Is this correct time to buy home in Canada? - Need experts advise

[ipmonty]

There has not been any decrease in interest rates by the BoC as you claim, and there will likely not be one either. If you believe otherwise, please provide a link.

As for your claim that prices are up 10%, again, please specify which market you are talking about. If it's Vnacouver, then yes the speculation has driven prices higher; however, there are plenty of Canadian markets where prices are down more than 30%.

I have multiple properties in Canada, but they were purchased some time ago before this price rise and are being held for yield rather than capital gains.

Finally, if you can show me a way to short the housing market, please do. As an investment banker with decades of experience, I have not yet found a security that allows you to do this, but perhaps you have discovered something that no one else has as of yet.

I am mainly talking about GTA/Vancouver area where majority of immigrants come in, for price appreciation. Also, for places where prices have come down 30%, is now a good time to buy??? or should they still wait next xx years??

You answered your own question Mr. Investment banker!. You have multiple properties in Canada, if you so believe that its not a good time to buy as prices will crash, then you should sell all your properties. As a 30% fall will take a long time to recover, then the rent you get out of them. It seems interesting that you have many properties here and are telling people to not BUY! Did you loose out on that 30% loss or do you have properties in GTA/Vancouver area??

Lastly, BOC rates have an direct influence on Prime lending rates. As an IB, I am sure you can see if there is any correlation between the 2 or now. I can bet, you will find a strong positive correlation.

And BOC have reduced rates drastically over the last decade, ever since the recession hit.

 

[torontosm]

You answered your own question Mr. Investment banker!. You have multiple properties in Canada, if you so believe that its not a good time to buy as prices will crash, then you should sell all your properties. As a 30% fall will take a long time to recover, then the rent you get out of them. It seems interesting that you have many properties here and are telling people to not BUY! Did you loose out on that 30% loss or do you have properties in GTA/Vancouver area??

If you go back and read my post again, you will see that I am clearly holding those properties for yield. If you can find me another investment that offers similar yields, I will happily cash out and take it. But being a mortgage broker, you probably aren't aware of any asset classes other than real estate so I doubt you will be able to. On that note, I'm still waiting for your expert guidance on how to "short the housing market".

Lastly, BOC rates have an direct influence on Prime lending rates. As an IB, I am sure you can see if there is any correlation between the 2 or now. I can bet, you will find a strong positive correlation.

While there is naturally a correlation, if you go back and check the last few rate adjustments alone, you will see that the banks did NOT move in lockstep with BoC. that's what I said earlier, and it is clearly the case.

And BOC have reduced rates drastically over the last decade, ever since the recession hit.

I assme you are referring to the Prime Rate (rather than Repo rates or moneymarket rates). In the last five years, the prime rate has moved from 3.00 to 2.70. That is hardly "drastic" as you claim. Also, the price appreciation that you mentioned has really come in the last four years, not in the last decade.

The current bubble is just that, and isn't based on any fundamentals at all. If you can't see that, then perhaps you are too close to it and need to step back to get a more macro perspective. When the economy is sluggish, job growth is non-existent and land is plentiful, there is no reason for prices to appreciate the way they have been. The only thing that can be driving this market is overleveraging and speculation, both of which are extremely dangerous and have resulted in market crashes globally. If you think you can time the market, go right ahead and good luck to you. I, on the other hand, have lived through multiple crashes and value my sleep at night way too much to use these inflated values as an entry point.

 

[ipmonty]

I don't want to enter in an endless debate here.

Investing in an assert that is in bubble territory is ok for you.... but to buy a place to live for the long run is not?

So, getting rent on your property + hassle of tenants is OK, but ownership is a bad idea.

There are many companies giving yield above what you might be getting as rent - expenses, which you might have overlooked as an IB, being too busy managing your properties.
From risk perspective, given RE is too overvalued.. stocks can't be any more risky..

Also the bank rate has also come down approx 0.5% in last 5 years. And yes, I wasn't referring to lock-step moves either.

