Anshu Arora LLM, MSc, PMP

Cell 604-828-7331 |

“Finally, the market correction we’ve been waiting for!” I hear people saying recently. “Maybe now I’ll actually be able to buy my first home.”

Well, cool your jets there, enthusiastic would-be buyer. I’m sorry to break it to you, but there are reasons that home sales in major B.C. centres have fallen off a cliff, and that prices are teetering on the edge of the same abyss. And those reasons are what will probably prevent you from buying a home any more affordably than before.

Here’s the thing. People will always buy real estate at the maximum price that they can afford – it’s just human nature to make a nest that you can be proud of. If lenders and governments make it really easy, and cheap, for people to borrow a lot of money to buy a home, those people will do so. Consequently, real estate prices go up. That’s what was happening with our record low interest rates over the past few years.

As soon as you start doing the reverse – making it both harder and more expensive – people won’t be able to buy homes at the same price as before. They’ll buy cheaper homes (or won’t buy at all), real estate sales will plummet and prices will eventually follow suit.

That’s what we’re seeing right now in markets across B.C., but most notably Metro Vancouver, the Fraser Valley and Victoria. This is a very simplistic generalization for the purposes of clarity, and there are certainly other factors also at play, but the combination of the mortgage stress test introduced in January this year, along with mortgage interest rates rising, are making it much more expensive to buy a home. Therefore the market correspondingly balances this out with declining prices, and the net result is that it will probably cost about the same for a first-time buyer to get into the market as before.

Here’s a hypothetical example. Let’s say condo prices, which are starting to reverse, slide by 10 per cent by December this year, compared with December of last year. Let’s say you were unable to afford a $500K condo a year ago (you have a max budget of $450K, including $50K down), but you start thinking you could now afford the same condo, as it’s now priced 10 per cent lower at $450K.

Unfortunately, you’re wrong. The mortgage rate you could have qualified at last year is now much higher under the stress test. So even if you could reasonably afford the mortgage payments on a $450K condo, your purchase power has been reduced by around 20 per cent. So you now have to find a home for $360K to qualify.

And you’re thinking, OK, I have to get a smaller place, but at least the mortgage is more affordable, right? Well, then you have to factor in the series of interest rate increases that are making your monthly mortgage payments higher than a year ago. If you had bought that same $360K condo a year previously, when it was priced at $400K, you’d be paying the same monthly amount if you had fixed a 2.5 per cent rate then, versus a 3.5 per cent rate now. (And you’d have saved yourself a year of rent payments.) The price reduction hasn’t helped you at all.

My personal advice? Stop worrying about what the market is doing. Do whatever you can to become a “have” in real estate

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Anyone hoping for a more affordable housing market in Vancouver will be disappointed.

“Though demand-supply conditions are improving, affordability is expected to remain a concern,” writes Marc Desormeaux, an economist and policy analyst for Scotiabank Economics, in a report published this week. “Despite the [year-to-date] increase, Vancouver’s inventory of unabsorbed homes remains well below its long-run average, building on the shortfall accrued in recent years and indicating further price increases are likely ahead,” Desormeaux continues.

In August, the benchmark price of a Metro Vancouver home was $1,083,400, up 4.1 per cent from a year ago.

In a separate report released last week, Central 1 noted that BC housing starts rose in August, marking the second consecutive month that contractors broke ground for an increasing number of units.

Housing starts hit a seasonally adjusted annualized rate of 48,300 homes last month, flying 28 per cent above the level reached the same time last year and up 8 per cent from July.

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August saw housing markets across Canada post year-over-year home prices gains, in what many are calling the end of a policy-induced cooling period.

“Greater Toronto Area resales jumped 22 per cent cumulatively in June and July (on a seasonally-adjusted basis) from decade-low levels,” he writes. “Activity rose further month-over-month in August though the pace moderated significantly to just 2 per cent.”

And it’s not just the GTA that can expect single-digit year-over-year increases. Hogue points out that the Greater Vancouver Area’s benchmark price was up 4.1 per cent year-over-year in August

Now IS the time to take advantage of our market, and I can Help.

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In the past 5 years, real estate prices in both Lower mainland and Fraser valley have doubled!! This is amazing, and if history is any indication, prices will continue upwards in the years to come.

Now is the time to take advantage of our market – as the famous saying goes “ The best time to plant a tree was 20 years ago… and the next best time is NOW”.

I can help and/or assist you in starting and/or expanding your Real Estate Empire! Contact me to see how my research, algorithms and techniques can help you maximize your profits.

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Vancouver’s industrial real estate sector has posted the largest rent rises in the world. Why? Economic fundamentals, of course, with continued growth of Vancouver’s population, and a doubling of demand!!

Similar growth can be seen in cities across BC and now is the time to grow your Real Estate portfolio, or start one! and I can help and/or guide you

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