Posted by Krishna Menon
on 8 February 2016
If you've paid any attention to the news recently (or ever for that matter), you know that the Canadian housing market and the Canadian economy are generally hot topics. But can you really trust what you read in the media, specifically headlines? Headlines are written to catch your attention, they are designed to hook you in, to keep you reading the news. "Everything is fine, nothing to see here" simply doesn't sell papers.
A quick Google search for housing news in 2015 brings up the following titles:
"Canadian home prices to fall 40-50 per cent"
"The 2015 Global Housing Market Crash. Property Prices"
"A Housing Correction is likely to happen this summer"
"Why Canada's housing market is about to crash"
In early January of 2015, the financial post published an article titled "The Deutsche Bank reveals 7 reasons why 'Canada is in serious trouble', starting with a 63% overvalued housing market."
However despite all the predictions of doom and gloom, in actual fact, Canadian real estate increased in value year over year and the supposed bubble didn't burst. According to the Canadian Real Estate Association, 2015 saw a 12% overall increase in housing prices with Vancouver gaining 18.9%.
Will the headlines be any different in 2016? Probably not. A quick scan will tell you that the housing market is out of control, the loonie is depressed, you can't give oil away, foreign buyers are to blame for all our problems, and household budgets are being thrown out of whack by skyrocketing grocery bills (more about how to fix that later)... you get the picture.
So how do you find certainty in these uncertain times? Do your research and don't let fear drive your decision making. Whether you are looking to buy your first home, move up to a more suitable home, or sell your home to downsize you can't control the market! The market will be the market, all you can do is focus on what you can control, and that is 'you' and your financial situation.
So here are a couple things to consider.
Get pre-approved. Regardless of your financial situation, if you are considering buying a property, the first step is to always talk with your mortgage professional and get a pre-approval. Clearly outlining your income, credit, assets, and liabilities ahead of time will allow you to know your purchasing power and shop with confidence.
Turn off the news. Connect with local real estate professionals instead. Why? Because real estate is local. Asking the question "What is the Canadian real estate market like?" is similar to asking "What's the weather like in Canada today?". In order for a national media outlet to be relevant to all 35 million Canadians at one time, they have to speak about our nation as a nation. Local housing markets are as different between Regina, Saskatchewan, and Halifax, Nova Scotia, as the weather is between Gravenhurst, Ontario and Surrey, BC. The best way to get information about your local market is to talk with a local professional.
Don't try to time the market. Rather than allowing the market to dictate when to purchase a property, make that decision based on what's best for you, when it's best for you. Unless you are looking to purchase an investment property, you are buying a place to live in and your home has function well beyond being an investment.
Be honest about what you can afford. Just because you can qualify for the mortgage, doesn't mean you can actually afford it. There are many reasons this might be the case, and they all involve extra spending beyond what is considered on the mortgage application. Don't forget about costs associated with child care, sporting activities, commuting to work, or the increased cost of groceries (again, more about that soon) just to name a few.
Take a payment test drive. If the property you are looking to purchase will end up costing you more per month than your current arrangement, take your new payment for a test drive. Try living within those means for a while before making the move!
The truth is, if you listen to the headlines, there will never be a good time to buy! You will always feel as though you missed your opportunity, that it's too late, or worse yet, that as soon as you do decide to pull the trigger, the entire Canadian housing market will come collapsing down around you. That's simply not the case.