Is Buying a Home the right move for you? A look at the surging Market
The last five months have been full of surprises, especially in the Canadian housing market. The great news is that there is a strong surge that has been observed in sales after the spring slump, and this growth seems to be gaining strength as we move into fall. Homeowners are happy with their purchases and investment decisions, and many are comfortable with their level of mortgage debt despite the challenges we face with COVID-19.
Real estate is a long-term investment. It takes money to get started, the commissions are quite high, and the returns often come from holding your asset for a long time. Real estate can be an attractive investment because you can borrow the bank’s money for most of the investment, and then pay it back over time. For those who want to be their own boss, owning a property gives you that opportunity, and there are numerous tax laws that benefit property owners specifically.
Affordability of homes in Canada’s largest urban areas has improved according to a new report from Teranet and National Bank’s House Price Index. In 2019, Ottawa was ranked the 6th most affordable city to live in. Surprisingly, Toronto was ranked 11th most affordable city to live in, and Montreal was ranked 20th.
One of the least affordable places to live is Vancouver, British Columbia. Their benchmark home price was $1,156,050, required income was $164,844, actual median income was $69,327, and the income gap was $99,517.
The most affordable place to live is Calgary, Alberta. Their median home price is $400,000, required income is $57,037, the actual income is $73,183, and the income surplus is $40,297.
The Toronto real estate board reported a surge in sales last month. 10,775 homes were sold, up 40% year-over-year, with a 20% boost for the average selling price to $951,404. This was partly due to higher incomes in the second quarter of 2020, but can be mostly attributed to low interest rates. It is these two aspects that are offsetting rising home prices.
What cannot be ignored is the rise in unemployment and the reduced household formation set to play a much bigger role in the housing market once demand eases. The future of the housing market and the broader economy will be influenced by COVID-19, as well as the changes in government programs that support consumers employment and incomes, and policies that affect the housing and mortgage sectors.
So, is buying a home the right move for you? While the risks can be high, the rewards can be even higher. If you select a good property and manage it well, you can double or triple your investment if you are willing to hold the property over time. If you can pay off the mortgage on that property, you can enjoy the idea of having an increased cash flow, and greater stability.
Our team at Matrix Mortgage knows that we need as much discussion as possible about what issues are emerging. Call our 24 hour support line (1-855-553-8637), and we can talk with you about the policies currently evolving that will help you make good choices about housing and mortgages.