Coming In For A Soft Landing
Drama sells newspapers. Everyone loves to talk about, and fret about, and monger fear about the dreaded Vancouver housing bubble. But the reality is, if we are due for a little correction, it will likely be nothing too exciting. This is Canada after all. The big Hollywood style explosions and implosions just don’t seem to happen to us like the do in the States.
Will property values drop? Maybe a little. But then they’ll go right back up in a few years. It’s like gasoline. Will it drop below $1.45 in the next month? Maybe, but you can bet your bottom dollar that it will be $1.50 by the August long weekend. There are ups and downs, but eventually it all goes up.
For those fearing a sudden crash like we saw below the border, the Canadian government has seen that this Armageddon party is sure to be a dull one. They’ve been engineering a soft landing for years now. Yes, prices will go down, but they’ll do so slowly. The soft landing has been set up with the following:
1. 25-year amortization periods. It used to be 30, now it’s 25. Those five years make a difference. A slightly shorter amortization term keeps out
the buyers who really shouldn’t be buying (in theory).
2. Limits on home equity loans. BC has some of the most stringent lending policies in the world when it comes to home equity loans. And for good reason. No one wants to end up underwater - least of all the banks and their insurance companies. The crash in 2008 was in no small part because of Home Equity Lines Of Credit. They keep them closely regulated because of that.
3. Record low interest rates. The government and the Bank of Canada keep interest rates low for a reason. They want you to borrow money from them. The more money in circulation, the more taxes, the more jobs, and the better the economy. The government is basically giving money away. Interest can strangle a first time homeowner. This low rate makes it easier for new buyers. And therefore creates more churn.
4. Sub-prime loans. You can’t get a mortgage below prime in Canada. The reason is simple - most people overextend themselves to get what they can barely afford. If you are already overextended before the bank raises the rates, you are going to be scrambling when the deadline comes.
The Vancouver real estate market was quiet last year and the beginning of this year-although it is booming now! There wasn’t much action at all for about a year but prices remained fairly strong. I anticipate this uneventful course to continue for the next few months as well. Basically, it’s business as usual, just at a slower pace. This is good news for buyers who will face less competition and be less hurried in their purchase. I’m happy to take my time with you. Give me a call and we can start your house hunt today - with no rush or pressure.