Canada Housing/Debt: Trust me, I'm a landlord.

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

namaste friends: Sep 18, 2004; by Smythe

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/when-should-millennials-buy-a-house/article21243985/

quote:

It took just six words for a financial planner who thinks millennials are maxxed out on debt to demolish one young man�s plan to buy a house.

�He�s dreaming,� Kurt Rosentreter said. �He can�t afford it.�

When this young reader e-mailed to ask if his house-buying idea made sense, I immediately thought of Kurt Rosentreter, chartered accountant, certified financial planner (CFP) and author a few years back of a newsletter article that ran with the headline: �Canadian 30 Year Olds are Screwed�.

Mr. Rosentreter argued that young people are carrying too much debt, most of it mortgages. In his words, �thirtysomethings are leveraged to the hilt.� So be forewarned � I took this young man�s case to a guy who thinks debt levels are way too high and won�t hesitate to say so.

We�ll call the young man who e-mailed me Sam. He�s a public servant in his late 20s who makes an impressive $70,000 a year and works in a city not far from Toronto.

His plan: Buy a $500,000 home on his own with the minimum 5-per-cent down payment of $25,000 and rent out the basement for $800 a month. His only current debt is a car loan that he should have paid off in the next year or two.

Mr. Rosentreter started his dissection of this plan by computing Sam�s mortgage payments over the long term using a rate of 4 per cent.

�As much as you can get a mortgage for 2.5 per cent today, we all know that over 25 years, rates are not going to stay at 4 per cent.�

The 4-per-cent rate produces monthly payments of $2,577 per month, with mortgage insurance premiums added to the principal. Over a year, that�s close to $31,000. Add utilities and property taxes to the analysis and you end up with housing-related costs of up to $40,000 a year.

Next, Mr. Rosentreter turned to Sam�s salary. Usually, someone at his income level should expect to take home $55,000 after taxes. But as a civil servant, Sam is making big contributions to a defined benefit pension plan that in retirement will produce income for life at levels based on his years of service and career salary levels. If pension contributions are included, Mr. Rosentreter expects Sam to take home closer to $50,000.

Now for some simple math: $50,000 after taxes minus housing costs of as much as $40,000 leaves as little as $10,000 to cover all life�s other costs. Mr. Rosentreter said these numbers don�t compute, and that means Sam�s plan to rent the basement of his house becomes pivotal (you�ll notice we haven�t even included Sam�s car payments here).

Mr. Rosentreter believes mortgage costs should account for no more than one-third of your take-home pay, which in Sam�s case would be $16,500 a year or $1,375 a month. That�s a little more than half of his projected payments in buying that $500,000 home with 5-per-cent down.

Sam�s plan is to generate $800 a month in rent, which would reduce his payments to $1,777 monthly and $21,324 a year. This would improve his cash flow a lot, but still leave him well offside on Mr. Rosentreter�s one-third rule.

Sam actually had two questions for me, the first being whether he can afford to buy a house on his own.

The answer is no, and it�s not just Mr. Rosentreter and me talking here.

Canada Mortgage and Housing Corp.�s online affordability calculator suggested a maximum purchase price of about $340,000 based on a $25,000 down payment, $80,000 in income from his job and rent, and a 4-per-cent mortgage rate (car loan included as well).

Sam�s other question was about retirement saving. Given that he�s a member of a DB pension plan, does he need to put money in a registered retirement savings plan?

This is an important matter because young people who buy houses may not have enough money to save for retirement.

�For a guy like this, I say: Do not put any money in registered saving,� Mr. Rosentreter said. �Focus on your mortgage, and be in a bit of a race to get it down so that if mortgage rates double or triple, you won�t be bankrupted. And next comes your children�s savings. That could come into play into the next 10 years.�

Sam�s finances appear to be strong. If he saves a bigger down payment, he�s ideal home ownership material.

But now is not the time for him to buy, even if interest rates remain at historically low levels and prices, at least in the Toronto area, Calgary and Vancouver, keep rising.

Save up, Sam. Don�t be one of those 30-year-olds Mr. Rosentreter wrote about.

How much house can Sam afford?

A man in his late 20s - we'll call him Sam - asks if he can afford to buy a $500,000 house. Here's how an online calculator provided by Canada Mortgage and Housing Corp. breaks down the numbers.

