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I believe that most homeowners would prefer their home to be an investment vs. a depreciating asset.
I respectfully disagree with your comment about "...higher interest rates translate to increased cost of borrowing and perhaps a lesser property." Because the increased cost of borrowing is the catalyst for lower values. So that $500K house you can afford to buy today, at current rates, you will be able to buy it at a lower proportionate price when rates go up.
Okay, so the theory is that rates go up and, due to less demand, today's $500K house will be available for $450K.
The intrepid investor then jumps at the bargain price and eats the extra costs associated with higher mortgage rates.
The intrepid investor then hopes that rates won't continue to rise and further devalue his property (on which he's paying a hefty mortgage rate).
If he's been lucky enough to hit the rates at their peak, he then needs to sit on his property until such time as rates drop again and stimulate the market enough for his property to significantly appreciate in value. He'll then sell (at the height of the market, of course) and turn a tidy, capital gains-free profit.
Of course, all this will take years to work through and no one can predict how many years -- it could be 7 or it could be 17.
Regardless of all the penciling and figuring to the last decimal point, the GTA continues to grow in population and those folks all need somewhere to live. A property bought today will, certainly significantly appreciate over the next 25 years.
How much is a crap shoot that depends on a lot more than the financial markets; area economic development, changing neighbourhoods, the fashion of the day, and even if Hell's Angels choose to locate their clubhouse on your block will play a large part in determining future values.
Okay, so for someone like me who is moving over there next year what do you think my game plan should be?
Rent for 1-3 years and hope that prices start a downward trend.
Buy in 2011 and hope like heck that prices don't go down!
One other reason to rent is to get a feel for different neighborhoods. You could buy a certain house, and say "well this area sucks". I would advise to rent for awhile and really get a feel for where you want to be. The good thing about renting is that you're not as tied down financially. Even if you're not in your ideal neighbourhood, it gives you a chance to explore where you really want to be.
One thing I did before I bought my place was drive to the neighborhood, park my car and walk around.
I'd spend all day there. Visit the shops, check the traffic etc.
just my .02
...My question is this - will these realtors ask us to sign anything which says we have to work with them exclusively to find a home? One realtor has been lined up for about 3 months and we've just recently come across another through word of mouth here in Australia. Neither of them are aware of the other.
I believe that in the US it is fairly common to sign an exclusivity agreement with one realtor, but need advice on what is the norm in Canada.
Keep in mind that in Canada, real estate agents work for themselves in a "small business" scenario - they are associated with a real estate office, but they have to pay out of their own pocket a myriad of fees (for licensing, associations, advertising, office space, insurance, etc.) to run their business, and they survive on commission.
So yes, some agents will ask you to sign an exclusivity agreement. Even without that, basically it is considered (by those in the industry) very bad form to have a real estate agent do all the research, cart you around spending money on gasoline looking at houses, etc. (not to mention their time), to then have you buy from someone else. Unless they are a real jerk there is no reason to do that to anyone in the industry - in Canada all agents have access to almost all listings. So an agent may work for company X but they can show you houses from all different companies (and tender your offer, etc.) If you DO decide to do this, make sure you tell the agents you are working with a number of agents.
Exceptions
"Exclusive listing"
There are some listings (usually on very expensive homes) for which only the listing agent can sell/show the home - it is called an exclusive listing. IMHO, this is a disadvantage to the home owner in that only that one agent can show the home, but in exchange they do get a lower commission rate.
Propertyguys.com
This is an excellent network of listings of homes for sale by owner. Very professional site. I have bought and sold homes through them and saved a crapload of money in commission - so be sure to check out the homes on there as well. Real estate agents and companies typically hate this company and many badmouth it - don't listen to them. Sell Your House and Pay Yourself the Commission - PropertyGuys.com
Your assumptions are not quite right. In short it is more complicated than that.
The question that most people never ask before buying a house is: "What is my exit strategy?". If I have to sell my house within the next 7 years (the average hold period) will I make money, loss money, or break-even based on current trends of real estate fundamentals? I don't try to pick the timing of tops and bottoms, but I do follow trends and IMHO all the trends are down.
