Doug Porter, the chief economist at BMO opines in the above article that the worst is behind us and the “soft landing” that was hoped for has in fact materialized.
Forecasting and analytics company, Oxford Economics Group on the other hand still ranks Canada as the third riskiest real estate market in the world (“Our set of cross-country risk indicators points to housing market dangers being especially acute in Sweden, Australia, Canada and Hong Kong.”)
The BC Real Estate Association predicts a 12% growth in home sales next year, however the Canadian Real Estate Association is more pessimistic, predicting (“The market is held back by unprecedented decreases in sales activity in British Columbia, and weak (but stronger than expected) sales activity in Ontario. Both provinces are forecasted to see double digit declines by the end of the year.”)
Who is right?
Flip a coin –you will be about as accurate as the experts.
An interesting article from The Smithsonian entitled, “Why Experts are Almost Always Wrong” points out that expert predictions on everything from political events to technology trends to stock picking are only marginally better than random chance.
“In field after field, when it came to centrally important skills—stockbrokers recommending stocks, parole officers predicting recidivism, college admissions officials judging applicants—people with lots of experience were no better at their jobs than those with very little experience.”
So, getting back to our central question, is now the right time to buy a house in the Lower Mainland?
In our view, it is always the right time to buy a house in Metro Vancouver, notwithstanding the vagaries of interest rates, the provincial economy, the ineptitude of the current federal and BC governments, world energy prices, climate change, pipeline protests and the many other variables that can have an effect on real estate.
Metro Vancouver is one of the most desirable places to live in the world and tens of thousands of people are still moving here every year. That trend does not seem to be abating.
At the present time, the real estate market has slowed down, prices have come off their peak somewhat and inventory has increased.
Arguably, it’s now a buyer’s market, with even a few detached homes in Vancouver dipping below the $1M mark.
That means that a buyer can make an offer containing the normal due diligence conditions without having to bid against other buyers who are prepared to pay over the asking price with no conditions (as has been the norm for the past few years).
Unless one is a land speculator, a real estate buyer should be prepared to hold a property for five to ten years, in which case market fluctuations should have been ironed out and probably the home will have appreciated in value (although not necessarily at the blistering rate of the last ten years).
Is there still a risk that the prices could go down and stay down? Of course, but what financial decision does not have any risk?
For instance, the decision NOT to buy also carries a risk.
Buyers who chose to rent for the last ten years have been literally priced out of the market –and rents have become sky high as well! In retrospect, that decision proved to be a very risky one indeed.
While the past is not a reliable indicator of the future, the graph below shows that over the last forty years in Greater Vancouver, the general trend has been for prices to increase and when they have declined, that correction has not lasted long.
No one –certainly not the “experts,” can predict when the present market slowdown will end (or whether prices will continue to decline further).
Given that fact, if you have the financial wherewithal to buy and are prepared to hold the property for five to ten years, then your chances of a financial loss would seem to be slim and your chances of a gain likely.
In this highly desirable part of the world this old real estate bromide still seems apropos:
“Don’t wait to buy real estate. Buy real estate and wait.” (Will Rogers)
Offices in Vancouver and White Rock
DISCLAIMER: The foregoing is not legal advice. It is for information purposes only. When undertaking a financially significant transaction such as a sale or purchase of real estate it is always recommended that you obtain professional advice to assist you to make the best decision. If you don’t know a good realtor, mortgage broker or banker, we can help you with that selection as well.