I think a recession would probably trigger a crash, even if interest rates stayed at their current levels.
Originally Posted by stryder1587
All very good points.
Originally Posted by cashinstinct
I had a nasty financial "wakeup-and-smell-the -coffee " bath in divorce court after 22 years of marriage.
People change, situations change. It cost me $50K
in legal bills up to the time of divource + 8K in interest on outstanding issues from time of separation to time of divorce on property and equalzation payment to the Ex. Her lawyer calculated the interest penalty from Sept 1, 1994 to April 10th 1998...4 long years of dragging it out with lawyers and finally into the divorce court.
I went through 3 lawyers (fired the first two for not paying attention to my case, yet very eager to bill me hundreds/thousands for their professional services.
I survived that scary unforseen episode in life, at age 52, fortunately for me, I was still working at the time and managed to recover after about 5 years with my mother's help. She came in as 50% owner of current principle residence and with her help , I managed to buy a semi and pay it off after 8 yrs by cashing in my RRSPs to pay of the mortage.
Its a real eye opener in divorce court...the person that you trusted for many years becomes your adverserial "enemy" and it all boils down to dollars and cents.
As far as buying a home in the OVERHEATEd GTA real estate market...you need to really be diligent. It's due for a correction, I don't care what any
"expert" is saying here. I the economy turns sour, and jobs start to erode, real estate prices and affordability will be the first casualties felt.
My brother who lost his home in Brampton a few years back due to divorce as well, he survived and now lives with my mother. He also has experienced the
harsh reality of what can happen as well to your future dreams.
In serious situations, your family is about the only people you have left that you can trust.
Last edited by carverman; 2017-03-10 at 06:20 PM.
Interesting interview about Toronto/Vancouver:
Macbeth's book is a very, very good read.
I'm in this boat also, 32, live with gf in rented condo, north of $250k saved myself (gf will be in school the next 2 years, has <$15k).
My point of view was that I wanted to only buy a house when it was time to put down roots (ie have kids). Otherwise, I would stay relatively liquid and not be tied to a leveraged bought property for investment purposes. I have been happy renting, but now rents are starting to creep up, and now property is high anyway.
I am looking at living in Europe for a couple years instead; I hold an EU passport, and always admired the lifestyle there.
Agreed, a recession would trigger job loss. But where's this recession going to come from? Canadian economy is based is based in natural resources, energy and the financial sector. The oil sands and Calgary just got wrecked, there's no where lower to go. For the financial sector, the crash of 09 was pretty devastating but Canadian banks were the most resilient in bouncing back due to our conservative risk policies. Does it look like our financial sector is due for some cyclical recession again?
Originally Posted by rebel_ins
FinancialPanther, which part of Europe are you thinking? Some places are pretty expensive there too (Moscow, Paris, London, Monaco)
A debt crisis could do it. Many high level bank execs - including CEOs - have expressed concerns about housing prices the last few weeks. The US has just hiked their rates, and more are expected to come. This should affect fixed mortgage rates in Canada - they should increase. Canadians are already close to their limits, with a debt to income ratio at 170%. If banks become more risk averse, they will tighten credit. If Canadians borrowing power is reduced, they will stop spending and will focus on debt reduction. This could very well trigger a recession.
Originally Posted by stryder1587
Last edited by rebel_ins; 2017-03-20 at 05:09 PM.
I am open to anything really, this is temporary so it is really more career dependent and being in a major-ish city with good transit, English being a usable language, and airport access. I like Germany, Netherlands, Denmark. Girlfriend will be studying in Sweden, so Stockholm would be good.
Originally Posted by stryder1587
It's really a bet on the interest rate outlook in Canada for the next few years. If you think the actual/contract mortgage rates won't hit 5% from the current 2-2.5% in the next decade then maybe buying will look smart in hindsight after 10 years.
The inflation rate in Canada is manipulated. When our Loonie went down, everyone was complaining about ever increasing grocery food items, rent and housing is going up, hydro and electricity going up yet Stats Can manage to compute below 2% inflation rate. What products have we not seen go up in price because our Canadian dollar had depreciated against the USD? Inflation has to be reported low in Canada because most provincial and the federal government had been on a debt binge the past few years and increasing interest rates will mean more funds going to servicing debt.
Currently, every payment on a 25-year amortization is 55% principal and 45% interest. This makes it look so much cheaper than renting but of course, you have potential building maintenance and there's property tax to pay.
It is really a crazy market out there.
The good news is I think we are about to peak whether or not there is government intervention. Before the changes to mortgage lending rules, households were allowed to borrow 5.5x of their income. After the qualification at 4.64%, that factor may have dropped to 5x.
If interest rates go up, that factor will keep decreasing.
Let's say the interest rates stay about where it is.
Only 5% of Canadian households make $200k over. These households can afford to buy $1m+ properties but I'm sure most of them have already bought a principal residence and may be delving on investment properties.
I think in the GTA (especially the suburbs), decent sized detached home will peak around $1.6m at the most, semi's maybe around $1.2, and townhomes around $1m. No way will it keep going up unless wealthy foreign buyers exert that much influence.
You can see that is what's happening where the Durham area is now facing the higher increases because the prices are the cheapest within 100 km of Toronto. People are moving east because they can still afford to choose the biggest structure they can qualify for.
Stock markets have hit all time highs so that's additional ammunition for people but the 20-30% returns on indexes is probably a thing of the past until after a minor stock market correction.
Can't predict the future but... A large chunk of GTA buyers are speculating. Houses are not really affordable, not even to people with $200K incomes. We need a sparkle and the whole thing will go up in flames. Interest rate rise, even a small one could change the balance. The rate is on the move in the States; Canada will follow with a 6-9 months lag.
Chances are pretty good for a fall in the fall.