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Vancouver's
Current Real Estate "Outlook"...
Vancouver
is a unique city in that it's practically always, consistently
had the highest cost-of-living in Canada. There's a few reasons
why, namely - it's beautiful, it's one of the busiest harbors
on the West Coast of North America, and it's a metropolis
that supports a full range of jobs, industries and so on.
In
short - everyone wants to be there.
And
real estate prices reflect that. However...
We
are not of the opinion that one can depend on the "ever
rising" prices in the city of glass. Yes, prices have
consistently risen, even compared to inflation, since the
mid-80's, and following a slight decline in the mid to late
90's, prices have literally skyrocketed from 2001 - Present.
Folks,
eventually the market has to be based on available buying
power. Just because sellers can ask stupendous amounts for
their houses, doesn't mean there will always be a buyer lined
up (even though recent behaviour seems to suggest otherwise,
re: 3 bedroom 1930's houses that need major renovations selling
for $2+ Million in West Van).
At
some point, the market will need to reset itself back to reality.
Prices cannot continue skyrocketing if wages aren't following
suit. It's simply a matter of time. (And that's assuming that
rising interest rates don't catalyze the process prematurely,
which is entirely possible).
So
should you buy in Vancouver - or Hold out for a "Drop"?
Well,
to make an informed decision about buying, holding or waiting
- you need to know where the market is right now. According
to the UBC Center for Urban Economics & Real Estate, this
graph clearly illustrates the overall Vancouver hosing
market as having just "rolled over the peak" of
the largest pricing spike in the last 30+ years.
Does
this mean we're on the edge of a big drop? Or perhaps a "hiccup"
in a never-ending climb?
Nobody
knows concretely, but the current market conditions, the economic
constants and in general the harder lending market (at the
moment) would have us leaning a bit on the "cautious"
side, to say the least.
However,
this does not mean "don't buy".
What
it does mean, though, is look for value, and be realistic.
Here's
some guidelines as you navigate the Vancouver housing market
Tips
for Buying Well in the Uncertain Vancouver Market
•
Can you afford this property if interest rates jump in the
near future? And by how much? (And remember that housing
prices will drop as the cost of money rises).
•
What is the Core Value of the Property? (Location, Quality/Community/Scenery,
Revenue, etc. Keep in mind that vacation properties, condos
and otherwise "compromise" properties can often
be the first to fall in a price-slide, leaving you with little
time to react.)
•
If Buying for Revenue - Does it Cash-Flow With Enough Margin
to "Carry" Should Prices Drop? (Or if interest
rates rise and your payments increase?)
•
What is the Specific History of the Neighborhood? (Get
sales data from your realtor and take a look at what houses
have actually sold for over the past several years to get
a good sense of where you stand currently.)
And
Bottom Line - Is It Worth the Price?
That's
more of a "gut reaction" after you've done your
research, but it's a reaction you will need to heed. Always
remember that there is always opportunity out there. If something
smells a little off, or seems a bit out of your range - it's
probably best to pass on it for the time being.
The
key to buying well in real estate is to use measured, calculated
risk from a foundation of comprehensive research.
There's
a reason why lenders conduct their own appraisals of a property
and often require a third party home inspection as well. They
won't take a risk on something that doesn't have the value
to secure the loan.
So
in a market as volatile and expensive as Vancouver's, you
really need to be sure that you're buying value.
Just
because you can "afford" something, doesn't mean
it's worth buying.
And
for first-time buyers, don't get caught up in the craze about
"building equity" and "buying an asset".
Equity only matters if there's value at the core of the property
- which is only an asset if it's going to maintain its value
or grow in value.
If
you buy a speculative property that doesn't hold obvious value
(great location, cash-flow, etc.) simply because you want
to get "in" as an owner rather than a renter, the
risk of your "asset" becoming a huge liability with
a massive amount of negative equity is all too possible.
Buying
condo for $650,000 to become an "owner" isn't going
to pan out very well if 3 years later the interest rates rise,
your payments drastically increase and you can't sell the
place for $400,000 to save your life. That puts you into a
very deep rut, and for some people it will be enough to bankrupt
them on the spot.
That's
not a prophecy by any means - but it is a common occurrence
in "roller-coaster" markets like Vancouver.
As
the saying goes - "you make your money on a house
when you buy it".
In
other words, take the time to buy well - or else...
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Need
a Lender Who "Gets" Vancouver?
Our
network of brokers understand the unique challenges the Vancouver
market represents - and they can work with basically anyone
to make things happen (and get you the financing you need).
So
go ahead, take just a minute or two of your time and submit
your loan request here.
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