The Conference Board isn’t buying the notion that Canada’s housing market will suddenly crumble, saying the most likely outlook is for a modest decline nationally and in some specific markets.

The Ottawa-based think-tank argues in a comprehensive new look at real estate in Canada that the conditions for a crash simply don’t exist, despite numerous reports that the market is overbuilt and overvalued.

Rather, the report argues that with the possible exception of Toronto, housing starts the past three years have been roughly in line with the 20-year average.

Even in Toronto, there is only a “borderline” case that it could be overbuilt.

“At this point in the housing cycle, there is a risk that Canadian housing prices in some market segments are due for a modest correction,” the report states.

“Nevertheless, we believe that continued population growth, additional employment gains and modest mortgage rate increases will limit potential price declines in 2014 and 2015.”

There is a case for more dramatic price adjustment further out if higher mortgage rates start crimping affordability, the Conference Board says, but even then it is likely to be a soft rather than a hard landing.

In recent years, some economists and international organizations such as the OECD, the IMF, Deutsche Bank and The Economist magazine have described Canada’s housing market in stark terms, characterizing it as among the priciest in the world based on historical averages and other metrics.

But the consensus of economists within Canada has tended to be more subdued. Last week, the Canadian Real Estate Association also predicted a slowdown as mortgage rates start edging up later in the year, but it still saw the market overall growing in 2014 and 2015.

The Conference Board says fears of a housing bubble about to burst in Canada are exaggerated.

It says some of the evidence cited by correction hawks, including comparing home prices as a multiple of rental costs, don’t take into account historically-low mortgage rates that keeps affordability steady. Citing Toronto, it notes that in 2013 mortgage payments consumed less than 20 per cent of average household income, the same as in 1993.

“Mortgage costs, not just house prices, are the principal deciding factor for potential homebuyers,” says Robin Wiebe, the think-tank’s senior economist.

Even when mortgage rates do start rising, the Conference Board believes it will happen gradually and over an extended period. For instance, it forecasts rates with only a gain of 200 basis points — two percentage points — by 2017 or 2018.

But at current low rates, the typical homeowner on a posted five-year rate will have paid down $42,104 principal on a $100,000 in mortgage debt, so affordability won’t be seriously impacted once it comes time to renew at a higher rate.

The Conference Board provides an outlook on six major cities:

— Vancouver: Moved back into balance last spring. Recent price gains will give way to slower advances in 2014.

— Calgary: A approaching sellers’ conditions, noting strong price gains last year.

— Edmonton: Balanced, with brisk resale and price growth activity last year.

— Toronto: Balanced with healthy price growth. A major correction is difficult to see given solid employment and population growth.

— Ottawa: Market cooling due to falling employment from the government sector, flatter sales and tempered prices.

— Montreal: Flirting with buyer’s market conditions with sales and average prices having dropped somewhat last year.

Source: Julian Beltrame, The Canadian Press

Economists continue to watch Canada’s housing market. According to the Canadian Real Estate Association, the average house price climbed to $388,553 in January, which is 9.5 per cent higher than it was last year. But how do Canadian cities compare to the rest of the world when it comes to the affordability of housing?

The rankings below are based on a city’s ‘Median Multiple,’ which looks at the median cost of a house compared to the city’s median household income in the third quarter of 2013.

10. London, U.K.

Median multiple: 7.3

International investment in London’s housing market has driven housing prices up and made it less affordable for moderate and low-income households. London’s median multiple puts its housing market into severely unaffordable territory; the median price of a home is 326,000 pounds ($546,310), while median household income is 44,800 pounds ($75,076), as of 2013. The good news is that the city’s median multiple dropped from 7.8 in 2012. London has the most unaffordable real estate market in the United Kingdom. The U.K. has a median multiple of 4.9, which is a slight improvement from last year’s 5.1 rating.

London’s overheated housing market has contributed to rising home prices in the U.K., which is expected to jump by seven per cent this year, according to Reuters.

9. Los Angeles, Calif.

Median multiple: 7.7

Los Angeles’ housing market, along with other cities in California, is causing concern; the median multiple has risen at more than three times the national rate since 2009. In December 2013, Los Angeles’ house prices increased a whopping 20.3 per cent from the year before. A recent study by RealtyTrac found that it would be cheaper to rent rather than buy a three-bedroom property in Los Angeles. According to the Demographia study, Los Angeles’ real estate is considered to be severely unaffordable and the city has made land use regulation more restrictive. The City of Angels is the fourth most unaffordable housing market in the U.S. with a median house price of $448,900 and a median household income of $58,300 in 2013.

