Should You Wait To Buy a Home in Canada? or Should you Buy now? – July 30, 2021,
The housing marketing in Canada may have reached its peak, but then again, there still are moves the central bank of Canada can do, as well as Canada’s regulators to push asset prices up further. If you’ve been saving to buy a house, and you’d be a first-time homeowner, honestly I feel sorry for you, because the government and central bank mismanagement of the economy are why home prices are so high, to begin with.
If I may go on a rant for a moment, as of the date of this publication, the Bank of Canada interest rates are 0.25%, yes they’re less than 1%. No, in the normal world, the central bank is supposed to mirror FREE MARKET interest rates. a free-market interest rate all depends on what a commercial/private bank is willing to lend out money for.
Now, in the real world, people and GOVERNMENTS can go bankrupt if they can’t at the very least service their debts. In the year 2021, we’ve entered into a bizarro world in which otherwise bankrupt investments have value. It would be a shock to many people the “Tesla Inc.” and “Uber Technologies Inc” have not made a profit, now, their ASSET value is profitable, but their cash flow statements are horrible, however, because 0.25% interest rates help the rich to get richer, a lot of companies and entities will gamble on future earnings.
How this translates to the Canadian housing market is that the price of Canadian real estate is priced as if this were the year 2040. Because most fiat money systems fail, most people predict that the Canadian dollar will be WORTH-LESS in Canadian dollar terms later, what this means is that asset prices are given a premium now, in anticipation of what they’ll be sold for later.
The people that get screwed over in this scenario are the working classes. So if you’re a first-time homeowner, there is great chance that if you purchase a house for let’s say $500,000 today, that your $500K purchase might be $500K 10 years from now, there’s also a chance that your $500K purchase will be worth $250K 10 years from now.
But if things continue the way they are, there is also the chance that your $500K investment into a house will be worth $1,000,000 10 years from now, the real question to ask yourself is if your home purchase goes up or down in value will you still work hard to pay for the mortgage?
In Japan they have these things called 100-year amortization, these financial products allow the cost to service a mortgage to be lower than it would be if let’s say the amortization is 30 years. The difference between Japan and Canada, however, is that Japan is not at war with its working-class citizens to the degree Canada is, furthermore in Japan that doesn’t have the same social safety net that we have here in Canada.
What this means is if the Canadian economy, or maybe a better term I should us is if Canadian productivity continues on its downward trajectory, the cost of living will go up in Canada, which will make it harder to service debts. So if you’re going to purchase that $500K mortgage, make sure that you do your own stress test.
50% of Canadians are already mortgage-free, if you pay a premium for your mortgage, you can still go to war with paying it down. If you’re not a real estate investor and have no plans on being a real estate investor, don’t listen to the morons who tell you that you shouldn’t pay off your mortgage.
Most of the real estate investors I know are on the verge of bankruptcy, they’re asset rich, but they’re cashflow poor and heavily dependent on Government and central bank subsidies to keep them afloat. So if you’re not a real estate investor, don’t pretend to be one. Pay off your mortgage and then accumulate savings and learn to invest.
Most people, myself included, after paying off my mortgage, I focused on DIVIDEND PAYING stocks, I don’t like being in debt, and after paying off your mortgage, you’re bak loves you, they’ll offer you all sorts of financial products, which is something most real estate investors never learn about.
When you own your property free and clear, and your only bill is basically your property taxes, regardless of how the markets are priced, you’re sitting on money and you’re in a very good negotiation position. So yes this market is over-valued and this is not how the economy is supposed to be, but life goes on, so any price you’re going to pay for a mortgage, make sure it’s a price you can imagine you can pay off regardless of the market conditions.
I’d also recommend that you look at your profession, are you in a high demand profession, as an example if you’re in health care, your services will be needed regardless of the market conditions, but if let’s say you’re in retail, your job security might be at risk.
We all want to buy the best for the lowest price, but because of the corruption of our current world, you have to know for yourself when is the best time to buy a house. A lot of people are waiting to see what happens in the year 2022, to decide to buy a home, because that’s the year when most of the debt deferrals will have to be paid back.
Interesting times ahead!