Real Estate Market Remains Buoyant

小叶子

Edmonton Real Estate Market Remains Buoyant Despite Frigid January     
2 L" ~- o# e* f: H: YSaturday, February 05 2005 @ 02:28 AM EST
' u3 o7 L  ^2 r! I* cContributed by: Jason
. O$ e" X1 q3 t+ B+ }9 EViews: 38
: H* V4 E( F8 F# xEdmonton, February 2, 2005: Housing sales in the Edmonton area were buoyant despite a bitter cold snap in January according to the Edmonton Real Estate Board. Total residential sales of 886 units were up 6.9% from last January and the average* price of all residential housing rose to $180,819 (up 3.2 from January 2004).

knptmug

涨得太慢了, 扣除交易税, 利息, 管理费等等就没有赚的了.

小叶子

Are you sure, could you explain more details about that?
We are all interested in it.

Thanks

Originally posted by knptmug at 2005-3-1 12:27 AM:
涨得太慢了, 扣除交易税, 利息, 管理费等等就没有赚的了.

knptmug

I Just overhear that the business tax amounjts to 5% of real estate value in transaction.(help verify that).  Moreover, the mortgage interst is not low, usually 5% a year. And you will have to pay the real estate tax. These are the expenses of purchasing transaction.

Now let's see the benefit. The largest benefit is that you don't have to pay the rental fee and even can get the rental from the tenant if the owner purchases a house and rent one room to other people. The second benefit comes from the increase of  the price of real estate, which is mentioned above.

  f; e& `1 ?; BThe benefit minus the cost is the true profit the real estate owner can make in one year. (We only consider the situation that purchasing and selling transactions were conducted in one year. If the owner holds the estate for more than one year, the business tax (suppose 5%) could be treated as fixed expense, which does not vary in accordance with the duration of holding the estate.

knptmug

Let's make an easy example.

5 j( j& f  @) pSuppose one person bought a house  worth 100,000 last year. It's a two bedroom style.
+ g( i8 {6 v. {, s7 m! UAfter one year, he or she decided to sell it out.
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Cost (expense):
" ^6 C- H1 c- w" ~3 f; c/ u  qBusiness tax: 5%*100,000=5000 (please verify)
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Mortgage interest: 5%*100,000=5000 (not only the loan interest you pay the bank, but the interest of inital payment of house should also be accrued)

Estate agent fee: 1%*100,000=1000 (this part is neglected in previous statement)

$ }5 V& l6 G1 s! v) s: F! `+ OReal estate management fee: 250*12=3000
! m7 V. ^/ q5 }" {Total cost: 14000
# v- R9 T- L1 z  a) e
# G3 @" D& u  w- p, N5 m2 tBenefit:
5 B. O: u8 O1 s& J; R) SThe saved rental: 350*12=4200
$ h# X/ p, H' Q2 D: gThe rental income from tenant: 350*12=4200
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5 z- P) W; L2 r! [' R: WValue increase: 100,000*6%=6000
4 I  I) P/ W! z( g  {
Total benefits: 14400
3 I$ P( e; H. D( T: X+ H2 USo if both purchasing and selling transactions are conducted in one year, just slight gain could be achived. So the edmonton estate market is not worthwhile for short term investment

( l2 d5 m5 b4 S0 |[ Last edited by knptmug on 2005-3-8 at 07:45 PM ]

knptmug

If the owner holds the estate for five years. The business tax and estate agent fee won't change. Then there will be profit. The condition of being profitable is that there will always be someone renting the estate and the price keeps increasing.
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2 M& M& W' r& A. L/ J[ Last edited by knptmug on 2005-3-8 at 07:59 PM ]

knptmug

Compared the estate market here with that in some parts of China (usually capital city of each province), you may find that the edmonton estate market is just stagnant. However, we will have to admit there's big big bubble in China's estate market.
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[ Last edited by knptmug on 2005-3-8 at 08:01 PM ]

variator

What is "Business tax"? Could you please explain it? May it mean "property tax"?

knptmug

The business tax might not be the "property tax", which was levied each year. the business tax refers to the levy in each transaction. But I am not quite sure of the rate.

variator

In my experience, I am quite not agree with your calculation.:)

knptmug

洗耳恭听

variator

I give you example. Assume You buy a single house. The price is 20W$. The dowpay is 25%=5W.
  ~: o2 _7 C6 u; g) \Mortgage is 15W----this is very popular for first time to buy a house.

knptmug

I know what you mean.
3 K. D5 M8 T& t9 SThe 5W (down payment), if not invested in the estate, might accrue its own interests (say low risk bond interest). And this amount of money must be included in the cost of purchasing.

variator

The property assessment genally is about 19W so the property tax=190000X0.01=1900$
Property insurance=350$
9 O- d& X& `' }0 [% c" wMortgage rate =4.5% The mortgage=850$/Month, please remenber there is only 560$/month is your interest.

knptmug

This part of interest is called the opportunity cost in purchasing the estate.

variator

gas average is 130$/month
water=60$/month
electrical power=60$/month
2 L  j  I0 {- j6 @6 PTotally average cost (not include mortgage)=1900/12+350/12+130+60+60=440$/month
) u+ _. e9 t& rplus mortgage (interest part 560) =1008$/month

variator

From this point, It look like much high cost to buy a house than rent an apartment. I agree with this point. But..

variator

If you consider the following advantage, you will change your mind.
1. If your house rise 7% every year (I beleive it have happened in past time and will continue for several year)=190000X0.07=13300$, That is equal all of your monthly cost.
- l/ G% [$ D# P4 d. e2. Your mortgage interest is continuelly reduce, especially if you double pay it, After 1 or 2 year your mortgage interest may only remain less than 400$/month.In the same time the rental fee still same or even rise.
" w5 F: O/ h2 l& w3. If you rental basement or one bedroom out, there will be much different
Do you agree?

knptmug

Yes, you are right. If the mortgage loan  interest is eqivalent with the rate of increase in the market, the rental saved and got from tenants might  cover the utility fees.

( e" Y" c7 Y6 K7 e9 d/ |1 ZBut there are other reasons for purchasing the house instead of renting: (1) stability (2) sense of achievement (3) against currency depreciation. These factors are not included in the previous calculation.

knptmug

So, in my opinion, purchasing the house in Edmonton for residence purpose is worthwhile. But purchasing for short term investment is not worthwhile.

knptmug

Sometimes, we might not control other external factors: like war in a negative perspective, or  economics booming in a positive perspective

variator

Yes, I much agree with your point. Stability. All of this calculation must base on your stability. i.e, you not sell your house within about 3 years. Only realtor fee for sell house is about 6% of house price=230000X6%=13800$

variator

Originally posted by knptmug at 2005-3-8 23:41:
Sometimes, we might not control other external factors: like war in a negative perspective, or  economics booming in a positive perspective

Yes, I can not control these factor, But we can predict them. Canada normally is peace country. And world will increase the dependence for the Energy, Alberta can supply energy for long time.

knptmug

Yes.  Here is a stable country.  Peaceful and wealthy. So living here is quite good.

variator

Ok, it's my time to sleep. I am glad to talk with you. See you.:)

小叶子

讨论的好，每人奖金币100！
% Q+ S- m. Q- j6 Q+ F
" G& T$ E! e1 c; a' e真希望更多人加入！这是个很多人关心的话题！

小叶子

讨论的好，每人奖金币100！
$ w2 a" Q0 E$ a) j: s3 c
8 S% ^. t5 S4 T3 P真希望更多人加入！这是个很多人关心的话题！