8. San Diego, Calif.

Median multiple: 7.9

San Diego is another California city where foreign investment is driving up the city’s real estate prices. The median house price in the latter part of 2013 was $485,000, while the city’s median household income was $61,500. In just one year, from December 2012 to the same month in 2013, the value of San Diego homes increased by 18 per cent. While home supply remains at an historic low, Michael Lea, a real estate professor at San Diego State, expects that house appreciation will slow down to single digit increases in the next few months.

7. Auckland, New Zealand

Median multiple: 8.0

Houses in Auckland were less affordable in 2013 than the year before (its median multiple increased to eight from 2012’s 6.7 score). The city has been ranked severely unaffordable for all 10 years of the Demographia housing survey. The median house price in Auckland is $561,700 AUD ($506,990), with residents earning a median household income of $70,600 AUD ($63,724). Auckland saw a dip in home prices in January, but it’s predicted that the city’s housing market will be active during the first quarter of 2014. High housing prices in the city are also raising prices in the suburbs.

6. Melbourne, Australia

Median multiple: 8.4

Melbourne’s housing affordability has deteriorated — its median multiple increased by 0.9 points from last year. Housing in Melbourne, along with other major markets in Australia, has been severely unaffordable since the Demographia housing survey’s inception. In 2013, Melbourne’s median house price was $595,500 AUD ($537,498), while its median household income was $70,800 AUD ($63,904). Melbourne’s house prices rose by 3.2 per cent in January with the median price of a residential property reaching $553,000 AUD ($493,829), according to the Sydney Morning Herald. It’s expected that there will be a slowdown in Melbourne’s house prices due to higher levels of housing supply and deteriorating affordability.

5. San Jose, Calif.

Median multiple: 8.7

Yet another Californian city where housing affordability has deteriorated from the year before, San Jose’s median multiple was 7.9 in 2012. In the latter half of 2013, the median house price for a property in San Jose was $805,000, with residents in the city earning a median household income of $92,400. San Jose is among 11 California cities that have been deemed unaffordable. San Jose’s housing market will continue to perform well in 2014, according to the Urban Land Institute’s Emerging Trends in Real Estate 2014 survey. It’s expected that increased jobs and wages in this area will contribute to higher demand for property.

4. Sydney, Australia

Median multiple: 9.0

Sydney is home to the most unaffordable housing market in Australia and affordability continues to worsen. The median multiple rose from 8.3 last year to this year’s 9.0. The median price of a home in 2013 was $722,700 AUD ($652,309) with households earning a median income of $80,500 AUD ($72,659). Sydney has been deemed severely unaffordable for the last decade. While an American economist has predicted that Australia’s housing market will see a 50 per cent drop in values, Canada’s recent decision to axe the Immigrant Investor Program could drive more foreign investors to the Land Down Under, according to the Sydney Morning Herald. Foreign investors are one of the reasons cited for the rapid rise in housing prices.

3. San Francisco, Calif.

Median multiple: 9.2

San Francisco is considered to be the most unaffordable city in the United States, where an average school teacher is unable to afford property in the city, according to Bloomberg Businessweek. In 2013, the median household price for a home was $705,000 and the median household income was $76,300. Affordability has worsened since last year’s survey when the median multiple was 7.8. Within the last 10 years, 75,000 new people have made San Francisco their home, but only 17,000 new residential units were built, according to The New York Times. Over the next 25 years, 150,000 more people are expected to move into the city. With a large influx of well-paid Silicon Valley workers, the costs of real estate and rent have risen to new heights. And prices are unlikely to drop soon; San Francisco has been voted the top housing market expected to perform well in 2014, according to the Urban Land Institute’s Emerging Trends in Real Estate 2014 survey.

2. Vancouver, B.C.

Median multiple: 10.3

Vancouver’s affordability has worsened over the last year; the city’s median multiple is now in the double digit range, rising from 9.5 last year. This is the sixth year that Vancouver’s housing market has placed within the top three unaffordable housing markets in the world. In 2013, the median price of a house was C$670,300 and the median household income was C$65,000. In February, Vancouver broke a real estate record with the average cost of a detached house climbing to C$1,361,023, according to the Real Estate Board of Greater Vancouver. But some Vancouver real estate agents are expecting housing values to drop with the federal government’s recent decision to scrap the Immigrant Investor Program.

