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Jan 2012 GraphThat is the question (to take this out of context from Shakespeare’s “Hamlet”). The question is: what is the right choice for you? It all depends on your situation and the time frame.
 
Those that have seen property appreciation over the years are glad they got into the market, while those that held off the purchase to wait for the market to crash have missed more than one cycle.
 
If I’m raising a family, I’d like some stability and a place to call home. I would be close to schools, shopping, transit, and not having to worry about the landlord moving in or selling the property. This is for the long term.
 
If I like carefree living where moving is not an issue, enjoy travelling extensively and not want all my equity tied to real estate, and no plans for a family, I probably would be renting.
 
There are several web sites that offer a “rent or buy” calculator where the costs of home ownership are compared with rent payments over time to see which is more beneficial. I would argue that if given a choice in Greater Vancouver, most would choose to buy simply because of the property appreciation over time.
 
 
Arthur Ng 
 
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Cash bonus for 1st time buyersThe BC government announced, on Feb 21, 2012, a one time cash bonus that can be received by 1st time Buyers on new home purchases (with qualification criteria to a maximum of $10,000).  While this bonus is still subject to be legislated, this is a huge benefit to those getting into our expensive marketplace. With some banks offering 5 year closed mortgages at 2.99%, the Property Transfer Tax Exemption for qualified first time Buyers in place, and some developers absorbing the net HST, this is a huge windfall to jump into home ownership. With the details yet to be released, there is mention of a time deadline for eligible purchases that must complete by March 31, 2013. For example, on a new apartment priced at $300,000, the savings could be as much as $35,000 (7% HST absorbed by developer; PTT exemption; $10,000 bonus). If you are still renting, you might want to talk to your mortgage broker and real estate agent to see how you can benefit. Time is ticking…
 
-Arthur Ng
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Own a Home in Your LifetimeWith the price of real estate continuing to rise year over year more than the rate of inflation, will you ever be able to get into the market? Over the last 20+ years, we have gone through several cycles with peaks and troughs. Each correction was followed by an increase which exceeded the previous high. First time buyers need to understand that the first purchase will not be the dream home. Remember when you bought your first car in high school? Expectations need to be realistic and sacrifices need to be made. Saving for the down payment may mean foregoing the daily mocha or lunches out. It may mean getting a used vehicle instead of financing or leasing a new sports car that depreciates and is not tax deductible. It may mean not replacing your smart phone every time the latest model is released. It’s a matter of controlling or determining the spending as necessary or not really required. We have helped many buyers get their financial affairs together to buy their first home and they have never looked back. They also thought that they could never afford it. It is never too late if you plan ahead. If you are tired of renting and would like a place to call home, you need to act on it today.

 
 
--Arthur Ng
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We have heard reports for many years about the affordability, or rather the lack Vancouver Home Mortgagethereof, of real estate in Greater Vancouver. The latest report from RBC suggests that the typical home is now about 10 times the median family income. This means that if your family income is $60,000, then the typical home would be about $600,000 which is about the GVRD benchmark. Let’s have some fun when factoring mortgage rates and going back in history.

 

 
In 1981, the typical home was about $150,000 and the mortgage rate was around 20%. Assuming the $60,000 income the house would be 2.5 times that amount. Yet with 20% down on a 5 year term, you would only qualify for a $115,000 home.

 

 
In 1991, the home became $275,000 with mortgages at 11%. Using the same income, the home would be 4.6 times that amount; however that income now qualified for a $189,000 property.

 

 
In 2001, the same house became $360,000 with rates at 7%. The income was now 6 times the amount while the same income qualified for a $260,000 property.

 

 
In 2011, the rates dropped to 4%. The same $60,000 income now qualified for a $350,000 property while the typical home is about $700,000 which is about 11.5 times that.

 

 
You get the idea. Over the past 40 years, real estate has proven to be a sound long term investment. This is another reason to buy when you have the opportunity to do so instead of waiting and renting. Typical incomes will never catch up to hard assets. I have heard so many people waiting for prices to drop. Remember that you are buying a place to live in, not a short term investment. Cycles do come and go, but prices have always surpassed the previous high. You would think that increased mortgage rates should have the opposite effect on house prices. Yet Vancouver has become a destination city where others want to live from around the world. What do you think?

 

 
-       Arthur Ng
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