Is 2012 a good time to buy a house in Canada?
Unless you’re purchasing a house for cash flow purposes or purchasing a home with 50% or more down I would avoid purchasing a home in 2012 in Canada. Yes interest rates are low but the reason they’re so low is because of the economic downturn. When the economy starts to recovery the first thing that’s going to happen is interest rates are going to rise and they will keep rising until the true purchasing power of the Canadian dollar is realized. I will go on record to say thank God we have Jim Flaherty as Minister of finance right now and also thank God Canada is starting to do trade talks with nations other than America.
America’s artificial economy is going to have a severe impact on Canada when they start to “recover”. This is caused mainly because of the Amount of USD currency in circulation right now. What America’s recovery means to Canadians is a stronger Canadian dollar, Canada is in a very interesting position right now mainly because we’re one of the few countries that survived the economic downturn without much stimulus spending.
When the fear is gone they’re running to Canada
When panic and fear leave the market place Canada is going to be a very delicious place to invest into which in layman terms is going to boost the Canadian dollar and there will only be one effective way to handle this problem and that will be to raise interest rates. The faster this economic disaster fixes itself the worse off the indebted Canadian will be. The Euro’s problem is almost fixed and America’s current economic problem is not really a financial problem it’s a political one even if America simply patches up its financial problem (which I suspect it will do) Canadians in debt will have a huge problem.
It’s important that Canadians realize that we do not have the luxury of printing Money like America does. The Canadian dollar is NOT the world’s reserve currency and our market is not that large, the rest of the world will not feel sorry for us if we have economic problems which basically mean the government will have to make some tough decisions. Like I said earlier 50% of Canadians own their own homes, mortgage debt is the largest debt in Canada who do you think the Government will go after first?
Smart move by the Aussies!
Australia is shaping up to be the country with the most stable economic outlook in the future because its citizens have been paying higher interest rates during this economic collapse. Canada on the other hand has been doing what America’s been doing which is keeping interest rates extremely low this posts a HUGE problem when the recovery happens.
The reason I believe the price of your house will drop
I expect housing prices to drop because interest rates will rise. I recommend buying a home only if you can purchase one without a mortgage or if you’re purchasing one for cash flow purposes (Renting your home and/or basement). Also don’t forget that investing for cash flow does come with some risk if you can’t get your house rented you can’t make money from it.
My point here is 2012 is a TERRIBLE time to purchase a mortgage, housing prices are still rising and interest rates are at Historic lows. When interest rates start to rise what do you think will happen? When the recovery happens who do you think will be the winners the buyers or the sellers? I’m betting that the buyers will be the winners because majority of Canadians are already living pay check to pay check and most Canadians have Mortgages, Car loans, credit card loans, personal loans, lines of credit you name the loan they got it. An interest rate hike will wipe out a large percentage of the Canadian middle class at least temporarily which will be a perfect time for investors to purchase things like houses for cheap.
Many investors are already positioning themselves for this to happen. Power of Sales and Foreclosures are coming to Canada very soon. Jim Flaherty and the Harper Government aren’t lower taxes and giving you breaks for no reason the idea is to get Canadians ready for the Tsunami of Investors that will be running to Canada in the very near future.
For the record I do not give financial advice this post is merely a reflection of what I expect to happen. Please seek financial advice from qualified individual.
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