BiscottiGelato

你講到alpha已經係actively trading樓/股票﹐呢個係另一樣嘢啦, Biscotti。我無話你錯呀﹐我只係覺 ...
大C姐 發表於 2010-7-17 09:35

Alpha is just a concept on risk return. I ain't the best in using the English language so couldn't think of simpler terms at the moment I wrote. Just saying if someone is considering buying a house as investment, in Vancouver, at the current prices, it might not be the best choice based on risk return.

I always say buy a house for 自住, esp for people that have stabilized in terms of geographic location, and married couples and esp esp w/ kids, is probably a good idea. Otherwise, one should give rent a very good consideration before dismissing it.

Onto the topic of investing in one self, and that no company is stable. If you have skills, you can always get re-employed. Skills will always be with you. Obviously investing in which skills can dictate how well your income is going to be and how stable your income stream is going to be. No investment is without risk, but investing yourself probably have some of the lowest risk. Also don't put this to the extreme. Getting degrees and certs does not mean you shouldn't work and gain experience. I myself is working full time here, even tho I'd like to see myself to be in school again in a few years.

BiscottiGelato

Just to sum up my points, cuz I can't sit here reply all day.

I am not condoning a certain specific kind of investments. I ain't an investment expert myself. I definitely suck as an amateur trader. What I want to say is, I think in general, and also by the tone of this post, a lot of people just think buy > rent for almost all cases. I think that conclusion is widely emotionally charged and is based on historical trend. This is dangerous. It's evident that housing prices, like all asset, will never go up forever. One should think twice if their investment thesis is based on this assumption. A more fair and rational assessment before buying a house is definitely deserved. Reassessing the points stated by the financial professor in the video CP posted can be a good start.

If anything, there's probably more downside than upside coming up for the Vancouver housing market. In these times, one should mind more on the risk, not the return. There will be better opportunities down the road for return based investment, buying housing now is probably not the best chance for this.

BiscottiGelato

I am actually in the market for an accomodation and i debated between buy and rent. And I still decided on rent. Here's my justification.

- Purchasing to live in is okay, since payment isn't that much more than rent. This is applicable if you plan to close to complete the mortgage or if you have a time horizon at least 10 years+
- Purchasing with possibility to resell in the short term is super risky. Can easily be 100k+ in the water a couple years down the road, possibly wiping out equity right at the time you are trying to sell.
- Purchasing for rental right now is risky. Vancouver market is on track for a 20% minimum slip, up to 40/50% over the next 4 years. The odd that the market will go down is greater than going up. There might be much better entry points coming up.

Slightly off track. Looking for rental 1 Bdrm + Den in the Brentwood area. 10 years old max. Stainless Steel Appliance req'd. Thinking concrete condo or ground floor apartment, so I don't get noise complaints when watching movie or throwing a party or whatever. Prepared to be a good bit over 1k a month. Lemme know if anyone know of a good rental unit at a great price around that area!

BiscottiGelato

Just hard data. Up, down or whatever, you be the judge. From http://f.redflagdeals.com/showthread.php?t=1194032

(Updated Nov 1, 2012)

----------------------

DETACHED - $1,116,100
- Down 9.6% in 8 months from all-time high in Feb, 2012 ($1,235,200)

APARTMENT - $429,400
- Down 11.1% in 18 months from all-time high in Apr, 2011 ($483,400)

ATTACHED - $583,400
- Down 1.4% in 7 months from all-time high in Mar, 2012 ($593,100)

-----------------------------

BOOM #1
- Mar/79 @ $73,200
- Apr/81 @ $181,200 (147% increase in 25 months - 102% with inflation)
- Dec/84 @ $113,300 (38% decline in 45 months - 51% with inflation)

BOOM #2
- Jun/88 @ $177,100
- Jul/96 @ $426,400 (140% increase in 97 months - 92% with inflation)
- Feb/99 @ $339,900 (20% decline in 31 months - 23% with inflation)

BOOM #3
- Jan/02 @ $363,900
- Feb/08 @ $920,600 (153% increase 73 months - 100% with inflation)