# ? Oct 23, 2014 20:57

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# ? May 10, 2024 16:14

namaste friends: Sep 18, 2004; by Smythe

Btw, in case you didn't already know this, the above article was written by Rob Carrick, a man that Brad J. Lamb the condo king has described as dispensing 'moronic' advice. That's how you know Carrick knows what he's talking about.

# ? Oct 23, 2014 21:09

namaste friends: Sep 18, 2004; by Smythe

I never read Garth Turner because he's a loving moron. I had no idea he was this loving dumb:

http://www.greaterfool.ca/2014/10/21/darwin-2/

quote:

Almost nine million people born yesterday (between 1981 and 2000) which is roughly equal to the number of wrinkly Boomers. Incredibly, half of the M-people still live with their parents, and about a million of them who could work, don�t. Six years ago, the number living at home was just a third. Go figure.

Millennials account for about 20% of all income earned in Canada, while the Boomers, many of whom are now at the end of their piteous careers, constitute 30% and their kids (Gen X) who are in mid-career, represent 46% of all earnings. Of course, this last group � saddled with houses, kids, dogs and SUVs � also spend hugely.

Well, so what?

Hmm. This is an ugly demographic mix for the little skunks. I hope their moms are teaching them to forage, and hide their nuts.

Our social system � much of the economy, in fact � is based on working people supporting old wheezers. Today there are four-and-a-half workers for every senior. So, the Boomers never have to worry about their CPP or OAS or health care. But when the average 25-year-old millennial is 65, there will be just two people with a job for every retiree. Oops.

And that's all you need to know about Garth Turner. Young people aren't working because they're lazy.

# ? Oct 23, 2014 21:19

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

You maybe reading more into his tone than is really there, though he does have a drunk uncle style of writing.

50% of Spanish youth could, but don't, work. It is more that there isn't work than laziness. The over-educated kids working at my morning coffee shop aren't lacking ambition either.

# ? Oct 23, 2014 21:39

ascendance: Feb 19, 2013

Lexicon posted:

How do these folks raise the capital for the loans?

Those automative lenders? Looting employee pension funds is a big part of it, I'm sure. Which is why the US pension funds for the Big 3 are so hosed.

# ? Oct 23, 2014 21:43

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

I love Garth Turner's style, even if I disagree with his point of view fairly often. He treats all demographics with contempt and opprobrium, not just millennials.

# ? Oct 23, 2014 21:48

peter banana: Sep 2, 2008; Feminism is a socialist, anti-family, political movement that encourages women to leave their husbands, kill their children, practice witchcraft, destroy capitalism and become lesbians.

I got the sense that he was sympathizing with us, the last line seems to really nail that for me. We're supporting the sweet, sweet retirements of Boomers, but we'll be hosed when we get there.

He wrote a column a while ago about good investing advice for Millennial. I think he thinks it sucks Millennial can't find jobs and how that's loving our country up.

# ? Oct 23, 2014 21:48

Laphroaig: Feb 6, 2004; Drinking Smoke; Dinosaur Gum

Cultural Imperial posted:

I never read Garth Turner because he's a loving moron. I had no idea he was this loving dumb:

http://www.greaterfool.ca/2014/10/21/darwin-2/

And that's all you need to know about Garth Turner. Young people aren't working because they're lazy.

Uhh...? He comes across as a total rear end in a top hat, but he mocks the idea that millenials should invest in real estate, rightly so, because its a terrible loving investment.

I've never read his other stuff, and don't really intend to, but the article you link states:

quote:

Some months ago I gave you a Millennial Portfolio. It was met with thunderous neglect. So let�s try again.

First, the investment vehicle of choice for all the kids should be the TFSA. Forget RRSPs for now, because they�ll end up being tax bombs you deeply regret in a few decades, when taxation rates are inevitably higher. You may not get a break for making a TFSA contribution, but you�ll pay nothing on the growth or any withdrawal.

Second, these savings accounts are not for savings. Get out of the bank or the orange marmalade outfit and into a place where you can hold a bunch of low-cost ETFs � exchange-traded funds. Divide your money into five piles and buy a fund holding the TSX 60, another containing the S&P 500, one with a basket or preferreds, one comprised of a bundle of REITs and the last containing a good mix of bonds. Now you have balance, diversity and liquidity.

