According to a new report from global rating agency Fitch Ratings, the outlook isn’t as positive as many homeowners would like to see. The agency is predicting that in 5 year window, we will see prices “flatten” or decrease modestly and put an end to the climb we’ve been experiencing.
Many skeptics have been calling for a market correction for years, advising homeowners to sell now and cash out while the market is still hot. The same skeptics are calling for homeowners to turn to renting instead, which could be beneficial in the short term if such a collapse came to fruition. However, in the long term the only sure-fire way to lose money in the Real Estate market is to rent.
Yes, you will not be responsible for maintenance costs, either associated with strata corporations or not. However, in order for you to lose money by holding on to your property, your home has to devalue itself by the same amount of rent that you’re paying. So if you’re paying $2000 or $3000 a month in rent, imagine your home having to devalue itself by $36,000 per year in order for you to justify getting out of the market.
Fitch Ratings estimates that real estate is overvalued by as much as 26% in Canada, and that some regions could experience a reduction in prices by as much as 10%. We know that in Vancouver Real Estate prices are very high and the growth we have experienced in our market is almost unparalleled. The danger, according to Fitch Ratings, is that with so much individual net worth tied to homeownership, such a reduction could have some very serious repercussions for many Canadians.
The report indicates that since 2001 home prices have grown more than 130%, meaning that if you bought in 2001 and were thinking of selling today you could theoretically sell for more than twice as much. As most of us know, especially among North Vancouver homes this is not an unrealistic statement. Many of the homeowners I have spoken with in North Vancouver have already decided to sell their homes and move into more affordable accommodation by either entering the condo market (an approach taken by any downsizers) or moving to other areas of Greater Vancouver where ‘affordability’ is still an active part of one’s vocabulary.
For example, depending on the property in North Vancouver, a homeowner could sell and buy two houses of comparable size and age in Coquitlam. This is simply due to the prices of North Vancouver real estate being as high as they are today. Many builders on the North Shore are buying up large lots and paying top dollar, to take advantage of the hot Vancouver market.
Fortunately for Canadians, the government has taken measures to help prevent a market crash by tightening up lending restrictions for home buyers. Something that aims to steer us well clear of the infamous market crash in the United States.
If you’re interested in browsing Real Estate in North Vancouver please visit our website for all the active listings and community information.
Comments(2)