Quote:
Originally Posted by Cornerguy1
Okay, so the theory is that rates go up and, due to less demand, today's $500K house will be available for $450K.
The intrepid investor then jumps at the bargain price and eats the extra costs associated with higher mortgage rates.
The intrepid investor then hopes that rates won't continue to rise and further devalue his property (on which he's paying a hefty mortgage rate).
If he's been lucky enough to hit the rates at their peak, he then needs to sit on his property until such time as rates drop again and stimulate the market enough for his property to significantly appreciate in value. He'll then sell (at the height of the market, of course) and turn a tidy, capital gains-free profit.
Of course, all this will take years to work through and no one can predict how many years -- it could be 7 or it could be 17.
Regardless of all the penciling and figuring to the last decimal point, the GTA continues to grow in population and those folks all need somewhere to live. A property bought today will, certainly significantly appreciate over the next 25 years.
How much is a crap shoot that depends on a lot more than the financial markets; area economic development, changing neighbourhoods, the fashion of the day, and even if Hell's Angels choose to locate their clubhouse on your block will play a large part in determining future values.
I just moved to Canada myself about 6 months ago, from the U.S., and plan to rent for at least a couple of years. Renting is currently cheaper than buying and prices are trending down. So why buy a depreciating asset when you can rent it for much less?
Quote:
Originally Posted by bevk23
Okay, so for someone like me who is moving over there next year what do you think my game plan should be?
Rent for 1-3 years and hope that prices start a downward trend.
Buy in 2011 and hope like heck that prices don't go down!
I think renting for a few years to get to know the area/areas is good advice.
But from what I have heard from experts in the news the only part of Canada where there is anything resembling a housing bubble is Vancouver.
Most experts also say that housing in Canada in general is undervalued compared to most places in the world. Sure it is cold almost everywhere but Canadian cities do offer personal safety, decent infrastructure and economic conditions, and social calm. Not everywhere even in the developed world can offer this type of lifestyle these days.
So I would venture to say that Canada will remain a desirable place to live and may even become more so in the coming years.
Which means housing prices aren't likely going anywhere but up. Perhaps not dramatically, but still constantly up.
So this will likely mean that your house in Toronto will cost you less in 2010 than it will in 2013.
But if you are able to afford 400K today, you will likely be able to afford 420K a few years down the line.
I heard this argument before when I lived in New York City and various parts of Florida. I'm glad I didn't listen to the so called experts.
Quote:
Originally Posted by Acajack
I think renting for a few years to get to know the area/areas is good advice.
But from what I have heard from experts in the news the only part of Canada where there is anything resembling a housing bubble is Vancouver.
Most experts also say that housing in Canada in general is undervalued compared to most places in the world. Sure it is cold almost everywhere but Canadian cities do offer personal safety, decent infrastructure and economic conditions, and social calm. Not everywhere even in the developed world can offer this type of lifestyle these days.
So I would venture to say that Canada will remain a desirable place to live and may even become more so in the coming years.
Which means housing prices aren't likely going anywhere but up. Perhaps not dramatically, but still constantly up.
So this will likely mean that your house in Toronto will cost you less in 2010 than it will in 2013.
But if you are able to afford 400K today, you will likely be able to afford 420K a few years down the line.
I just moved to Canada myself about 6 months ago, from the U.S., and plan to rent for at least a couple of years. Renting is currently cheaper than buying and prices are trending down. So why buy a depreciating asset when you can rent it for much less?
Prices are not necessarily trending down in places like Toronto. There are some months with slight drops, of perhaps 1%. But overall things are still trending upwards, it is just that the increase is slower.
It depends on your source of information. Most published information is lagging by 6 or more months. I like to follow listings (supply) and monitor asking prices to get a better feel for trends.
Quote:
Originally Posted by Acajack
Prices are not necessarily trending down in places like Toronto. There are some months with slight drops, of perhaps 1%. But overall things are still trending upwards, it is just that the increase is slower.
I am glad the original post has been hijacked so well to inform us all, instead, of the investment prowess of some members.
Bevk23, I'm sure if they are wrong in a few years they will kick in a few bucks for your wasted rent and lost opportunity. Free, unbidden financial advice, you gotta chuckle.
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