Housing: Are You Ready to Buy a Home?

By Francisco Garzon

Francisco Garzón is a certified real estate investment consultant by RECO (Real Estate Council of Ontario), and currently works as Sales Representative for Royal LePage, a leading Canadian real estate company. He is also member of the Toronto Real Estate Board and the Mississauga Real Estate Board.

Many people ask the big question, “Is it better to invest in a house now or to rent it?”

The answer to that question depends on the answers to many others: Are interests going up or down? Will housing prices go down? Is a fixed interest rate better than a variable one? Do you have a credit rating in Canada? Will the real estate market stay as stable and keep prospering as it has for the last five years?

Analyzing the figures and different scenarios is the best people can do. Nobody can provide an exact answer, but the market should keep stable, and buying right now means buying with a low interest rate, which really provides the possibility to receive very favourable financing.

Let’s see some more information, so you can make your own decisions:

What are the Market Conditions?

Did you know that during 2004 TREB (Toronto Real Estate Board) members reported an record-breaking 83,501 homes were negotiated in the resale market and several other sales records were broken in the GTA (Greater Toronto Area).

And after that incredible year in 2004 – amazingly – 2005 was even better! The number of sold homes increased to 84,145. From the point of view of prices, the market showed an average increase of six percent.

There are many reasons for this healthy market growth, and one of them is us – the immigrants. Around 50 thousand families arrive annually to the GTA, and 100 thousand arrive in Canada, creating the need for housing, health, and transportation solutions, as well as numerous products and services.

More Market Facts:

  • 50% of sold houses are detached (single)
  • 20% of sales were condo apartments
  • the average sale price in the whole GTA was $315,231 on 2004 and $335,907 on 2005? • the average price varies according to the geographical location, access roads, transportation, age of the house, and maintenance?
  • more than 42,000 new homes were built during 2004

Are You in the Financial Position to Buy a House?

Did you know that interest rates boost the real estate market? With our current low interest rates, every 100 dollars paid to the monthly mortgage payment is applied by around 35% to the principal, that is, 350 dollars for every one thousand dollars per month ($350 x 12= $4,200 per year). This is very good for the homebuyer.

Did you know that in order to get a credit pre-approval, you should have credit history in Canada, and enough income and/or savings? Additionally, a mix of these conditions may help if one of the others is not fulfilled. By example: If you don’t have income and a credit history, but you have good savings (minimum 35% of the purchase value), you can buy. In the same way, with a good enough credit rating, you could buy without a single saved dollar. (100% financed). Some conditions apply.

Any and all questions you may have are valid, even if they seem obvious. Such an important investment as buying a home requires having everything clear! The most important thing is to understand that this is an important investment, and that it represents great benefits for everyone in your family.

You may think that it is necessary to have a crystal ball to answer all your questions. But here in Canada, there is open information and many sources to consult (Libraries, Internet, the Government, Banks, Certified Real Estate agents). Consultancy is the key to maximize the investment and avoid mistakes. Gather as much information as you can, and when you think you are ready – call a real estate professional. After all – helping you is what we are trained to do.

CNM