1. Hong Kong

Median multiple: 14.9

Hong Kong has the most unaffordable housing market in the world. Residents of the island buy the smallest houses for the least affordable prices; in 2013, the median price of a home was $4,024,000 HKD ($518,496) and residents earning a median household income of $270,000 HKD ($34,790). This is the fourth year that Hong Kong has claimed the top spot — housing affordability has worsened from last year’s 13.5 median multiple score. Since 2008, the price of real estate in Hong Kong has increased by 120 per cent, according to Reuters. But government policy to double a levy on properties worth more than $2 million HKD may successfully cool the market with prices dropping by 4.5 per cent since last March’s peak price, according to the South China Morning Post. It’s expected that developers will need to undergo steep competition to attract homebuyers this year, which could result in cheaper prices for property shoppers.

Source: Josephine Lim, MSN Money

Canadian home sales are expected to rebound this spring, with B.C. forecast to see the largest year-over-year increase and contribute the most to national sales activity.

The province is expected to see an 8.3 per cent increase in sales activity, according to the Canadian Real Estate Association, compared with a plus or minus three per cent increase in activity across the other provinces in 2014.

The national average home price is expected to rise by 3.8 per cent to $397,000 this year, with similar sized gains in B.C., Alberta and Ontario.

National resale housing activity has started slowly this year, partly because of stronger levels of activity recorded last summer and fall when buyers with pre-approved mortgage financing advanced home purchases before their lower pre-approved rates expired.

Home sales are expected to trend higher heading into the spring and be boosted over the second half of the year with a “widely anticipated pick-up in Canadian economic growth.” Sales are forecast to reach 463,700 units in 2014, up 1.3 per cent from a year earlier.

In 2015, national activity is forecast to edge up a further 1.2 per cent to 469,400 units. Affordability is expected to restrain activity in Canada’s most expensive markets, with annual sales forecast to decline marginally in B.C.

Source: Kelly Sinoski, Vancouver Sun

I recently came across this interesting article written by Ian Young who blogs for the South China Morning Post about immigration, property prices and Vancouver.

No one in Vancouver better understands the impact that rich immigrants have had on the city’s property prices than Professor David Ley.

Ley, holder of the Canadian Research Chair in Geography, literally wrote the book on the subject. Millionaire Migrants, published in 2010, is the definitive account of latter-day East Asian migration to Vancouver, describing how wealthy newcomers and their migratory patterns moulded the city.

It’s no surprise that he has been closely watching the fallout from the Canadian government’s surprise decision last month to terminate the 28-year-old Immigrant Investor Programme (IIP), which has brought tens of thousands of Chinese millionaires to Vancouver.

Oxford-educated Ley has particularly noted attempts to downplay the impact of the scheme and its closure on Vancouver’s sky-high property prices, which he said represented deliberate “suppression”.

“There are interest groups who are in denial and the moment that you or I make a suggestion [about the impact of rich immigrants on property prices] we are immediately racist and this is how the discussion has been closed down,” the University of British Columbia academic said.

“We are very polite in Canada and if anyone raises the red flag of racism then everyone shuts up. To my mind that is an irrelevance. The issue is investors, wherever they are coming from, creating an issue of affordability in the market.”

Ley’s previous research revealed the exceptional correlation between international immigration to Vancouver and the city’s property prices. He charted this from 1977 to 2002, with the results presented in eye-popping clarity on page 153 of Millionaire Migrants. A graph (above) of the two factors shows them moving in near lockstep.

Ley calculated the correlation at +0.94; that’s about as close to a statistical sure thing as you can get.

By contrast, “made in Canada variables” – interest rates, employment, domestic Canadian migration and rental vacancy rates – proved rather hopeless as price predictors. Interest rates, routinely touted as the most significant factor in Vancouver’s property boom, had a negative correlation, of -0.12.

During this period, prices peaked in 1995, then fell when migration from Hong Kong all but ceased. The drops that followed were concentrated in areas favoured by rich Hongkongers, such as wealthy Shaughnessy. “The overall prices dropped, although it was concentrated. In Shaughnessy, prices went down by 25 per cent … that’s a big drop,” Ley said. “But it was not as great across the market as a whole.”

Now for the big question: is the current Vancouver market similarly tied to mainland Chinese migration? And is the cessation of the IIP analagous to the way that Hong Kong migration under the scheme halted in the mid-1990s?

Sadly, Ley isn’t sure. “There are a number of similarities. It’s not perfectly the same,” he said. He notes that the Asian financial crisis coincided with the Hong Kong handover, exacerbating the sell-off in Vancouver as immigrants repatriated their funds to the SAR.

“The combination of the exodus [back to Hong Kong] plus the repatriation of funds led to significant sales and declines in the high-price property markets here,” he said.

Nevertheless, Ley takes issue with some observers who have sought to disregard the impact of the IIP on Vancouver prices. These critics point out that arrivals in British Columbia under the scheme (recently averaging 4,600 individuals, or 1,340 households, per year) are dwarfed by greater Vancouver’s 25,000-30,000 annual residential sales.

“The problem with that argument,” said Ley, “is that if that estimate of a couple of thousand does not include secondary migration from other parts of Canada then that is an underestimate.

“The other point: are people coming in buying only one property? Undoubtedly, it has been that property is the primary form of class mobility and property is a very easy investment to manage. I would question that these folk are only buying one property.”

Ley said the investor migration scheme also fuelled Vancouver’s market in indirect ways – namely, by helping word get out among China’s rich that the city’s real estate market was a convenient, friendly and profitable place to invest. If such word-of-mouth turns in the other direction, will prices do the same? That remains to be seen.

Lower Mainland real estate markets climbed modestly in the first two months of the year.

The Fraser Valley Real Estate Board (FVREB), which includes Surrey, White Rock and North Delta, reported a benchmark detached house price of $558,100 in February, up about 1.5 per cent from December and up 3.2 per cent year-over-year.

Townhouses were up 0.7 per cent to $296,700 from February of 2013 but the benchmark price of Fraser Valley apartments dropped 4.6 per cent from a year ago to $193,200.

The Real Estate Board of Greater Vancouver said its benchmark price for a typical detached house climbed 3.5 per cent from a year ago to $932,900.

Attached units were $458,300 – a 0.6 per cent one-year gain. Apartments were up 3.6 per cent over one year to $373,300.

The biggest one-year gains reported were for detached houses in Vancouver and South Burnaby, which are up more than seven per cent, while detached houses in North Delta and Langley were up six per cent.

The biggest recent drop was in Abbotsford apartments – their benchmark price is down 21 per cent from a year ago.

Other areas where prices have dropped include apartments in Squamish and Whistler – both down 13 per cent – and detached houses on Bowen Island and the Sunshine Coast, both down more than four per cent.

The most expensive market to buy a detached house remained the west side of Vancouver, where the benchmark price is $2.15 million, while the cheapest was Mission at $352,800.

It’s taking less time for a home to sell – an average of 51 days in the Valley.

Both real estate boards reported sales are up significantly, reflecting a typical jump in buyer interest as spring approaches.

Source: Jeff Nagel – Surrey North Delta Leader

The number of homes sold in Vancouver increased 44 percent in February compared to the previous month, after a monthly drop reported in January.

A total of 2,530 homes were sold in February, up from 1,760 sales in January, according to the Real Estate Board of Greater Vancouver.

“Home buyer demand picked up in February, which is consistent with typical seasonal patterns in our housing market,” said Sandra Wyant, REBGV president. “We typically see home buyers become more active in and around the spring months.”

Last month, the Canadian Real Estate Association reported the fifth consecutive decline in monthly sales for the country, citing weather conditions as a detractor.

Today’s report shows home sales grew 41 percent from 1,797 sales in February 2013. The February figure was just 17 sales away from the 10-year sale average for February of 2,547.

The number of listings for all property types totaled 4,700 in February, dropping 2.8 percent from a year ago, and declining 12.1 percent from listings in January. February’s listing count was less than the region’s 10-year new listing average for the month.

“With the market continuing to perform at a steady, balanced pace, it’s important for home sellers to ensure their homes are priced correctly for today’s conditions,” Ms. Wyant said.

The benchmark price for all homes in Metro Vancouver is $609,100, increasing 3.2 percent increase from a year ago.

