You’re not richer than you think

You're richer than you think

Scotiabank’s “You’re richer than you think” campaign is a potent reminder of the ideology driving Vancouver real estate into oblivion. You see, it turns out you’re not richer than you think. Not even close.

With this cat out of the proverbial bag, Vancouver home values are dropping at about two per cent a month. Suddenly, a corporate promise of limitless luxury comes across as insult rather than opportunity.

To see this first hand, go the movies and wait for the Scotiabank ad to draw the crowd into a fury. At the screening I attended, a pack of moviegoers shouted obscenities before one hurled his beverage in revulsion. (The “thrower” soon picked up the cup and got a free refill. Classy guy, I know.)

25 Responses to “You’re not richer than you think”

  1. Ulsterman Says:

    I too saw this advert run about two weeks ago at Scotiabank Theatre on Burrard. My experience was the opposite to yours. I was surprised at the complete lack of reaction – not even a murmur.

    I can’t believe Scotia Bank hasn’t pulled this advert yet.

  2. Quattro of Solace Says:

    The played this in front of the new Bond. It got a reaction. Laughs and groans. Nobody threw anything. I did see a stain on the screen but I think it’s always been there. This is in the big auditorium, the one on the main level, at the Scotia Paramount.

  3. jesse Says:

    Love the Finding Nemo Seagull wallpaper. Shouldn’t it say “bank bank bank bank bank….”?

    Also I love scotia’s url: findthemoney. That is the best piece of comedy I’ve seen in a while. Their structured product department is having a heck of a time these days with the whole “findthemoney” thing. My parents refused to come within spitting distance of Scotia. My mom still crosses the street to avoid walking directly in front of any their branches.

  4. anon Says:

    Hey, Scotiabank’s dealing with a run on gold… what do you expect them to say?

  5. Carioca Canuck Says:

    Saw a movie tonight here in Calgary……..during the commercial where the feeble looking guy asks for a second opinion from the banker about his investment portfolio, and she says “these are not from Scotiabank”………some guy yelled out “They’re from Lehman Brothers”………it got quite a few chuckles from the crowd.

  6. vomitingdog Says:

    2% a month? Make that 10% down this month.

  7. j6p Says:

    since the new scotia bank opened in chilliwack with the giant banner on it, i’ve dreamed of painting out the “you” and writing in “we”

  8. Noz Says:

    This whole concept of homeowners being wealthy and making wealth has been a publicity stunt buy the banks, by the realtors, by the brokers, and by the industry as a whole.

    It’s a propaganda fiasco just like any other that we suckers have fallen for in past…from the tobacco companies to the oil companies to the car companies….it’s the same:

    Make the people they need something, keep saying it, make them feel like garbage if they don’t get it, and attach a huge burden on the ownership…such as debt, such as tricky mortgages, such as huge costs.

    Nothing wrong with buying a home if you really would like to own one…but make people feel like they are subhuman or losers because they are renting…or “throwing their money away” is pure BS.

  9. The Urban Dweller Says:

    If you want to rent your whole life that is your choice. If you want to own a home that is your choice. Home ownership isn’t bad, especially if you have the money to put down a significant down payment. I know people that pay $1600 and up in rent a month in Yaletown, does that make sense? Do ads prey on peoples fears or stupidities? Of course they do, that is the thing we call the marketing machine.

    This current cycle will bring prices down significantly, is that a surprise to you guys? I mean this kind of thing has happened before and it will happen again and again. There is equity in a home that you can use for leverage when and if needed. So don’t think owning is all that bad either. In this climate you’d be stupid too make a purchase thats for sure.

    If you have a little bit of financial knowledge you can find ways to own a home. Sad fact is most people are dolts when it comes to finance because it involves numbers. Egregious. Thats my two cents.

  10. Lothian Vasquez Says:

    Look — banks blow big bucks on these ads cuz they KNOW their market. Vancouverites went tulip bulb mania lo these last 60 months or so. There are a lot of spectacularly, venally stupid people in places like West Van and Van West, where this moronicism plays well. Don’t blame the banks.

  11. Lothian Vasquez Says:

    …And TWO PER CENT per month? MAYBE, averaged over a year, but even then, that seems low. I think by the time total declines are tallied on the year, especially in places like West Van, the rat will be more like 2.5 – 2.75% per month…

  12. condohype Says:

    Urban Dweller, good comment. I’ll point out that I’ve never said home ownership is bad. Home ownership can be good or bad; it depends on the numbers and needs of the individual. My objection is to the cult of ownership — the idea that owning a home is ALWAYS a good investment.

    Lothian Vasquez, I don’t blame the banks. In my opening line I say the bank’s marketing is reflective of the ideology that brought the market to where it is. BTW, the two per cent monthly drop is based on a cumulative drop of 12 per cent since May. Divide the drop by six (as in six months) and voila, two per cent per month.

  13. sidelines Says:

    UD:

    Are you saying that if you have a big downpayment and are faced with either renting at upwards of $1600 per month or buying, you should buy in this market?

    Between buying and paying $1600 in rent, it seems clear right now that renting is the way to go, doesn’t it? No way to realise positive leverage on a depreciating asset. If you’ve got a down payment, hold on to it for the time being.

    There is simply no good fiscal reason to get into this market at the moment – which seems to be in agreement with what you say at the end of your comment. It’s that first bit about the big downpayment and homeownership you refer to that I don’t get…

  14. John Says:

    Apart from it being silly to buy in the current market unless you really have to, there’s nothing too wrong with that ad – depending on were in the country you read it that is. It’s the right way to promote buying in my opinion as it focuses on what you can afford. It DOES make sense to buy when the costs are similar to the costs of renting as a) you know you can afford the payments, b) it’s likely other people will be able to afford the payments if you have to sell and c) you can rent it out if you have to.

