Wow! Did you feel the heat?! Holding steady and sober over the last few years, the housing market went wild in Oceanside this Spring. A combination of low interest rates, affordable housing, a soar in equity on the mainland and our fantastic lifestyle here, whether a family or retiree, fueled tremendous demand for Vancouver Island. Throw in a shortage of inventory and you have a seller’s market, resulting in price hikes in the double digits. This was frustrating for buyers who had to buy quickly at top dollar and for sellers who may have wanted to move but had nowhere to go since the number of listings were hovering at less than half normal levels. Agents had to be at the top of the game, with their ear to the ground for the whisper of upcoming listings while trying to elbow their way through competitive offers. I am happy that my clients were often the first to view a listing, even before it hit the MLS, and made some killer deals along the way – Rockstar performance rules!
Below, you'll see the latest stats from VIREB. Overall, the increase in housing prices, when averaged over the previous 5 years, is perfectly reasonable and we are certainly not in ‘bubble’ territory economy-wise. Despite the adjustment, Vancouver Island remains an excellent, affordable choice for investment; in fact, I highly recommend purchasing property for rental and will talk about that in an upcoming blog post.
New Housing Regulations coming October 17th, 2016
I have been asked a lot of questions about the new housing regulations that are being put in place by the Feds in October and what it means to those looking to purchase soon. First, understand that this only affects those who are putting less than 20% down on a property, either as a new purchase or in porting their existing mortgage to another property – not renewals on existing mortgages. What the Govt has done, in a (misguided) effort to further protect new buyers from mortgages they may not be able to afford if rates go up, is to require borrowers requesting a high ratio mortgage (80%+ LTV) to QUALIFY based on the 5-year bank rate, not a variable or shorter-term rate which is always lower. Since the payments on a 5% rate are much higher than a 2.5% rate, this will make a big difference to the amount of loan you can borrow and therefore, the price of the home you can buy.
For instance, according to RateHub.ca’s mortgage affordability calculator, a family with an annual income of $100,000, with a down payment of $40,000 and using a five-year fixed mortgage rate of 2.17% will qualify to purchase a home worth $665,435. (Assumes property tax of $400 and monthly heating costs of $150.)
Under these new rules, this same family would have to qualify for a mortgage using the posted rate of 4.64%. This would drop their home purchase price to $505,762—a difference of $159,673, or a 24% reduction in the home purchase price. Remember, this is for qualifying; they can take the lower rate and payments but their house-buying ability has changed significantly.
This goes into effect October 17th: if you are pre-qualified already, it is not enough and you must get your loan firmed-up (which probably means purchasing), prior to the date.
This will have a big effect on buyers without large down-payments and although the Govt is trying to protect homeowners, I feel it is misplaced. By far, the biggest threat to personal finances is consumer debt such as credit cards and loans. Over 10 years, the only commodity that can almost certainly be sold for more than the debt balance is property, making a mortgage the safest type of debt to own. Once again, the real estate industry is not the main problem. How about more learning and instruction from school age about debt, interest, consumerism, savings and real-life economics?
If you need personal help on working on a strategy for your next home, contact me anytime.
Here’s a prediction; at some point, you will be looking for a home to purchase. It might be your first or fifth but the chance is extremely high that you will own property: over two-thirds of Canadians do. And of those, over 90% start their search online. In some ways, this is a no-brainer as there are bucket loads of interesting properties, neighbourhoods and statistics at your fingertips. A few clicks of the mouse and you can be transported to someone else’s home, taking a virtual wander through their rooms, amid their décor and furniture choices while looking for something you need, maybe office space or a larger kitchen. On Google maps, you’ll be able to see just how close the house is to the ocean or that main highway or their neighbours. There is lots of information available: on communities, school catchments and major transportation or shopping centres. So why would you bother with an agent? Well, here are three major reasons: