Novocastrian

I know, I know. Tut tut.

conjonway

Eugh I feel like if you buy property for the right reasons and you like the house/area you're in, and can commit to a decnt period of time then whatever. Property values will rise and fall but that doesn't necessarily mean you should wait (or worry about) it happening.

We bought along the danforth in Toronto, and if property value falls I will seek solice in the fact that those who bought those properties in the far reaches of the GTA will undoubtedly pay increasingly terrifyingly large gas bills to commute AND spend ungodly hours in their cars.

I wasn't going to waste years more rent waiting for a bubble to burst.

Tony-the-Tigger

Fair play to you. Wish it was my situation!

fletcher m

IMO property will remain at the current price as long as it is affordable. Low interest rates, well paid jobs, employment, availability of land to build and a steady influx of immigrants will keep prices as they are. It is when they become unaffordable due to a severe difficulties in the economy, people losing their jobs, over extending their credit and wait for this because it is coming.....when governments start increasing pressure to raise interest rates that will in effect raise inflation, that in turn in real terms reduce he value of the debts.

If you can follow that, great, dont read the next bit. If you are struggling to grasp this, here is an example.

You owe £100k You earn £20k pa 5:1 ratio

Now rack up inflation......

You still owe £100k, however due to high inflation and higher salaries being awarded due to inflation you now earn £25k. 4:1 ratio.

Ok, you might say great, I am earning more so I can afford it, but chances are you cant afford it, because the interest rate you are paying is twice that when you were earning £20k. This was the situation with the property crash of the late 80's early 90's. It is coming again.

The one thing that might keep prices up in Uk is the shortage of property and affordable land to build on.

fletcher m

So you might ask, how is this going to effect Canadian Property prices? that is the thread..IMO as long as interest rates remain stable and canada does not have a depression, it won't, if property is affordable compared to average salaries, then it will remain stable or will continue to go up.

Former Lancastrian

So when was the last crash all over Canada or is it just limited to certain areas?
Calgary had booms and busts in the 80s but nothing since.
Yes its hard to believe that prices will keep going higher but they have done over the last 20 yrs.
You are beginning to sound like supporters of a certain football team.
Next season will be different
So what happens when the market crashes and by how much.
If you paid $600,000 for a property and now need to move how much would you sell for?

conjonway

Also, the property you are going to move into will presumably be part of the same crash and will cost you less than you would have paid for it pre-hypothetical-crash. Swings and roundabouts

Former Lancastrian

Not always. The crash might only hit a certain area or areas like it did with Calgary. You live in Calgary crash happens and you move to Vancouver where there is no crash so prices not affected.

Tony-the-Tigger

The Canadian housing market is artificially stable due to the bank of Canada base rate of 1%. This rate can't continue indefinitely so what's going to happen to all the people out there who can't see past their nose - borrowing the max they can afford at 3% or so?

jericho

It is ridiculous to think salaries will ever keep pace with inflation.
How may people got an inflationary pay rise in 2009/2010/2011? Very few I imagine- cost cutting, lay offs, streamlining... In my previous job, I got 0% increase in 2010, and then 1.5% in 2011... so with inflation, I was technically earning less in 2011 than I was in 2009.

jericho

Think that one through for a minute. So you take a 10% hit on your Calgary house, then you up sticks and move to Vancouver where you're forced to pay twice as much $$$ for the same house, and earn less money also. Doesnt really make sense does it.
And besides, the "crash" in Calgary wasnt really a crash was it?

The whole Canadian property market will be f***ed when interest rates go up to 6-7% (or more).

jericho

No not really.
You buy a house for $600k.
Crash happens and your house is now worth $400k.
You're mortgage is still $600k, so you've got $200k Negative Equity.

The house you want to buy is now $300k (maybe it used to be $500k), but you've also got $200k you need to pay back to the bank.
You're not gonna get a $500k mortgage on a $300k house.

Former Lancastrian

Oh I agree once the interest rates go up a lot of people will find it difficult as they are at the edge on current rates. If you have lost your job in Calgary and the only offer is in Vancouver sure you have a choice not to move but if unemployed in Calgary then how do you survive?
I guess the ones who lost money on the small crash in Calgary might argue that fact. A fair few just walked leaving their house as some were taking up to a 50% hit loss on resale value.
Would you believe in 1981 interest rates were almost 20%.

Tony-the-Tigger

Was there not a big crash around 96 too?

Former Lancastrian

Possibly I cant remember but was it Canada wide or just a specific area?
In my area prices were still on the rise in 96 and have been ever since and despite all of these forecasts they are still rising.