DESERTFOX

Hi all. After arriving in 2009 we have been renting a 3 BR suite for $1500 all inclusive. We are happy at the place that we are renting at the moment as it is in a quiet area in North Burnaby with good nearby schools for our kids. We have been longing to have our own place but I'm not sure if it's the right time to buy. Luckily we both have full time jobs. Should we continue to rent or it is the ideal time to buy?

mattieuk

Are you happy in the area (i.e. want to stay in the area?). As for whether it is an 'ideal time to buy' - that is purely down to individuals opinions, and there are many bears and bulls about this market, some suggesting that housing prices could plummet from their high prices now after a change in interest rates, to people who thinks that Vancouver has just been more immune from the recession and property drops seen in other places because of a few different reasons.

If it was me, personally, I would continue to rent for now, as it seems like you have a pretty nice deal going on there, and it may be more economical for you in the short term to continue renting, rather than taking on the extra cost and hassle of ownership. Perhaps put a few feelers out there to see what is on the market (are you looking strata property or SFH?) so that you can get a better feel for how prices are progressing as time goes along?

nldfc

In my opinion you have just paid over 15k of someone elses mortgage rather than your own but I have no idea what the housing market is like in Burnaby

mattieuk

The old chestnut of the indoctrined 'owner'

You are right, by referring to the market. It boils down to you are either paying a large chunk each month to a landlord, or to the bank (in interest). The question is what is going to give you a better residence (both short and long term) for the month invested. If a 3 bedroom rancher is going to cost you $700,000-$750,000, there is a lot more maths to do than if it was a $300,000 house in another part of the country.

ExKiwilass

North Burnaby is big dollah.

The question is: do you know where you want to stay, can you easily afford a mortgage. I don't think anyone can predict what the market will do. If your mortgage is reasonable & you like the area you're in it doesn't matter if your house declines in value right?

What I've heard from a few different sources is that prices in certain areas are just going to keep going up, North Burnaby being one of them, the westside another, because of the perceived cachet of the schools. All I can say is that listings are still tight in North Burnaby and things are still selling well ...so..yeah.

DESERTFOX

That's basically the reason that favours us to get into the property ladder in BC as early as next year with interest rates still at all time low but not for long I guess.

Funny enough our landlady don't even need our rent immediately. My guess is that mortgage fully paid. We always paid our rent 1st of the month and don't even cashed it in a month later. Typical Chinese businessman husband in Hongkong and only visit every 3 months or so and wife here in Canada with the children.

JonboyE

To buy as an investment? For the long-term this still makes sense. Making money in real estate is all about timing. You have to be able to ride out the tough times when prices are down because other people are forced to sell. In Metro Vancouver I don't see the tough times to be any worse than the normal economic cycles. Projected inward population movements over the next couple of decades, plus the fact that we are hemmed in by mountains, sea and an international border means that demand for housing will remain strong for many years to come.

For the short-term I am less sure. If you understand the niche markets in your area it might be worth a punt purely as an investment.

However, you are looking to buy a home. Owning somewhere you enjoy living is at least as important as investment potential. If you find somewhere you love, and that you can afford, and you expect to be there for the medium to long-term than anytime is an ideal time to buy.

For a home affordability is the key. How comfortable are you with the mortgage payments? Can you risk variable rates? There are some great 5 year fixed rates available at the moment but what happens after five years if the rates are double. Can you "get by" for a few months if one of you looses their job? How much equity will you have in the house - if prices dropped by 10% and you were forced to sell would you be in negative equity? Remember that it will cost about $25,000 to sell a $1/2m home. I.e. will you be forced to sell at the same time as everyone else is being forced to sell? If you will not be forced to sell then short-term rises and falls in house prices are irrelevant.

If you can live with this, and have found somewhere you like, then sure, why not buy now?

Alan2005

People always forget mortgage interest. Rent is dead money they say, but so is anything not being used to pay down the principle.

mattieuk

Citzens Bank has an okay (there are some better ones out there) calculator for rent vs buying:

https://www.citizensbank.ca/Personal...ors/RentvsBuy/

On the basis of the target property (not that the OP has specifiied a target property, but just for the sake of argument)...