More from the report:

* Sales of detached properties in February 2014 reached 1,032, an increase of 46.6 percent from the 704 detached sales recorded in February 2013, and a 6.3 percent decrease from the 1,101 units sold in February 2012. The benchmark price for detached properties increased 3.5 percent from February 2013 to $932,900.

* Sales of apartment properties reached 1,032 in February 2014, an increase of 35.8 percent compared to the 760 sales in February 2013, and a 1.2 percent increase compared to the 1,020 sales in February 2012. The benchmark price of an apartment property increased 3.6 percent from February 2013 to $373,300.

* Attached property sales in February 2014 totaled 466, an increase of 39.9 percent compared to the 333 sales in February 2013, and a 9.9 percent increase from the 424 attached properties sold in February 2012. The benchmark price of an attached unit increased 0.6 percent between February 2013 and 2014 to $458,300.

The million-dollar club isn’t so exclusive in Greater Vancouver, where the average price for single-family detached houses sold has soared to a record high of more than $1.36-million.

Prices surged as total residential sales climbed to 2,530 last month for detached homes, condos and townhouses, up 40.8 per cent from volume of 1,797 properties changing hands in February 2013, according to data released Tuesday by the Real Estate Board of Greater Vancouver.

Detached properties have soared in value, rising to an average of $1,361,023 last month, an increase of $139,986, or 11.4 per cent higher than $1,221,037 a year earlier and smashing the previous high of $1,287,213 in January of this year.

But the board cautions that average prices give a skewed picture of the market because sales of many high-end homes boost the figures to well above other transactions that are considered more typical.

The board prefers to focus on the benchmark index price, which strips out the most expensive properties. On that measure, detached index prices reached $932,900 last month, up 3.5 per cent from February, 2013. On Vancouver’s West Side, the detached index price jumped 7.2 per cent to more than $2.14-million.

Over all, the index price hit $609,100 for Greater Vancouver detached houses, condos and townhomes sold on the Multiple Listing Service last month, or a hike of 3.2 per cent over the past year.

Sales volume last month was slightly lower than the 10-year average in what is shaping up to be a balanced market for sales and active listings in 2014, said board president Sandra Wyant.

The B.C. Real Estate Association noted that Ottawa’s shutdown of the federal immigrant investor program last month could reduce sales volume for the most expensive detached homes.

Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Ltd., said he doesn’t think prices will change dramatically over the next several months, as long as interest rates stay low. If there is any slide in the housing market, it will be slow because prices are “sticky on the downside” due to the lack of major economic setbacks such as a huge spike in unemployment to force people to sell, he said.

The attraction of Vancouver remains high, including for wealthy immigrants from China, Mr. Scarrow said.

Greater Vancouver includes the City of Vancouver, the municipalities of West Vancouver and North Vancouver, and also suburbs such as Burnaby, Richmond, Coquitlam, Port Coquitlam, Port Moody and New Westminster.

In the Fraser Valley, which includes the sprawling and less-expensive Vancouver suburb of Surrey, residential sales climbed to 1,102, up 20.7 per cent from February, 2013. The index price for detached homes reached $558,100, up 3.2 per cent from year earlier. Average prices for detached properties rose 9.7 per cent to $644,574 in the Fraser Valley.

The index price for detached houses, condos and townhouses was $428,100 in the Fraser Valley last month, or 1.3 per cent higher than in February, 2013. The average price for those three categories reached $519,082 last month, or a 10-per-cent hike from $471,767 a year earlier.

Source: Brent Jang, The Globe and Mail

The world’s wealthiest may look at expanding their real estate portfolio as they may use sub-orbital space travel to reduce travel time, believes Knight Frank.

More than 70 wealthy individuals, with a combined wealth of over $200 billion, are investing in space research projects, which includes asteroid mining to sub-orbital space travel, the global real estate consultancy said ahead of the March 5 release of its Wealth Report 2014.

“By travelling outside the Earth’s atmosphere, gravitational forces will allow spacecraft to travel at over 4,000 miles per hour, so breakfast in Mayfair could easily be followed by lunch overlooking Sydney Opera House,” says Knight Frank’s Head of Research Liam Bailey.

The consultancy believes that space travel will have impact on global luxury property markets, with ultra high net worth individuals (UHNWIs) will grow their luxury property portfolio.

