2015 is well underway and as we head into the light of Spring, what better time to present you with my outlook for the property market in 2015 and 2016.
We’ve rounded up the leading expert opinion in Canadian Real estate to give you all the facts needed to make an informed decision whether buying, renting, or selling.
1. Renters, it might be time to buy.
The cost of rent is higher than ever, and set to continue rising.
The cost of rent in Canada is soaring and according to Canada Mortgage and Housing Corp. (CMHC), monthly rents for a two-bedroom unit increased by 5.9 per cent from $1,224 in October 2013 to $1,322 in 2014 and these rates are expected to climb further in 2015.
This is pushing many Canadian renters to consider buying a home. But what types of homes are current renters looking to purchase? According to CREB chief economist Ann-Marie Luri, Calgarians in particular are looking to purchase “in the condominium apartment sector”.
Notably, demand for larger family homes have also put construction companies at a supply deficit for 2015, meaning that Calgary is expected to see some increasing construction activity in the next 12-24 months.
2. Something to watch.
Oil price could spark shifts in the market.
Oil prices have been stagnant for the past few months which has been influenced by the credit crunch globally, increased efficiency, and a switch to alternative sources of fuel.
Another issue which had a major effect on the price of crude oil was OPEC’s failure to agree on curbing production back in November of last year which sent prices tumbling.
On the domestic front lower oil prices have had a negative effect on the local economy which is contributing to a slowing in the housing market.
On the plus side, prices are expected to increase in 2016 from US$65 per barrel
in 2015 and US$74 in 2016 and this is hoped will offset increasing interest rates and should aid steady economic activity.
Lots of speculation exists whether production will be curbed in 2015 as a result of continually falling prices, or even a consistently lower price being maintained. No matter what happens, interest rates, the local Calgary economy, and our housing market all shift in accordance so people are wise to keep abreast and ask their Realtor for help understanding the implications.
3. Home Prices could be another reason to get into the market if you can.
Calgary's Real Estate market is still going strong.
Canada’s home prices have for the most part increased since 2008 and Calgary, has been the epicentre for growth nationally with average house prices rising at 8.3%, over the past 12 months.
This is nearly double the national average and with research from Teranet–National Bank Composite House Price Index indicating a further rise of 1.5% nationally, 2015 looks to be a good, albeit slowing year for the housing market.
4. Interest Rates and long-term financial planning.
An experienced Real Estate agent who understands the market can help you plan success.
One of the biggest factors that influence the housing market and mortgage feasibility are interest rates. Canada’s interest rates have been generous over the past few years reaching the optimum growth rate of 3% in September 2010. This was expected to continue until at least the 2nd half of the year when the Bank of Canada was originally expected to revise their lending rates.
However, as The Economist wrote on January 22nd “...on January 21st markets were shocked by the bank’s decision to drop the target for the overnight rate from 1% to just 0.75%. Stephen Poloz, the central bank's governor, said that it was moving swiftly to counteract the negative economic impact of lower oil prices on Canada, the world’s fifth largest crude producer.”
Robert Hogue, senior economist with RBC Bank, says he believes the coming year will be “a moderating phase for the market with a soft landing in 2016.” He went on to say that waiting for a price drop may not be the best advice and that people seriously interested in purchasing property need to think about affordability in the long-term.
CBC’s Business News suggested on Jan 26th that Alberta may be among a few provinces in Canada to feel the pinch from lower interests rates and a lower Canadian dollar more acutely. In the real estate market, this can spell advantages for some and caution for others.
Bottom line, in a complicated financial world professional advice can be mission critical to making good decisions and if you’re considering your home-ownership options, it’s always wise to seek out an experienced Realtor to help you assess the market.
5. Jumping on the property ladder.
Transitioning from renting to owning is almost always a sound fiscal move.
With rent prices where they are and construction set to continue, then buying a home in 2015 may be a good option. There’s also the fact that giving all your hard earned cash to your landlord, might be better used on a longer term, more tangible investment.
However with interest rates expected to increase in the second half of 2015, if you are considering buying, then you may want to do so quickly.
In my opinion with rent rates what they are and interest rates low for the time being, now may be as good a time as any to buy, but that window could be closing quickly.
My advice would be make sure that you can afford the repayments when interest rates do increase.
Another solution for rising interest rates might be a fixed rate mortgage, that way you will be protected at the same rate for at least 5 years, which according to veteran mortgage lender VInce Gaedomo "makes good sense for homeowners until they find their financial equilibrium."
Thank you for reading, if you need any advice on any of the issues raised above, leave a comment below, email me: firstname.lastname@example.org, or feel free to call me anytime at 403.701.7139.