2015 Predictions – There are signs, but are we seeing them? My name is Ray and I believe that the Real Estate Market in Canada is an interesting animal. Some say that Canada’s real estate property values are connected to the world economy and if that is correct, we are in for a decrease. In 2011, Ireland, Spain, United Kingdom, Australia, Japan and the United States had decreases in “Real House Prices.” Switzerland, France and Canada had increases. The US has had a huge drop in property values which they seem to be recovering from, but has Canada truly felt the ripple of that yet? Are interest rates which are slightly rising now, going to push us into a recession? I believe there is a slow but powerful wave that just has not reach us yet.
Are we seeing the signs?
Economists, bankers, and other experts have seen the warning signs and yet, the average consumer is still buying what others would say are homes ten to twenty percent overpriced. Many Canadians are over-leveraged and an increase in interest rates would cause they to collapse.
The average house price has grown more than twice as family incomes since 2001. Nationally home prices are five times the family income. (Vancouver is approx 10 times, Toronto is almost 7 times). As an author and ex-real estate salesperson, I understand buying a home is important. My advise is simple, buy something you can afford to pay if the interest rates rise.
Jan 1982 15 year FRM 16.54%
Jan 1987 15 year FRM 11.13%
Jan 1992 15 year FRM 7.79 %
Jan 1997 15 year FRM 7.18 %
Jan 2002 15 year FRM 6.62 %
Jan 2007 15 year FRM 5.94 %
Jan 2012 15 year FRM 3.23 %.
I think buying a house not thinking about possible changes in the future interest rates could be fatal. The United States is an example of this type of fatal and collapsing market. No one every thinks we will have rates like they were 20 years ago and I agree but it is a cycle. We will probably see a rise in interest rates in Ottawa before your new mortgage renews in three or five years. Think ahead. Rates are based on conventional conforming 15 year fixed mortgages. Mortgages are over a long period of time when you decide to purchase a house. Amortization can be for as long as 30 years when terms can be renewed from 6 months to 5-10 or 15 years.