    In fact, if it ran in Vancouver it might make some of the chumps buying overpriced condos stop and think. $1300 would be the max rent I would ever pay, yet what could I buy in Vancouver for $203,000? Even factoring in a 25% down payment, there is very little worth buying (give it a couple of years) – nothing you’d want to live in for the long-term and certainly nothing better than you can get for $1300 rent.

    Unfortunately in Vancouver people have been buying with zero down and paying the equivalent for $2500 in mortgage payments for someone that would cost $1500 to rent on the false assumption property always goes up. Not only will they be in trouble if they lose their job or have to bail out but they won’t be able to rent it out to cover payments, and will have to sell in a falling market at a loss. I guess that’s why foreclosures are skyrocketing!

  15. patriotz Says:

    But look at the numbers in the advertisement. They say that if you can afford $1000/month in rent you can afford a $156K mortgage, etc. So if you’re currently paying $1000 for rent, buying a place for $156K will give you the same shelter for the money.

    What they have actually done, without intending to do so, is to show what the proper price to rent ratio should be,

  16. patriotz Says:

    Er should be “should give you the same shelter for the money.

  17. condohype Says:

    Scotiabank continues to use the tagline in their marketing. This ad featured in this post ran in 2007 but the tagline is still in use. I do think it’s a good brand for a bank. Certainly the most memorable of those used by the Canadian banks. But there’s no escaping the irony of the end result of “leveraged investing” on the world economy. We’re all poorer because of it.

  18. blueskies Says:

    this kind of marketing can work:

    doctors:
    you are sicker than you think!

    psychiatrists:
    you are weirder than you think!

    estheticians:
    you are uglier than you think!

    brothels:
    you are horner than you think!

    universities:
    you are dummer (sic) than you think!

    bloggers:
    you are lonelier than you think! 🙂

  19. ds7777 Says:

    if im richer than i think now, then why would i buy property?

  20. Skye Says:

    What they have actually done, without intending to do so, is to show what the proper price to rent ratio should be,

    YES YES YES YES YES x 100

  21. rjb Says:

    “What they have actually done, without intending to do so, is to show what the proper price to rent ratio should be”

    Excellent point and I totally agree.

  22. Ulsterman Says:

    Anyone else like the middle of the night dash by vancouver condo info? He appears proud to have done a VHB.

  23. john Says:

    If you didn’t buy a condo in Vancouver in the last 5 years you’re dumber than you think. Stocks are down 50% year over year and condos are up year over year still.

  24. paul Says:

    Yea but John , who are you going to sell it to? Nobody’s buying. Put your condo on the market and find out for yourself. Once you get away from your real estate agents/mass media hypnotic blabber you’ll find that prices in the real world have plummeted and are heading south faster than a bad curry vindaloo through my large colon. The fact is that real estate markets are cyclical.
    Condo sales are down 70% in Vancouver. Projects are dying all over. Buyers are few and far between. Desperate realtors and the support network of liars , advertisers and associations are saying ludicrous things that only an idiot could believe.
    Speaking of real estate agents and thier thralls , look for a reduction in the head count of licensees by at least 50% over the next 2 years. Even now they’re dropping like flies.This cycle was over extended by artificial intrest rate policies . A majority of todays owners have zero equity and cannot requalify for thier first mortgae and have to take out seconds just to stay in their homes which are upside down due to the market going down further than the 5% they used as downstroke from the LOC they’re mortgage broker sold them.
    Normal cycles are 7 to 9 years in duration with 18 to 36 month trough periods in between. The average cyclical downside repricing has been 34%. The 81-87 recession took Vancouver prices down 54%. The last recovery trough from 1992 to 2001 was the most extended in history. This recession is shaping up to be the most complicated in history. I suggest it will take prices down more than average because of the ubiquitous nature of the problems. Any way you slice it real estate prices are going down and it will be approx 6.6 years before the recovery based on historical data.
    This is only the beginning, next year will be much worse. Please feel free to do your homework and confirm all these facts that I have presented. If you are 21 to 35 years of age you have no experiance of what actually happens during a vicious recession, get ready to be schooled real good. It’s ugly. In the 70’s and 80’s thousands of people would show up to compete for a waiters job. Go the archives and check it out. You couldn’t give a house away during the bitter winter of 82/83. The market can just die. It did between 92 and 2001, 82 na 86, 73 through 79, 63 through 69.

    If you’re young and used to some level of ease, wake up right now and start saving everything you can. Jobs will dry up that you thought were safe. Unemployment will skyrocket and the streets suddenly become very quiet because so many businesses have failed. Recessions are evil and they never go away without harvesting many many victims. Even now unemployment is skyrocketing, tech workers, finance, legal, sales, construction. Don’t listen to the talking monkeys on TV, ask around in the real world and find out whats really going on.

  25. Jose Sutton Says:

    Interesting discussion! I am just wondering the ratio of renters to owners in the responses.
    And I know that I will be chastised as it is in my best interest to sell houses. But in fact I just got into Real Estate and might not make it. Nonetheless, I believe on owning a home and only wish I had bought when I got to Canada instead of in October 2001 when everybody thought the world was going to fall apart. But the sky did not fall apart; and hopefully sooner rather than later I am not going to have an equivalent-to-rent mortgage payment; and hopefully sooner rather than later people are going to start buying homes again, because they are buying right now, not as much as before but still buying.
    To my point, the academic world (not banks or real estate agents) has study the differences of net worth between renters and owners, and you might justify it as much as you want but the difference is not insignificant. I suggest reading this great report from UBC Sauder School of Business: http://cuer.sauder.ubc.ca/download/research/discussion/2007_feb_somerville.pdf
    And my sales pitch: anyone wants to buy a home? Send me an email at jose@josevancouver.com.

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