If you start with five grand and add that much in a year, securing just a 6% annual return (assuming a slow-growth world), in thirty years the balance will be $494,000, of which almost $300,000 would be tax-free growth. That�s half a million in taxless wealth, all for contributing $100 a week.

Or, you could buy a condo for $400,000, with a $390,000 mortgage, pay twice the amount per month that a renter does, and end up losing all your equity. In a vaguely deflating world populated with annoying and condescending old people who won�t give you money even though you�re special, why would you?

Ask your phone. There�s an app for that.

I mean, its not the best advice - ETFs have their issues - but its better advice than "buy a house".

# ? Oct 23, 2014 22:00

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Laphroaig posted:

I mean, its not the best advice - ETFs have their issues - but its better advice than "buy a house".

So what characterizes the best advice in your estimation, then?

# ? Oct 23, 2014 22:14

melon cat: Jan 21, 2010; Nap Ghost

Cultural Imperial posted:

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/when-should-millennials-buy-a-house/article21243985/

I don't understand why people think that renting out a room/their basement is a fool-proof way to reduce their mortgage burden. Sometimes renters leave abruptly during a bad time of the season, so your room is empty for a few months. Or sometimes they just stop paying rent, or can't pay it in full, or they're late. Or sometimes you get a bad tenant who damages the property, leaving you to foot an expensive refurnishing/remodelling bill. I had an investment property and ran into all of these problems. Anyone who thinks that renting out their room makes things "safer" for them needs to have their head examined.

Rental income should be considered "extra" income, and definitely shouldn't be part of the home affordability calculation.

melon cat fucked around with this message at 14:48 on Oct 24, 2014

# ? Oct 23, 2014 22:21

namaste friends: Sep 18, 2004; by Smythe

peter banana posted:

I got the sense that he was sympathizing with us, the last line seems to really nail that for me. We're supporting the sweet, sweet retirements of Boomers, but we'll be hosed when we get there.

He wrote a column a while ago about good investing advice for Millennial. I think he thinks it sucks Millennial can't find jobs and how that's loving our country up.

To me the tone was that millenials are just not working because they don't have to, and this was going to screw them and everyone else.

# ? Oct 23, 2014 22:26

namaste friends: Sep 18, 2004; by Smythe

melon cat posted:

I don't understand why people think that renting out a room/their basement is a fool-proof way to reduce their mortgage burden. Sometimes renters leave abruptly during a bad time of the season, so your room is empty for a few months. Or sometimes they just stop paying rent, or can't pay it in full, or they're late. Or sometimes your get a bad tenant who damages the property, leaving you to foot an expensive refurnishing/remodelling bill. I had an investment property and ran into all of these problems. Anyone who thinks that renting out their room makes things "safer" for them needs to have their head examined.

Rental income should be considered "extra" income, and definitely shouldn't be part of the home affordability calculation.

agree 100%

# ? Oct 23, 2014 22:27

Laphroaig: Feb 6, 2004; Drinking Smoke; Dinosaur Gum

Lexicon posted:

So what characterizes the best advice in your estimation, then?

Off the top of my head? A bit hard, since I am not an expert on Canadian tax law and I'm probably missing whatever various loopholes you crazy moose-wranglers have. but:

quote:

Second, these savings accounts are not for savings. Get out of the bank or the orange marmalade outfit and into a place where you can hold a bunch of low-cost ETFs � exchange-traded funds. Divide your money into five piles and buy a fund holding the TSX 60, another containing the S&P 500, one with a basket or preferreds, one comprised of a bundle of REITs and the last containing a good mix of bonds. Now you have balance, diversity and liquidity.

ETFs are not something I would recommend without reservation - take a look at one of the best industry pages for ETFs, http://www.etf.com/etf-education-center/21004-what-risks-are-there-in-etfs.html

This gives a good skivvy on it. ETFs have tax advantages, but there are risks. The difference between one ETF offering, say, the S&P 500 and another ETF offering the S&P 500 could be a lot of percentage points. The example the link above gives is "Last year, for instance, the difference between the best-performing "biotech" ETF and the worst-performing "biotech" ETF was more than 18 percent."

