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Pique'n'yer interest

Return to housing sanity

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I bought into Whistler employee housing in September of 2006, probably either the first or second person to buy in following the decision to change the rate of appreciation from the Vancouver index to the Core Consumer Price Index. I knew what I was getting into, and what I was potentially losing by purchasing a house that will only realistically appreciate two to three per cent a year ­— well below the over 5 per cent interest I’ll pay into my mortgage.

In one year my house will have appreciated around $7,000, while I’ll have paid the banks around $14,400 — only $4,600 going towards the principle. In other words, I paid about $9,800 in interest, which is only slightly more than the $9,600 my wife and I used to pay annually in rent — not including property taxes.

However, when you include the appreciation of the house — assuming we ever sold and got what we asked for — we only paid about $2,600 when you subtract the principle.

The situation will continue to improve over time as the amount of principle we pay starts to add up, and the amount we pay in interest decreases. As long as inflation doesn’t go backwards, our home should also increase by a modest amount annually.

In the same year my house appreciated $7,000 under the CCPI, some houses in my complex — still tied to the Vancouver market — increased by close to $50,000.

Now some of the owners of those houses are selling, and can’t find anybody out of the 671 people on the housing waitlist interested in buying at that price. As a result they’ve taken it upon themselves to sell to people off the waitlist, but it has been slow going. They have turned down offers below the maximum resale value, and are holding out for the full amount.

I can’t blame them for this. When someone tells you your house is worth $375,000, you’re going to think twice about selling for $325,000. That’s a lot of money, and compared to places like Vancouver the higher number is still quite reasonable.

I also can’t blame people on the waitlist for not buying. It’s a lot of money, and will likely be more expensive per square foot than several housing projects on the horizon.

People need to be realistic, especially when they watched their homes increase in value by 60 per cent or more in the last five years.

First of all, those homes were not supposed to increase that much. When the decision was made to tie WHA homes to the Vancouver market, the projected appreciation was one-to-three per cent a year. And still you bought in.

Even if you secretly expected the Vancouver market to explode, you can’t really take the credit.

Those homes were built at a set price per square foot, and kept deliberately cheap to ensure they would be affordable for staff. You were allowed to buy in because you were a resident of Whistler, had a pre-approved mortgage, and were high enough on the waitlist to get the call. Taking advantage of those circumstances do not make you the next Warren Buffet.

Secondly, buyers are not idiots. Nobody will ever buy a property that they have no chance of reselling, unless they absolutely love the place. While I like my WHA unit and there’s always an outlet where I need one, it’s no castle in Scotland. It’s very much affordable housing.

Here’s the thing: while my house increased in value by about $7,000 this year under the CCPI, any home still attached to the Vancouver market that sold for $50,000 more than the value of my house would continue to increase at a greater rate.

Say my house was worth $200,000 and it appreciated two per cent a year. That means it will be worth $204,000 after one year, $208,080 after two years, $212, 241 after three years, and so on.

If the same house was worth $250,000 and appreciated two per cent a year, it would be worth $255,000 after the first year, $260,100 after the second year, and $265,302 after three years.

In other words, if the difference in price between homes starts at $50,000, the difference will grow to $51,000 after the first year, $52,020 after the second year, and $53,061 after three years. The more expensive home will always appreciate faster than the cheaper home, even if they both appreciate at the same rate.

Confusing? It isn’t for most homebuyers that are looking to buy Whistler’s resident-restricted properties. If you want to sell, then you have to lower your price to what’s reasonable for the market, and forgo the profit you never really should have made in the first place.

Whatever happens, it’s going to be a sore trial for the Whistler Housing Authority. Technically, people aren’t allowed to own WHA properties if they no longer live in Whistler or bought another home. But the WHA can’t make these people sell for less than the maximum resale value. As far as I know there’s no mechanism to solve it, and those people will be able to rent their places out and pay off their mortgages until they find a buyer at the highest rates, which may never happen if the Vancouver market keeps climbing.

That doesn’t help people on the waitlist. Which was kind of the whole point.