BC Business
Some people were highly amused – and many were highly incensed – when I recently compared the real estate industry and its breathless media cheerleaders to the pornography industry. So people get ready, because here it is: Real Estate Pornography 2.0. Tony Wanless
Some people were highly amused – and many were highly incensed – when I recently compared the real estate industry and its breathless media cheerleaders to the pornography industry. So people get ready, because here it is: Real Estate Pornography 2.0. For example, media coverage of real estate certainly has all the trappings of pornography, particularly as most stories feature what seemed to be equal parts of leer and fear. Recently, all over the television news was a house tour of Vancouver’s most expensive condo, something in the neighbourhood of $16-million Whatever the price, it was damned expensive. The cameras and reporters fairly slavered over the marvellous views, the wonderful fittings, the large open spaces. Mostly, though, they drooled over the price, just like pornographers focus on boobs or bums when they’re trying to stimulate desire. Then there have been the recurring stories about how prices just keep going up and up and will do so, apparently, forever. Every “expert” around seems to be explaining how this is not a typical real estate boom/bust scenario, although evidence is everywhere that it is and most people have the common sense to know that chasing quickie real estate riches is just dreaming in technicolour. Ahh, but it’s hard to resist the allure: You can’t stop yourself from fantasizing, and thinking, Jeez, I want that. The media can be lowbrow, but it isn’t dumb. Emotions are its stock in trade, and so it’s particularly adept at touching these kind of basest emotions. You want lust? Just whip up some lifestyles-of-the-rich material that will have all those Joe Consumers in their mortgaged to the hilt townhouses envious. To stoke the lust, run numbers by them like porn marketers list Seductive Sonya’s measurements: 10 per cent yearly price increases; X number of housing millionaires; hundreds more square feet of living space. Ooooo, baby. You want fear? Run stories about how people fought to get into the market only to discover their half-million-dollar condo was full of bats, or rats, or next door to a gang run grow-op. Well,, here’s the financial planner’s boring response to real estate porn: It’s okay to fantasize but don’t act. Real estate today is a very bad bet. Some basic numbers from Vancouver wealth manager Adrian Mastracci: If you want to buy an average – not exciting, but merely average – house in Vancouver, it will cost you $570,000, which will require $114,000 in down payment, and $2,850 a month to cover the mortgage. You’ll have to earn at least $95,000 a year for the next 25 years to pay that off. And even at that level, you’re going to be pretty financially strapped because houses have a lot of other costs beyond the price, like taxes, upkeep, etc. If you extend that mortgage to 40 years – like you’re going to live in that place for that long — you’ll knock 400 bucks off your monthly cost but end up paying three times the value of the house in interest. Now, that’s what I call obscene. Read Tony’s original blog entry on real estate porn: Wallowing in Real Estate Lust published July 29, 2007. Click here to read Tony’s previous blog entry. Click here to read Tony’s next blog entry.