Again, a lot depends on your Canadian tax vehicles, and whatever government sponsored dodges are popular. In the US for example, the Mortgage Income Tax Deduction is a MASSIVE federal subsidy to home ownership worth between about 70 to 100 billion annually.

This is kinda off-topic but basically, real estate is not a good investment, unless you buy real estate under which is oil or gold, other mineral wealth etc, that other people do not know about, and your purchase includes rights to said mineral wealth etc.

# ? Oct 23, 2014 22:53

Lead out in cuffs: Sep 18, 2012; "That's right. We've evolved."

"I can see that. Cool mutations."

Lexicon posted:

I love Garth Turner's style, even if I disagree with his point of view fairly often. He treats all demographics with contempt and opprobrium, not just millennials.

Yeah this. He was throwing out some dumb memes (like that owning a smart phone is somehow an indicator of economic status), but it didn't seem too dumb otherwise.

Laphroaig posted:

This is kinda off-topic but basically, real estate is not a good investment, unless you buy real estate under which is oil or gold, other mineral wealth etc, that other people do not know about, and your purchase includes rights to said mineral wealth etc.

That is the exact opposite of off-topic. The fact that real estate is a terrible investment, and the popular narrative asserting the contrary, is exactly the topic of this thread.

# ? Oct 23, 2014 23:29

namaste friends: Sep 18, 2004; by Smythe

http://www.smh.com.au/world/australia-set-to-seize-assets-of-corrupt-chinese-officials-20141020-118kl3.html#ixzz3Gw8nRrJi

quote:

Beijing: The Australian Federal Police are poised to seize assets of corrupt Chinese officials within weeks, in an unprecedented joint operation with their Chinese counterparts.

In an exclusive interview with Fairfax Media, Commander Bruce Hill, the manager of the AFP's operations in Asia, has confirmed Australia has agreed to assist China in the extradition and seizure of assets of corrupt officials who have fled to Australia with illicit funds running into the hundreds of millions of dollars.

The joint operation will make their first forfeiture of assets within weeks, having agreed on a priority list of alleged economic fugitives who have taken residence in Australia � identified by Beijing as one of the most popular outlets for corrupt Chinese money.

Among the suspects identified by the AFP are naturalised Australian citizens and permanent residents who for years have laundered money under the guise of being genuine investment or business migrants from China.

"They don't all of a sudden leave overnight and take a bag of money with them. In some cases they're very carefully planned," Commander Hill said, who explained that a typical scenario involves officials sending their spouses and children overseas, often using them as a conduit to shift assets offshore. With barely any assets to their name, the so-called "naked official" � as is the popular term for them in China � is then able to join their family overseas at the first whiff of trouble.

"As time goes on, they start to put [their funds] into legitimate assets such as houses and property and shares and bank accounts and then the money becomes their wealth," Mr Hill, who is based in Beijing, said. "But it's never been their money to start with in the first place; it's the corrupt money flowing out of China."

The sums of money believed to have been spirited out from China are staggering. The Washington-based Global Financial Integrity group, which analyses illicit financial flows, estimates that $US3 trillion flowed out of China illegally between 2005 and 2011.

Since taking power in November 2012, President Xi Jinping has directed a wide-ranging anti-corruption drive aimed at regaining credibility from a public disillusioned with endemic graft in the Communist Party, while also striking fear into his opponents.

The impetus for the joint operation has come from a campaign launched in July � called Operation Fox Hunt � to track down corrupt officials overseas, and to deter others from absconding.

"It's extremely difficult for public servants to go abroad now," said Lin Zhe, an anti-corruption expert at the ruling Communist Party's in-house training institution, the Central Party School.

"The passports of department heads and above are withheld by the Organisation Department. When I first came to the Central Party School, there were many [international] exchanges, but this rarely happens now."

The priority list agreed between the Ministry of Public Security and the AFP was culled from a broader list of "less than a hundred people", Mr Hill said, adding that the assets being pursued by China in Australia were in the "many hundreds of millions of dollars".

Mr Hill said the AFP were not party to any information Chinese investigators may hold relating to Communist Party links that a suspect may have.

"We only see what's on face value, this person has committed an offence," he said. "There is a human rights side; we need to make sure that we're monitoring that as well, that this is not done for political expediency where we can."

