The Inside Edge Business Gazette

Philippa Berg, Realtor, Royal LePage 

We are now into second quarter of 2017 and lots of  speculation as to where the local real estate market is headed; The key questions on everyone’s minds are:

  1. Interest rates
  2. What’s happening in Vancouver and Canada overall? What impact does that have on the Comox Valley
  3. Is the real estate bubble bursting or is this just the beginning for the Comox Valley
  4. What’s it really like out there as a Buyer and Seller.

 

#1. Interest rates: As widely predicted, the Bank of Canada announced this week that it is holding the key rate steady. Yes, its taken into account uncertainties that include the potential impact of U.S. trade policies. The next rate-setting day is May 24. This announcement means there should be no change to the prime rate. Who is this good for?

  1. For those of you with a variable-rate mortgage or line of credit
  2. Those in need a of new mortgage or are renewing
  3. Those looking to consolidate debt at the lowest-cost for funds.
  4. Those of you thinking of using home equity to invest in a rental property or second home, or cost effectively complete renovations.
  5. Given the uncertain economic outlook, we continue to expect interest rates to stay low in Canada for next 12-18 months — although the new mortgage rules have caused mortgage rates to be very complicated

#2.

So let’s take a recap of Vancouver…

In Vancouver, the pace of year over year home price appreciation in greater Vancouver has been noticeably lower than the historic highs in 2016. In fact for the first time since 2013 home values for the region as a whole have declined on a quarterly basis. A Price reset is underway in the lower mainland where lack of affordability and the announcement of the 15% foreign tax left Vancouverites on hold…. Or at least on “pause”. Some feel this could be temporary as the main victims of the 15% foreign tax were Canadians who had planned to sell or buy their home but were frightened away thinking the Chinese were to blame for Vancouver’s housing shortage. According to Phil Soper RLP CEO as much as 90% of the housing activity that disappeared overnight in the lower mainland after the tax was introduced 7 months ago was from Canadian residents not foreign investors.

So… homebuyers “may “braven up after putting things on hold the last 7 months. Will they then rush back into the market — sending prices sharply up again? We will have to wait and see.

Regardless… Canada is one of the fastest growing advanced economies in the world.

The aggregate price of a home in Canada grew 12.6 per cent year-over-year to $574,575 during the first quarter.

The price of a two-storey home climbed 13.9 per cent year-over-year to $681,728, while the price of a bungalow rose 10.9 per cent to $490,018. Condo prices increased by 8.9 per cent to $373,768.

The overall Canadian market is healthier in 2017 than it has been in years and our economy seems to have recovered fairly from the 2014 oil crisis. We are still dependent on unpredictable moves by the US government and everything can be swayed by unforeseen global events.

 

#3.

Everyone has an opinion on Real estate…

The bubble bursters believe we are on the precipice of a full blown housing bubble bursting. But wasn’t this a predicted for 2011 and then again in 2015? I for one am glad I didn’t cash in, run to the hills and decide to rent. I feel the $ amount my home has appreciated during that time and the equity I have now paid down far outweighs what I would have saved in renting? Not to mention rents are skyrocketing and every urban market is experiencing a shortage. I have peace of mind that mortgage payments have remained the same in fixed rate and my balance always goes down not up.

Don’t get me wrong I am not naive… YES, THERE WILL BE A CORRECTION. Eventually.

I don’t know when — who really does?. But we can learn from the last real estate crash. 1990. Back then, house values dropped between 25% and 50% in just 6 months.(scary) But, house values went up between 125% and 175% during the housing boom just before the crash, from 1984 to 1989. So… If house values go down by 25%, most homeowners will still have realized considerable gains.

If you are a first time home buyer that purchased after 2015 — remember you bought a home… you are not renting. Consider if you own that home for 7 years you are likely to have amortized all of the buying and selling costs. On average you are likely to have paid down your mortgage by about 20%. I am not a mortgage broker but Real estate bought as a longer term investment always safer than looking at flipping. Let’s not forget. Real Estate always goes up in the long term. And you won’t always have a mortgage. People forget that your principal residence can appreciate tax free. Unlike our US neighbors that must pay tax on any appreciation. If and when you sell, you won’t have to pay any tax on the profit. So, housing bubble? Maybe but unless you are of the millennial mindset there’s a lot to be said for buying and owning. The key is to buy smart — Location, location, location, think long term investment.

Following many years of economic acceleration, most forecasters expect British Columbia’s growth to slow in 2017 as the housing sector decelerates to a more sustainable pace.

 

#4. An April 3 VIREB report shows Low Inventory Continues to Limit Vancouver Island Buyers and multiple offers are the new norm with many selling above list price. The VIREB area has been a seller’s’ market for several months now.

So attention Buyers — stay smart and educate yourself as to market value, future resale and how to best prepare for bidding wars. With such high demand and low supply, prices continue to escalate. The average house price for March was $465, 892 compared to $393,393 in 2016 and $348,807K in March 2015. Lot prices are also up 20% in the last 12 months, condos are up 32% and there are more patio homes and townhouses sold 12 months to date than listed. Huge demand for patio homes and townhouses. Sellers this is your opportunity. Buyers be prepared to sharpen your pencil

If you are a buyer it is now standard policy to be pre-approved by your lender in advance of making an offer. That offer must be as strong as possible when it comes to price, flexibility on dates and as few conditions to purchase as possible. In competing bids it is now not uncommon to see subject free cash offers. Knowledge is golden in this stressful market so work with a Realtor who explains the process in advance and do not get pressured into a purchase above your comfort level whether it be financial or the sheer pressure of not knowing what you are getting into.

Sellers… If you are reluctant to put your home on the market fearing that you will not find another house to buy remember, “Real estate is cyclical, and consumers need to take advantage of these market conditions because they won’t last forever. When the market does correct itself — and it always does — it usually happens without warning.”

For fear of not finding something allow yourself a longer possession date and work with a Realtor who has their finger on the pulse of new listings.

I hope you found this useful… I am more than happy to answer any questions. Call me at 250.897.2032 or email me from my website at philippaberg.ca.

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