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Appreciation to stay strong in Canadian housing market

As the New Year gets underway, the great ‘bull’ housing market we’ve been enjoying for the past 10 years is starting to show signs of slowing its record-breaking pace. While some markets, particularly in Western Canada, are staying strong and are expected to continue throughout 2007, Canadian real estate overall is expected to experience a ‘soft landing’ back to a more normal market.

However, although the market is beginning to moderate in terms of the number of homes sold, appreciation still remains strong on a national basis and it is expected to do so throughout 2007. In fact, the Canadian Real Estate Association (CREA) has predicted that resale housing values, while no longer reaching the double-digit mark of recent years, should still continue to increase in 2007 by an estimated 6% nationally.

In local markets where your appreciation rate may be similar to the 6% increase being forecast nationally, that means there is great reason for buyer optimism.

Let’s take a look at 6% appreciation with 20% down on a $200,000 property.

The down payment of $40,000 will grow to $52,000 in equity, which is an impressive 30% return on the original investment.

If the down payment on the same house is 10%, that $20,000 down will grow to $32,000 and the return will be a whopping 60%!

That’s an impressive return any way you look at it. What’s more, it’s only based on the anticipated national increase of 6%. You may be located in one of many Canadian markets where the local appreciation rate is expected to exceed the national average predicted for 2007.

And this impressive rate of appreciation doesn’t even factor in the tax deductions a buyer might qualify for if a portion of their property is being used for business purposes or as an income property. Best of all, the new homeowner gets to live in their investment and enjoy it as it appreciates. The bottom line? Even if property values increase at a lower rate than we’ve seen in recent record-breaking years, a more moderate appreciation rate still will deliver one of the best returns on your investment you can achieve anywhere.

If you’d like to know more about the historical and projected property appreciation rates for your local community, give us a ring and we'll be glad to show you how investing in property can build your asset wealth while enriching your quality of life.
Posted on Monday, January 8, 2007 at 10:28AM by Registered CommenterElaine in | Comments2 Comments

Reader Comments (2)

Buying a house in today’s market is the worst financial decision ever. With current house prices in Canada so high it doesn’t make any sense to buy, keep renting and this is why. Considering the average Canadian home cost $344,000 and today’s buyers are young couples between 25 and 30 years of age and most already have student loans and other debts and don’t have any down payment. Not to worry the Canadian Banks will give them a 40 year mortgage with no money down. 68% of all mortgages today are of the “NO MONEY DOWN” type. If you think that is safer than an American sub-prime loan you’re mistaken. A monthly payment on a $344,000 loan is $1992.72 a month. After 40 years you end up paying $997,566.44 for a house that cost $50,000 to build. The Land transfer tax and closing costs would be over $20,000 in some provinces. The property taxes alone would be $400 per month for as long as you live. House maintenance and yard care would be $2000-$3000 per year. Even if you could pay off you mortgage (WHEN YOU’RE 75 YEARS OLD) which you won’t, you would have spent nearly $2,000,000 to live in that home. Do you really think you will ever see your house worth 2 million dollars someday………..pphsst dream on!!!
To make a long story short, if a renter were to take what they would pay just for property taxes and put that monthly payment away in a high yield savings account for the same length as the mortgage (40 yrs) they would have 1.28 million dollars to retire on. Starting with $0 and depositing $400 monthly over 33 years and 4 months (at a rate of return 9% compounded monthly), you will save $1,005,971 accounting 101. Think about it….to buy a house in today’s market is the absolute worst investment you will ever make.
June 20, 2008 | Unregistered CommenterDoug
Doug - you need a lesson in historical economics. Also, post the link where we can get 9% compounded monthly interest! This is the BEST time to buy right now! We have the perfect storm: Sellers are nervous and mortgage rates are incredibly low.
November 3, 2008 | Unregistered CommenterRichard

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