The federal government's Significant Investor Visa scheme has proven overwhelmingly popular among Chinese investors, who account for 90 per cent of applicants so far. But the difficulty in verifying the source of Chinese income had led to delays in approvals.

In announcing a new "premium" investor visa last week, which allows applicants who invest $15 million to gain permanent residency after one year, the government said it would "strengthen integrity measures" to ensure the migration programme was not misused.

Asked if the new visa class could lead to more corrupt officials fleeing to China, Chinese foreign ministry spokesman Hong Lei said it hoped to work with Australia to "trace fugitives and retrieve embezzlement from overseas".

"The corrupt should find no safe haven in foreign countries," he said.

With an extradition treaty with China yet to be ratified, Australia ranks high among the preferred destinations for Chinese economic fugitives, along with the United States and Canada. The Attorney-General can consider extradition requests for offences under the United Nations Convention against Corruption, to which Australia and China are both parties.

But immigration protection laws mean those accused have a series of claims, including applying for asylum, to avoid facing court back in China.

"All criminals will always go where the weakest link is," Mr Hill said. "In the interim we're trying to develop strategies to make sure these people don't think they can just go to Australia and live happily ever after."

GO AUSTRALIA GO

# ? Oct 23, 2014 23:38

etalian: Mar 20, 2006

Laphroaig posted:

This gives a good skivvy on it. ETFs have tax advantages, but there are risks. The difference between one ETF offering, say, the S&P 500 and another ETF offering the S&P 500 could be a lot of percentage points. The example the link above gives is "Last year, for instance, the difference between the best-performing "biotech" ETF and the worst-performing "biotech" ETF was more than 18 etc.

Somewhat off topic, but it's fairly easy to lookup the tracking error for different ETFs.

# ? Oct 24, 2014 01:08

Freakazoid_: Jul 5, 2013; Buglord

Saltin posted:

In the US they are starting to put immobilizers in cars and turning them off when people are delinquent.

I've only ever heard this as a proposal or maybe a prototype, and the reaction to them has been pretty negative. What cars actually have these?

# ? Oct 24, 2014 02:53

Baronjutter: Dec 31, 2007; "Tiny Trains"

Freakazoid_ posted:

I've only ever heard this as a proposal or maybe a prototype, and the reaction to them has been pretty negative. What cars actually have these?

All it will take is 1 malfunction that causes an accident or someone immobilized on the side of the highway to create enough of an outcry to ban them.

# ? Oct 24, 2014 02:57

Rutibex: Sep 9, 2001; by Fluffdaddy

Baronjutter posted:

All it will take is 1 malfunction that causes an accident or someone immobilized on the side of the highway to create enough of an outcry to ban them.

Get your outcry ready:
Starter cut-off devices keep car payments coming

quote:

Ward, a married mother of two, didn�t think much about it until one day that winter.

�I got into my car to leave for the doctor, and the car wouldn�t start. When I tried, the key it would make this beeping noise,� she said. �I�m freaking out because I have to get the kids from school.�

She wasn�t behind on her payment, she said. She called Western Funding, and they gave her control of the car again after a 30-minute wait. It happened again in March 2011, she said. This time it took more than an hour to restore.

By August 2011, however, she says she was two weeks behind on her car payment. She left work in Des Peres and found her starter frozen.

�Your payment was due on the first,� said the representative at Western Funding, according to Ward. �You�re late.�

At the time, she lived in Bellefontaine Neighbors, about 25 miles away. After some begging, they let her drive home before shutting it off again.

She fell behind again and was shut off again in November, while out shopping with her family. This time they wouldn�t unfreeze the starter until she paid. In December, her car was disabled again while she was at work.

�They laughed at me,� she said. �They said the policy had changed. Now instead of 10 days to pay, you have five days. My husband came with the kids and picked me up.� She later wired in the money to the lender.

After all that, she�s frightened by the device. �It�s a hassle, and I�m constantly nervous,� she said. �What will happen if I have the kids with me and it�s the middle of winter?�

But it does concentrate her mind on making on-time payments. �I�m a day late and I�m paranoid. It�s a constant worry,� she said.

# ? Oct 24, 2014 03:26

Shifty Pony: Dec 28, 2004; Up ta somethin'

Freakazoid_ posted:

I've only ever heard this as a proposal or maybe a prototype, and the reaction to them has been pretty negative. What cars actually have these?

