The soaring price of Real Estate housing which we witnessed earlier this year is cooling and slow down Canada. Its MLS Home Price Index (HPI) shows a decline in overall value of 1.7 percent from June to July 2022.
In addition to the market for housing there is a possibility of a recession coming within the next few years, and would cause the cost of real estate down. This is causing many Canadians wondering if is the right moment to invest in property.
Here are some things to be aware of when you are planning to shop for real estate properties in the near in the near future.
The market is a factor to be considered when looking for property
The market for housing is constantly in a condition of change, dependent on the overall economic situation as well as federal interest rates, the price of building supplies and much more. Here are a few of the most significant market variables to be aware of when buying property.
Inflation & Interest Rates
The majority of homeowners finance their homes instead of buying their house in cash. If you intend to finance for your property, you’ll have to obtain the mortgage loans from a bank. The rate of interest for your mortgage will match the Federal interest rate.
Newsletter The Offer: Sign up to receive carefully curated news about Canadian real estate
In light of the current 7.6 percent inflation rate in Canada (as as of July 2022) and the Bank of Canada (BoC) has been pushing the policy of quantitative tightening by increasing the overnight rates to 2.5 percent.
If you’re in the market for real estate, this means that the mortgage offered by the bank may have more interest and a larger monthly payments. However, it could indicate that the price of houses could decrease also.
Sellers market. buyers market
In a buyer’s market in which homes are available on the market than those who are searching for them. In a sellers market it is more people searching for homes than houses being offered for sale.
At present, Canada is still not in a buyer’s market, as per MLS information gathered by Wowa. Using something called the sales-to-new-listings ratio (SNLR), if it is below 40%, it is a buyers’ market, and it is currently above that mark.
Personal considerations to take into account when looking for real estate
While the market’s current state is certainly crucial but your personal financial situation will determine whether or not you can the difference in your ability to buy property. These are the most crucial personal aspects to be considered when looking for property.
Credit score
Many banks will require that you have 600 credit score. If your score is lower than 600, you may struggle to find the right lender to cooperate with you. Even even if they do you do, they’ll most likely be charging much more interest. Whatever your credit rating is it’s best to review it every month to ensure there’s not any fraud to your bank account. There are numerous services available in Canada that provide complimentary credit report.
The income history
In determining your suitability for home loans, the majority of lenders will want to know that you have a stable source of income to ensure that you can meet with your mortgage monthly payments. In addition, they’ll take a look at the way you manage your finances by determining whether you can make your payments punctually and maintain adequate levels of debt. It is essential to make sure that you have sufficient funds to cover your expenses each month to cover the mortgage payments.
What is the amount you can put aside for a downpayment
Minimum down payments that banks require from the majority of banks is five percent of the property value. Some banks require borrowers to pay 10 percent down.
Should you buy a home in 2022?
Although no one can be sure the future but there is a strong likelihood that there will continue to be pressure to lower home prices because of the rising interest costs. Personally, I’d be patient until the market shifts more towards a buyers’ market and we can see some relief in prices before purchasing. Check out the most up-to-date Canadian Real Estate Association reports that offer valuable insights into what the market is performing.
It’s also contingent on the city that you would like to purchase a house in. Different areas of Canada will respond in a different way to market trends So be aware of the areas you are looking to purchase and follow the coming months carefully.
Have a concern, question or a story idea regarding personal finances? Send us an email at [email protected]
