8-Step Guide to Buy Property in Canada Under Any Market Conditions

Bank of Canada’s 5th consecutive interest rate increase this year has resulted in the stagnant state of buyers, despite the falling home prices.

Consequently, housing market activities are quite slow. Buyers are considering whether they should wait out the consecutive hikes of interest rates or just give in and buy now. Needless to say, the condition couldn’t be any worse.

But there is a way to make this decision without the knowledge of the necessary factors. We call it the 8-step guide to buying a house under any market condition after analyzing the property and the conditions. 

Know the Different Market Conditions 

Canada’s real estate market shifts between different seasons, i.e. summer, winter, and spring. The season in which you are deciding to buy a house is going to play a critical role in determining how well the investment will do and how soon.

Real estate works in a cyclical trend; the demand stabilizes the supply and then the other way around. Assess the data through historical trends and expected reports and determine which market condition will be the best for you.

Look at the Interest Rates

Interest rates are a huge part of real estate buying and selling. When the rates are up, buyers tend to pause their purchases. That is because buyers get their house financed from banks, consequently agreeing to make payments + interest as per the current rate. 

That’s why the market slows down when the rates are high. When the rates are low, the market becomes active. And that is when most purchases are made.

Ask the Right Questions

If you have the deposit amount ready, you can get financing any time of the year under any market conditions, but all that is not enough to make a calculated, profitable purchase. You need to ask the right questions.

For example, in the current market condition, interest rates are extremely high. So, the right question to ask now is whether or not you should buy a house right now, or wait until interest rates come back down. Read below to get the answer. 

When  Interest Rates are Rising and Home Prices are Falling Wait

Falling home prices might tempt you to continue with your intention of purchase. Sometimes, the prices drop more than 30%, but that is only because the interest rates are touching the sky.

The increased rates you will be paying will offset any discount you would be getting upfront on the sale price. Even if the house prices drop 30%, the interest rate of 5% to 12% will equalize if not exceed the discount price you might be availing.

MindSet 

When investing in real estate, you should have a clear mindset. Nice to have a fearless attitude. It doesn’t mean you blindly go and invest in real estate. It would be best if you educated yourself. People say knowledge is power. Learning superpower, you must educate yourself daily and keep improving your knowledge. For a long investment, it never goes down. It always goes up. There are many strategies you can use in real estate. Please check out our other articles or contact your team.

Look at the Predictions

Expected rates are as important as the current ones. You need to know how well you can do with your property once you’ve acquired it.

For instance, currently, in Toronto, Ottawa, Niagara Region, Hamilton, London, Vancouver, and Victoria, the ratio of sales to listings is around 40%, below which buyers have had more sway on prices, historically, says assistant chief economist Robert Hogue.

As a result, buyers “will succeed in further reversing some of the previous outsized price rises in Ontario and BC in the short future,” according to Hogue, even if the national price decline stabilizes at a ratio closer to 0.50.

Compare Properties and Examine

The property you are considering is not the only one of its kind. There are comparable properties, so examine them. Look at how long they’ve been on the market. We call it DOM (days on market). 

A general rule of thumb is that if a property is on 60 DOM while other comparable properties are selling faster, it means it’s expensive. And you use that point to negotiate the sale price. 

Trade Up If You Can

If you are looking for both buying and selling, trading up is a technique that can help you offset higher interest rates in any market condition. 

For example, if you find a house for $1.2mil for which you were willing to pay $1.7mil 6 months ago, it’s a benefit for you.

Put It All Together 

Once you are aware of the different seasonal market conditions, interest rate streaks, home prices, expected rates and conditions, and all the reference points and have got all the answers you need, you need to put it all together. 

Armed with research, dive into the negotiations and lock in the property. Make sure to not hurry up, take time to understand the market. And if it requires you to wait, just be patient and let the market create the best conditions to purchase for you.