Congrats on not being poor I guess. Have you ever seen a lot with a sign that says "buy here pay here"? Odds are every car that leaves that lot will have a remote starter disable.

Here is a good article about the practice in the US. Not only do they allow remote disabling of the starter (but just the starter, they won't kill the engine while driving) but now they feature GPS which allows the dealers to track the locations of the cars at all times and even do things like this:

quote:

At its extreme, consumer lawyers say, such surveillance can compromise borrowers� safety. In Austin, Tex., a large subprime lender used a device to track down and repossess the car of a woman who had fled to a shelter to escape her abusive husband, said her lawyer, Amy Clark Kleinpeter.

The move to the shelter violated a clause in her auto loan contract that restricted her from driving outside a four-county radius, and that prompted the lender to send a tow truck to take back the vehicle. If the lender could so easily locate the client, Ms. Kleinpeter said, what was stopping her husband?

# ? Oct 24, 2014 03:30

Baronjutter: Dec 31, 2007; "Tiny Trains"

I've never heard of those, seem a bit brutal. As long as it's not malfunctioning and stranding people who have been paying, that seems harsh but fair. And only disable the car after attempting to contact the person repeatedly and sending a written notice that their car is going to be disabled on X date if they don't pay.

Of course the poor are the most likely to be stuck with such a system, and the poor are most likely to be totally auto-dependent to get anywhere so the poor have the most to lose by having their car turned off. Much in the way water and power can't just be turned off the second you're over due because those are essential services, a car is basically essential in most places. It's hosed we've built our cities around an extremely expensive way to travel and have been driving the poor deeper and deeper into the suburbs where the rich and middle class campaign tirelessly against transit and density.

# ? Oct 24, 2014 03:41

peter banana: Sep 2, 2008; Feminism is a socialist, anti-family, political movement that encourages women to leave their husbands, kill their children, practice witchcraft, destroy capitalism and become lesbians.

melon cat posted:

I don't understand why people think that renting out a room/their basement is a fool-proof way to reduce their mortgage burden. Sometimes renters leave abruptly during a bad time of the season, so your room is empty for a few months. Or sometimes they just stop paying rent, or can't pay it in full, or they're late. Or sometimes your get a bad tenant who damages the property, leaving you to foot an expensive refurnishing/remodelling bill. I had an investment property and ran into all of these problems. Anyone who thinks that renting out their room makes things "safer" for them needs to have their head examined.

Rental income should be considered "extra" income, and definitely shouldn't be part of the home affordability calculation.

the dude who bought the house I used to rent moved in upstairs (which wasn't up to rental code) and is fixing it up himself, even though he's just a paper pusher at CIBC and his wife doesn't work. He rents out the basement and our old unit. We recently moved back into the area to a place that doesn't have laundry. It was a little awkward running into him at the laundromat, since he bought the house 2+ years ago. I thought he'd at least be able to put a washer dryer in the house at this point.

It must not be going as well as he thought it would :smith:

# ? Oct 24, 2014 14:07

triplexpac: Mar 24, 2007; Suck it
Two tears in a bucket
And then another thing
I'm not the one they'll try their luck with
Hit hard like brass knuckles
See your face through the turnbuckle dude
I got no love for you

Rutibex posted:

Get your outcry ready:
Starter cut-off devices keep car payments coming

lol that was the most infuriating article. Just pay your loving bills on time!!

# ? Oct 24, 2014 14:48

LemonDrizzle: Mar 28, 2012; neoliberal shithead

triplexpac posted:

lol that was the most infuriating article. Just ~~pay your loving bills on time~~ be careful about who you lend to and on what terms

Also, there's an interesting article on global property prices in today's FT:

http://www.ft.com/cms/s/0/3df85be6-5abf-11e4-b449-00144feab7de.html#axzz3GzkYi7i7

quote:

