House in East Van - 1M Mortgage - Monthly Housing Expenses $5860 , less 2 Mortgage Helper suites $2000 total per month, leaves Monthly housing at $3860
Large Condo Downtown - 800 k Mortgage - Monthly Housing Expenses $4650
Medium Condo Downtown - 500k Mortgage - Monthly Housing expenses $3050
So lets say that the company also provides a RRSP/ Pension matching program, plus an employee stock plan, plus a 15% annual bonus, for ease of math will say that is on top of the 100k salary.
Using the worst case example, living in a large downtown condo, lets call it 6k all-in for car plus housing, Their retirement savings is taken care, TFSA can get maxed out via the stock plan and they have over 20k in after-tax bonus money (perhaps for vacations??), plus 6.5k per month to live-on (or approx $215 per day)
I guess it would make sense to first disclose that I don't personally know people who are working professionals, large mortgage, and living paycheck to paycheck. So I can't back any counter argument up with anecdotal examples. I'm just saying it could
Your example of the house in East Vancouver with the $1 million mortgage... I think you've moved the goal posts. Adding $2000 in rental revenue really means that they don't have a $1 million mortgage on their own housing - part of the $1 million mortgage is associated with the rental investment.
For the big condo, the mortgage payments for $800k, 30 year fixed at 2.2% are just over $4100. Strata fees, utilities, cable, maintenance, property taxes, and the actual housing costs are probably closer to $5500 / month.
Funny the CIBC mortgage calculator for a 800k - 30 year fixed at 2.2% is $3034 monthly, I used 2.15 at 25 yrs which is $3446 monthly...The rest of the expenses work out to about $1400 per month, including $850 strata, $4100 annual property tax, Cable, Internet, Hydro and Insurance...I didn't include any other maintenance, but generally that would be quite small...maybe a few light bulbs and the odd minor thing, but my numbers are based on a real example. Again this works out to about $4650 based on my mortgage assumption.
As for the house, I guess those new goal posts are important for people to keep in mind because most people have the rental suite(s) in their houses in East Van. The beauty is your so-called rental investment is capital gains free and helps insulate against job loss or loss of income. This is a common scenario, so people maybe aren't so bad off as you think.
Add in the extra incentives that a good paying job usually provides, and they have the retirement savings, the TFSA and some rainy day savings to put them in a very comfortable lifestyle, certainly not pay cheque to pay cheque. Even if you move them down to the 80k per person income, they would be still be relatively comfortable.
Thanks for this perspective, however I find this over-simplified.
There are assumptions in these calculations:
1. Rates are to remain constant or decrease since the risk of rate increase is not put into account. This is unlikely over a span of 30 years.
2. The borrower has 20% down. I have not inquired about mortgages lately so forgive me if I make any wrong assumptions. To get over 25 years amortization you need to have 20% down - according to RBC website. This is 160 CAD on an 800K home. I don't know anyone who has 160k, let alone 100k to spare for a down without the help of bank of mom and dad. The probability of a person that is in the top 5% of income AND has 100K + for down is quite low, probably in the top 0.5% of the population. - quite an anomaly but they do exist.
3. This person has no plans of having a family. This is probably the biggest assumption here. Children are expensive. They require living space, child care, food, clothing, education... etc - all of which are extremely expensive. In my humble opinion, having to chose between creating a family or owning Vancouver property is about as uncomfortable as it gets, and I'm willing to bet that most people would agree.
This scenario paints a picture for less than 1% of the population, furthermore it's for a person that does not want a family which filters it down to even less than 1%.