Let's stop here and take a look at where we are. A 153% increase (100% with inflation). It looks strangely familiar to when the two previous bubbles burst. Now would be a good time to predict a bubble burst... and... sure enough, wouldn't you know it? The bubble "pops" (or so everyone thinks). In Feb 2008, prices start dropping, and they drop almost 20% over the summer. It was supposed to end here... but it didn't. The government steps in with super low interest rates and prevents the normal cycle from happening. Not only does the market recover almost immediately, but the bubble continus to grow at an alarming rate. So what ends up happening? Here is where we end up, exactly 4 years later:

- Feb/12 @ $1,235,200 (239% increase in 121 months - 177% with inflation)

BiscottiGelato

As long as one is okay with holding super long term, and can sustain a year or two of vacancy or ridiculous rental rate at max, sustain ridiculous interest rate (~10%) and doesn't get emotionally shaken out IF there's a rapid decline (I agree that there shouldn't be, but a moderate decline of 10% per year over 2/3 years)... Then yes, I agree. Who cares about the current price and valuation then? Essentially, this is not treated as an investment vehicle almost, but more like a forced savings vehicle. Which is fine. Whatever works~

BiscottiGelato

I think the chance of interest rate jump to 10% is pretty low, that would mean our economy is pretty ...
Nam 發表於 2012-11-15 13:13

No, near 0% means our economy is pretty messed up. 10% is to curb uber inflation/excessive speculation.

Of course, it all follows the US rate, not so much reflective of our economy. We can be in sh_t hole and be doing a 10%, or be on hyper inflationary trajectory and still be at 0%....

BiscottiGelato

Bank of Canada interest rate from 1937 to 1975 to present day

http://www.bcrealtor.com/d_bkcan.htm#bkcanhist

Just because we live in time of low interest rate, doesn't mean it won't ever go up. It's kinda like saying we have never had a major earthquake in Vancovuer and think that it won't ever happen. Think again.

BiscottiGelato

你唔係炒樓的話如果加息供得吃力最多拖長嚟還２０年改做３０年，你咪等息低先縮返短囉。呢個世界人 ...
大C姐 發表於 2012-11-15 14:59

Umm... I am not worried about not being able to afford a mortgage now or in the future. I am more worried about being tied down when I'm young, esp a 6 figure amount of inliquid cashflow.

Regardless. Yes, as long as one can sustain all the variables and have a long term outlook., owning can be a better option.

But otherwise, one should carefully evaluate, instead of dismiss, all the possible scenarios before choosing to mortgage. Especially those whom requires 2 income streams to afford a mortgage or expect to be able to sell their property in order to release equity as needed.

BiscottiGelato

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大C姐 發表於 2012-11-15 21:40

Yeah, agreed. Rent is a pain cuz u can't buy as nice stuff for your place. That I view as the biggest downside to rental.

That said, I do need to know my savings' in a liquid place that I can access on demand over the next several years. I don't have a half a million or something lying around so I can keep a couple houses without feeling the pinch. A mortgage will mean that a significant amount of my current savings along with future income will go to into the house. If a downturn of 30%+/at least 100k down, does happen over the next several years, then the equity in the house will be completely wiped out. If this happens right at the moment I need the capital (relocation and buy a place elsewhere, tuition for further education, etc), then I will be really really screwed.

I will buy a place once I decide to marry and settle down~ My current stage in life doesn't justify house ownership, and current valuation doesn't justify real estate investment. I'll pass this time. Good luck to everyone else tho~

I will still buy some cheapo sofa and dining table and all that. Anything that won't have concern of decor matching I probably will not cheap out tho.

BiscottiGelato

haha, no cash ar ma. a 8M HKD property in HK, a few 1M CAD proerty in Van, and still have plenty of cash flow for other ventures. Man! Now that's made of money!

Too bad I'm not born rich, made of money or have a golden goose laying golden eggs for me at 1700 USD an ounce.. Even making 200k a year CAD won't be able to afford those kinda accuulated wealth before 30 years old. Maybe 200k annual salary is only chum change to most of you guys. I'm just a poor dude here. I'll stick to my tiny rental apartments I guess.