City dwellers around the world pay $650bn more in housing costs than they can afford yearly, as rapid urban growth meets a constrained supply, according to a new report.
Some of the world�s leading urban areas face the biggest housing cost problems, with New York, Tokyo and London among the worst affected, the McKinsey Global Institute said. Beijing, S�o Paulo and Buenos Aires are among those facing the biggest crunch amid lower income cities.
McKinsey looked at the cost of housing as a proportion of household income around the world, showing the extent to which a city�s residents are under financial pressure. For the first time in human history more than half the world�s population live in urban areas and the proportion is set to rise to two-thirds by 2050 according to the UN.
Housing affordability has become �a huge social and economic issue affecting billions�, said Jan Mischke, a senior fellow at McKinsey Global Institute and one of the report�s authors. �More and more cities are growing fast, they are quite likely competing for talent and workers.�
Around the world, 330m urban households lack decent housing or are cutting back on basic spending to cover housing costs, McKinsey found. By 2025, this number will grow to 440m � a third of the world�s urban population � unless governments do more to build and subsidise housing, the report said.

...

John Muellbauer, an economist at Oxford university, said one of the factors behind the affordability crunch was speculative investment.

�People look at recent rises in house prices and tend to extrapolate forward, so some price appreciation tends to create further appreciation,� he said.

So far, so standard: urban house prices being pushed up by a combination of demand outstripping supply and speculative froth. However, there's a chart looking at the extent of the imbalance between supply and demand in the major cities of different countries:

Canada's ratio is >1.0, which presumably implies that there's no demand/supply imbalance and the price increases are driven by nothing but speculative froth.

# ? Oct 24, 2014 15:11

Baronjutter: Dec 31, 2007; "Tiny Trains"

With the insanity in australia I'm surprised construction is lagging so behind.

# ? Oct 24, 2014 17:35

Kalenn Istarion: Nov 2, 2012; Maybe Senpai will finally notice me now that I've dropped :fivebux: on this snazzy av

Lexicon posted:

How do these folks raise the capital for the loans?

Issuance of notes to institutional investors, mostly.

# ? Oct 24, 2014 20:02

Guy DeBorgore: Apr 6, 1994; Catnip is the opiate of the masses; Soiled Meat

Kalenn Istarion posted:

Issuance of notes to institutional investors, mostly.

In which case those institutions would also be exposed to the auto loan market? Would the bonds be backed by all of Ford or just by Ford Credit?

# ? Oct 24, 2014 20:19

Grand Theft Autobot: Feb 28, 2008; I'm something of a fucking idiot myself

triplexpac posted:

lol that was the most infuriating article. Just pay your loving bills on time!!

Paying bills isn't exactly easy for everybody.

# ? Oct 24, 2014 21:12

Baronjutter: Dec 31, 2007; "Tiny Trains"

Grand Theft Autobot posted:

Paying bills isn't exactly easy for everybody.

Personal responsibility, failure to make payments means instant removal of heart plug (now standard issue on all poors).

# ? Oct 24, 2014 21:20

Buskas: Aug 31, 2004; ?

Grand Theft Autobot posted:

Paying bills isn't exactly easy for everybody.

Well if people would stop being so lazy and educate themselves on the financial liberation of home ownership, we wouldn't have that problem.

# ? Oct 24, 2014 21:21

blah_blah: Apr 15, 2006

Laphroaig posted:

This gives a good skivvy on it. ETFs have tax advantages, but there are risks. The difference between one ETF offering, say, the S&P 500 and another ETF offering the S&P 500 could be a lot of percentage points. The example the link above gives is "Last year, for instance, the difference between the best-performing "biotech" ETF and the worst-performing "biotech" ETF was more than 18 percent."

'Biotech' is a pretty nebulous descriptor but two ETFs which aim to track the S&P500 should produce virtually identical returns.

# ? Oct 24, 2014 21:37

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

blah_blah posted:

'Biotech' is a pretty nebulous descriptor but two ETFs which aim to track the S&P500 should produce virtually identical returns.

They would, but in reality those two biotech ETFs would be following different sublists of biotech firms.

Even two S&P500 funds could track differently if say one underweights Apple (I believe there is an ETF that does this) since it has more of an impact that Johnson & Johnson. It does poorly when Apple goes bananas, and does better when Apple is crap.

It is still a better way for a inexperienced retail investors to get diversified than directly purchasing a couple of stocks, which is why GT recommends them in the first place.

