We are talking averages. The majority of ppl do not buy a small property and end up with a large family 3 years later. Speculation may work for some in certain areas but not an average and risky.
Mortgage and buying a new house
- Thread starter Benrickjane
- Start date
One example is not the average and doesn’t make it common. Lots of examples of people who buy a smaller property, live in it for 5-10 years before selling to start a family. Traditional advice is to not buy unless you can remain in the property for 5-10yesrs. Some will get lucky and can get out early without losing anything before the 5 years. 3 years is even harder.
One example doesn't make it uncommon. Some might get unlucky and lose money even held property 5 to 10 years. 3 years might be harder but doable. Live there full time and then sell property is not speculation. But leave it vacant and sell is speculation.
If you buy a property knowing that you are going to flip it in 3 years is still speculating. You may have a skewed view if you live in Toronto or Vancouver but buying a property and selling after 3 years is not common in Canada. Any financial adviser would also advise you to not purchase anything if you know you will sell after 3 years unless you are able to tolerate a large amount of risk.
I bought a property in 2018 and sold it last month in Southshore/Montreal. Made a very good profit and is enough for downpayment here in Toronto to buy a good 3 bedroom in Scarborough. Just waiting for my PR in hand. May be pandemic helped me gain profit but i would say if i missed buying in 2018 falling for bubble speculation talk (it was ripe in 2018) i would've regretted bigtime. I never doubt my investments in real estate back in my home country or anywhere in the world.
Anyone stuck in the dilemma of investing in real estate should not think twice. In canada i say this is the right time. IMO
Anyone stuck in the dilemma of investing in real estate should not think twice. In canada i say this is the right time. IMO
Cetainly you wouldn't know you would be flipping in 3 years when you first buy the property.. Look at the post before me, the poster sold the property in Montreal after 3 years and made a handsome profit.
You happened to buy in Montreal right at the perfect time. The Montreal market was flat for decades ye now is on fire. Had you been living in another area that would not have been possible. You were able to buy and sell because crazy rise in real estate prices in Montreal and decrease of interest rates due to the pandemic. You took advantage of a good opportunity. I assume you didn't go into your purchase expecting to be able to sell in 3 years and make a profit.
Yes people who speculate on real estate often buy and plan on selling in a few years. Whether they do a few renovations or think they've bought in an areas on the cusp of gentrification there are buyers who do speculate on what will be the hot market in the future. The majority of buyers buy knowing they should buy something that would be suitable for them for 5-10 years. Would add that the housing market does need to be cooled so I expect that there will be some measures put in. This crazy market is not actually good for Canada. Also not good for Australia who have essentially essentially similar housing markets. Too much of the economy is dependent on housing construction, the cost of housing has risen significantly faster than salaries, many have used their potential house value as a piggy bank or are counting on the sale of their home to fund their whole retirement, many will still have a mortgage in retirement when that used to be almost unheard of, the younger generation won't be able to afford a home and many baby boomers are too dependent on the potential equity in their home for retirement but haven't factored in the cost of a smaller home in that area is still very expensive, etc. could go on.
The person got lucky and bought when Montreal was still very affordable. Montreal is getting less affordable which will change Montreal dramatically. Same thing happened in the east part of Berlin and Berlin in general. Used to be pretty affordable, could be more artsy and have more character because the cost of living was pretty affordable. No longer affordable so the character of the city changed.
No, people who speculate also buy and sell properties even within weeks (using assignments). You mentioned about Australia and Germany. Now, I am talking about Singapore. Singapore has one of the highest ownership rates. Why? The vast majority of families live in small apartments built by the government—concentrated, high-rise housing estates - compare to Canadian governments they only buy run down hotels and use them to house homeless or using other government land to build container homes to provide other affordable housing that are by no means high rise of 40+ stories.
I have exactly the same situation as you in 2020. I have to say how I regret that I didnt buy a property that time! I live in GTA. We have had some down payment that time and good income. With the tax we have to pay 35% of the full price (20% dp+15% nonresident tax), which limits our budget at a bit over 700k. Without the tax, we can use this money towards the 20% dp only and afford a house near 1m. We decided to wait for pnp. Now we avoided the tax, but a home valued 700k last year are just priced at almost 900k this year, and we have to take 200k more mortgage.
Of course this year is slightly different. I dont think we will ever see a big hike like in this Jan/Feb. But do consider the risks. Real estates in Vancouver and Toronto are crazy.
I guess the thing is, when someone bought the home he may have intended to live in it for at least 5-10 years, and after 2-3 years he found himself gaining a lot if he sells it. There is a good chance for such story in large cities. I agree that when buying a primary residence, we should not count on selling it after 2-3 years. However I guess many people are just open to sell before 5 years, provided market is good.
This discussion started when someone stated that most people in Canada plan on selling in 3 years time. Yes some people are able to sell in such a short time period and not lose money due to some crazy increases in prices in certain markets. Even in markets where prices have increased you can still lose money if selling within a short amount of time especially if you have put down a small deposit. 5% is not uncommon. Between land transfer fees, taxes, moving costs, lawyers fees, real estate commission, etc. it is hard to end up making money or not losing even if prices have increased.
It is a tough call. What we are currently seeing in many.markets is very worrying, People offering way over the asking price out of desperation to secure a property often after losing many bidding wars risks putting buyers and sellers in a really bad position. If more inventory comes on the market because lockdowns are eased and people are more comfortable with the idea of selling their homes, the market can cool just enough to put people in a position where they overpaid for a property that they bought just a few months ago. This happened a few years ago when we had another moment of really insane jump in prices. Many buyers ended up in a situation where their appraisal was significantly lower and they didn’t have the cash to bring to the table to close their purchase. They had pay for the difference between the selling price and the appraised price. People ended up losing their deposits, losing out on the home and being sued for by both the seller and the real estate agent. Others bought during a short lived bubble where there were insane bidding wars then went to sell their own home a few months but prices had already dropped to a point where people weren’t offering top dollar and significantly over the asking price. These crazy markets are not only hard to predict can change rapidly so you may feel differently 6 months from now. Who knows. It is pretty clear that Canada (and Australia) has a huge issue when it comes to home prices. Although many have benefited from the ever increasing housing prices around most of Canada, the high level of household debt, the disconnect between salary rates and housing prices, the percentage of the economy that is related to real estate, etc. is going to hurt Canada going forward.
Others can also lose money in longer periods such as 5 to 10 years. I bet you don't have such experience or unheard of people making money if prices have increased in 3 years time.