 

[torontosm]

I don't want to enter in an endless debate here.

Investing in an assert that is in bubble territory is ok for you.... but to buy a place to live for the long run is not?

So, getting rent on your property + hassle of tenants is OK, but ownership is a bad idea.

There are many companies giving yield above what you might be getting as rent - expenses, which you might have overlooked as an IB, being too busy managing your properties.
From risk perspective, given RE is too overvalued.. stocks can't be any more risky..

Also the bank rate has also come down approx 0.5% in last 5 years. And yes, I wasn't referring to lock-step moves either.

I don't want to enter in an endless debate here.

Investing in an assert that is in bubble territory is ok for you.... but to buy a place to live for the long run is not?

Agreed. We seem to have different viewpoints, so better to leave it at that. However, just to clarify, I did not purchase my properties when hosuing prices were in "bubble territory". As I said, I bought them quite some time back and have been sitting back and collecting rent since (I have a property manager so no tenant hassles at all). As for buying a house for the long run, there is nothing wrong with that. However, as the title of this thread is "Is is the correct time to buy a home in Canada", my answer remains a firm no. Prices are artificially inflated and a correction is long overdue.

There are many companies giving yield above what you might be getting as rent - expenses, which you might have overlooked as an IB, being too busy managing your properties.
From risk perspective, given RE is too overvalued.. stocks can't be any more risky..

You don't quite seem to understand yield and volatility. What companies are offering yields that surpass what i'm earning in rent, with comparable volatility? Any examples? Show me something with a low beta offering almost double digit yields and I'll happily invest in it.

Also the bank rate has also come down approx 0.5% in last 5 years. And yes, I wasn't referring to lock-step moves either.

Firstly, you are not correct. as I said, the prime rate has gone from 3.0 to 2.7%. You can check it on the BoC website. Secondly, even if you were correct, a drop of 0.5% would hardly be "drastic". Have you ever lived through an economic downturn? When the central bank starts cutting rates to zero or even below zero, that's drastic. A modest reduction to spur economic growth (that wasn't even matched by the banks) can hardly be placed in the same category.

 

[ayokunlex02]

Agreed. We seem to have different viewpoints, so better to leave it at that. However, just to clarify, I did not purchase my properties when hosuing prices were in "bubble territory". As I said, I bought them quite some time back and have been sitting back and collecting rent since (I have a property manager so no tenant hassles at all). As for buying a house for the long run, there is nothing wrong with that. However, as the title of this thread is "Is is the correct time to buy a home in Canada", my answer remains a firm no. Prices are artificially inflated and a correction is long overdue.

You don't quite seem to understand yield and volatility. What companies are offering yields that surpass what i'm earning in rent, with comparable volatility? Any examples? Show me something with a low beta offering almost double digit yields and I'll happily invest in it.

Firstly, you are not correct. as I said, the prime rate has gone from 3.0 to 2.7%. You can check it on the BoC website. Secondly, even if you were correct, a drop of 0.5% would hardly be "drastic". Have you ever lived through an economic downturn? When the central bank starts cutting rates to zero or even below zero, that's drastic. A modest reduction to spur economic growth (that wasn't even matched by the banks) can hardly be placed in the same category.

 

[anujoshi]

Hi Experts,

Could you please clear my below concern?

Is this correct time to buy home in Canada? Prices are almost 50% overvalued & interest rates are low at this time.

And what are the chances of interest rates will increase in future? I am not able to take any decision on these. Can any real estate expert comment on this ?

If your affordability permits, home ownership has significant long-term benefits in terms of increase in valuation and home equity in the future. But it differs person to person.

Just because a market is highly active right now doesn't mean it's a good time for EVERYONE to buy a home; similarly if the market is slow, there are some people still buying/selling homes. It depends on your financial status and affordability. Consult a Realtor or mortgage professional in person for a detailed assessment. On the forum, even the experts can only give general replies.