# ? Oct 24, 2014 22:09

blah_blah: Apr 15, 2006

ocrumsprug posted:

Even two S&P500 funds could track differently if say one underweights Apple (I believe there is an ETF that does this) since it has more of an impact that Johnson & Johnson. It does poorly when Apple goes bananas, and does better when Apple is crap.

If it isn't weighting the components by market cap then it's not tracking the S&P 500.

# ? Oct 24, 2014 22:10

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

blah_blah posted:

If it isn't weighting the components by market cap then it's not tracking the S&P 500.

Exactly. ETFs that aren't explicitly index-ETFs are where you run into trouble (assuming you subscribe to the correctness of passive investing for retail investors, as all right-thinking people should).

# ? Oct 24, 2014 22:21

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

It is not like they hide what they are doing though. If you buy a white-box S&P500 index, or if you buy a S&P500 that also has a bit of Samsung in it, what they are is listed in their prospectus. Not sure there's a big danger if the ETFs differentiate themselves from one another.

I suspect that is why most of them don't call themselve index funds anymore.

# ? Oct 24, 2014 22:42

Baronjutter: Dec 31, 2007; "Tiny Trains"

http://www.bloombergview.com/articles/2014-10-23/can-t-afford-a-house-don-t-buy-one

Article is about the US, but it looks like they've already forgotten about 2008 and are lobbying government for a repeat.
"When legislators and activists say that we need low-down-payment loans because most people couldn�t possibly save up for a 20 percent down payment, what they�re really saying is that people can�t actually afford to buy a house. Helping them to go buy one anyway is not a great idea; it will work out well for some, to be sure, but it will have tragic consequences for others, and for the housing market as a whole if there�s another downturn. We just spent six years learning, the very hard way, that you can�t borrow yourself rich. That knowledge is too expensive to throw away so easily."

# ? Oct 24, 2014 22:50

etalian: Mar 20, 2006

ocrumsprug posted:

They would, but in reality those two biotech ETFs would be following different sublists of biotech firms.

Even two S&P500 funds could track differently if say one underweights Apple (I believe there is an ETF that does this) since it has more of an impact that Johnson & Johnson. It does poorly when Apple goes bananas, and does better when Apple is crap.

It is still a better way for a inexperienced retail investors to get diversified than directly purchasing a couple of stocks, which is why GT recommends them in the first place.

Yes things like stock weighting can lead to tracking error.

However a good fund or ETF will still have solid tracking error over time

# ? Oct 25, 2014 01:49

namaste friends: Sep 18, 2004; by Smythe

http://www.theglobeandmail.com/life/home-and-garden/real-estate/vancouver-co-housing-movement-gains-traction/article21288424/

quote:

Vancouver�s first co-housing project is finally under construction and presales are almost sold out, with only three units remaining.

The 31-unit project, located at 1733 E. 33rd Ave. on Vancouver�s east side, ranges from studios to four-bedroom units. The remaining units range in price from around $300,000 to $720,000.

It may be a first for Vancouver, but it�s a form of housing that�s been undergoing a quiet boom throughout the province. In B.C., co-housing communities are either completed or in progress in Burnaby, Langley, North Vancouver, Bowen Island, Nanaimo, Qualicum, Parksville, Courtenay, Roberts Creek, Nelson, Yarrow and Victoria, according to B.C.-based Canadian Cohousing Network. In Vancouver, on East 35th Avenue, land has been secured for another 30-unit project.

Holy loving poo poo vancouverites are literally the dumbest loving people on earth.

700k so you can live in a frathouse.

# ? Oct 25, 2014 07:51

namaste friends: Sep 18, 2004; by Smythe

https://twitter.com/BenRabidoux/status/525793044701126657

# ? Oct 25, 2014 08:00

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# ? May 10, 2024 16:14

PT6A: Jan 5, 2006; Public school teachers are callous dictators who won't lift a finger to stop children from peeing in my plane

Cultural Imperial posted:

http://www.theglobeandmail.com/life/home-and-garden/real-estate/vancouver-co-housing-movement-gains-traction/article21288424/

Holy loving poo poo vancouverites are literally the dumbest loving people on earth.

700k so you can live in a frathouse.

I looked up "co-housing" and I have to think that whoever came up with it was probably sniffing glue. It's like a lovely hippie commune, but still expensive and with none of the sexual liberation.

# ? Oct 25, 2014 08:35

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

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