to live and then just make it happen. The larger forces you refer to stop being as important when you focus on your real needs.
If you guys plan to stay in Ottawa for a few years and buying is the only way to economically live in a neighbourhood you like, then it's probably a fine way to go. If you're not so sure about Ottawa longer term, and can live somewhere nicer for less money by renting, go that route and save the difference each month.
At 8:04 PM,
Anonymous said…
Hey Greg and Soph,
I guess timing is everything. We hit it lucky in the Winnipeg market and bought our house for what most people would consider a song. Housing rates have just ballooned and in a way it's nice, our house is worth a heck of a lot more than what we have paid for it.
I often wonder how other cities keep up, Karl was looking at the UK, near where he used to live (i.e. 7 hours away from London) and houses are about 200K for something small and so close to the next house a rat would get stuck between one "detached" home and the next one, but a qualified Engineer makes about 30K. It's a mystery to me how people afford this housing, as you say, the mortgages must be insanely LONG.
You have a great job in ON and it's probably a safe bet that RE is only going to keep going up, if you buy now, sell later, you will probably find that you make money on the sale, especially if you guys decide to sell in ON and move to Winnipeg. (hint hint). :)
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