A $700,000 property, with a mortgage rate of 4%, with a downpayment of 10% of $70,000 with a 30 year amortization period vs a $1,500 rent comes out to $2195 a month of interest alone to begin with (with $976 the principle, making a $3171 monthly payment). Not to mention that a downpayment of under 20% needs mortgage loan insurance which soon adds a few thousand a year to your bills. So on those figures, keeping renting will leave you $695 dollars more each month - albeit 'owning' nothing (not to mention the money you save on homeowners insurance, utilities, property tax, and the likelihood that rates will be higher when renegotiating your mortgage).

In this market, unless you are putting down a lot of downpayment towards the property, you will see this to be a very similar story throughout West, East and North Vancouver, Burnaby, New Westminster. The automatic assumption that 'paying your landlords mortgage' is the un-savvy thing to be doing is quite often wide of the mark.

MarylandNed

Yes, but many people depend on loans (which come with interest) to purchase a house. They may be better off buying - that depends on many factors e.g. how long someone owns the home, how prices move, what interest rates do, what the rent is in the same area.

Eventually the house can be owned whereas a renter has nothing to show for his investment - and the renter still has to pay rent while the home owner is free of the mortgage. Also, over time, the mortgage payment usually becomes much less than a rent payment - as rents will generally rise over time and a fixed rate mortgage payment will not.

There actually is an indirect way to have home mortgage interest be tax deductible but it involves something called an "asset swap". Not an option for everyone though.

I live in the US and luckily mortgage interest is tax deductable here.

This is a handy tool to help someone to decide whether it's better to rent or buy:

http://www.ic.gc.ca/eic/site/oca-bc....g/ca01821.html

Alan2005

Yes, we know that inflation makes almost any asset a good investment over a long enough time period. What makes houses the choice for ordinary people is that they can be bought using leverage, this can't be said of gold bars or stocks.

The inevitable day when fiat collapses and we go back to proper asset backed currencies can't come soon enough. Those who invest in houses will have to actually know what they are doing and won't be able to rely on the government subsidy which comes with deliberately reducing the value of their debt over time.

Cape Blue

No - over time the renter in the example above is $695 pcm better-off than the buyer and has the $695 pcm to show for it - after 10 years and assuming no significant property appreciation, the renter has $83,400 more to show for his "investment" (ignoring property tax, insurance, repairs, etc which make this differential larger).

If you think property will appreciate, or want the comfort of owning you home, then buy. Most people move within 10 years, inflation will help over that time period but not hugely - the renter is investing the $695pcm as well.

MarylandNed

How many renters get to pay the same rent for 10 years? Yes, incomes might rise to compensate but it's not always as simple as that. The home owner might well benefit more from a rise in income if his mortgage payment is fixed. Any rise in income for the renter may be needed to pay increased rent - the rise in income for the home owner may be extra disposable income to deal with things like home improvements etc.

A house I was renting for $1400 in my neighborhood 10 years ago (before moving out and buying my own place) is now renting for $2800 (about $400 a month more than my current mortgage payment and property taxes combined). In addition my house has almost doubled in value in that same timeframe and I'll eventually be mortgage free. For me buying was the best deal. Renting might be better for others. That depends on a lot of factors.

DESERTFOX

Thank you all for bringing up the arguments on both sides. There are indeed a lot of factors to consider buying a house. Good location, close proximity to good secondary schools for the kids, accessible transport for work and nice neighbourhood areas. I guess we'll just enjoy the season holidays and will see what comes up next year. If we decide to buy it will not just be an investment but a family home.

For now renting isn't as bad as we are trying to save as much as we can for the down payment. So far our landlady has been nice and provided us everything we have requested. It is in a very quiet and nice neighbouhood. 5 minutes walk for the kids to school and bus stop is in front of the house. We feel safe where we live.

ExKiwilass

Yeah, it's good to have the Hell's Angels in the 'hood. No one is going to piss on their patch.