Though the Wealth Report’s Global Cities Survey confirms, London currently wins over New York as a global wealth hub because it is more convenient for African, Middle Eastern, Russian and European UHNWIs.

But this convenience premium could be noticeably reduced if Richard Branson’s Virgin Galactic succeeds in making his vision for sub-orbital travel a reality.

Transcontinental travel – London to Sydney – a distance of 10,553 miles will be completed in 2.2 hours from the current 21 hours. Dubai to Vancouver, a distance of 7285 miles that currently takes a flight time of 14.5 hours, will be cut short to just 1.5 hours, says Knight Frank.

Talking to The Wealth Report, entrepreneur Richard Branson said: “New commercial space will be one of the most exciting investment sectors in the next 20 years, driven by the initial successes of companies like Virgin Galactic.

“There is already some good evidence that the leading players are receiving high levels of interest from the mainstream investment community and attracting valuations that reflect confidence in future growth and opportunity.”

In 2013, Virgin Galactic spokesperson told Emirates 24|7 that it expects thousands will take the suborbital spaceflight from Abu Dhabi.

“If approved, Virgin Galactic intends for the UAE spaceport to be the first international commercial spaceport, contingent on US regulatory approvals. The UAE spaceport will be a very desirable destination attracting people from all over the world to experience the unique view of earth from above the UAE,” a spokesperson said.

Currently, over 600 people from more than 50 countries have placed reservations. Celebs including Angelina Jolie, Brad Pitt and Ashton Kutcher are among those said to have bought $200,000 tickets.

Ticket price will play a critical role in defining the impact on real estate.

“If this is a technology for billionaires only, then property market disruption might be limited to a wider choice of global lunch options. But if the price drops to allow the merely very wealthy to access sub-orbital flights, then every assumption about current property prices will have to be reconsidered,” Bailey said.

Knight Frank has rated Dubai among the most sought after real estate destination in the world. In 2013, over 140 foreign nationalities, which includes Americans, Canadians and Europeans, invested Dh116 billion in the Dubai real estate market.

Source: Parag Deulgaonkar, Emirates 24/7 News

The average cost of a Canadian home hit a record high of $388,553 in January. This price is 9.5 per cent higher than last year. The average cost of a home in cities such as Toronto and Vancouver rose to $526,528 and $606,800. Over the last ten years Canadian real estate prices have soared 84 per cent. With prices sky-high in some cities, the following tactics could help make buying your first home just a little bit easer.

Get a mortgage pre-approval before you start house hunting.

Before you start visiting open houses or checking out properties with a real estate agent, it’s important to visit your bank to see which houses you can afford. This ensures you’re shopping within the correct price range. Many people will need to take out a mortgage to buy property, but the amount you are eligible for is based on multiple factors including credit rating, household income and monthly expenses. Before you begin property hunting, visit a financial institution. This way you’re able to hold a competitive rate for between 30 to 120 days.

Buy a home with your parents or a buddy.

Young adults are increasingly relying on help from family members to buy a home. About 27 per cent now expect it. In a hot housing market, real estate agents have seen ‘gift letters,’ which detail the money a family member will contribute to assist them with mortgage approval, or simply thousands of dollars in hard cash. If a family member decides to loan the money rather than give it as a gift, parents should establish payment requirements in a legal document to ensure that everyone is satisfied.

Buy a home in a more affordable city.

House prices in Vancouver and Toronto are climbing to unaffordable levels for many people, but this doesn’t mean you have to live in these cities. Near Toronto, the housing markets in Ajax, Brampton, Milton and Mississauga are heating up. These are popular placees to buy a bigger lot, but potential homebuyers need to account for other costs (like gas and car insurance), as well as commuting times should their work remain in Toronto.

Buy a home that you can use as an income property.

You could buy a property you can live in but also split into a rental unit. The best outcome is if your renter’s payment covers your mortgage costs, but there are some important points to consider. First, you need to determine how comfortable you are living in close proximity with your tenants. For example, are you comfortable having a boarder live down the hall, or would you prefer to live on separate floors and use different entrances? Many people would prefer a semi-detached home with a separate entrance, bathroom and kitchen. If these don’t figure in the property you’re eyeing, you’ll need to budget for renovation costs.

Negotiate your house price and insurance.

Some people don’t feel comfortable negotiating, but it can save you a lot of money. First, the more information the better. Research the value of other houses. Chances are an identical house has been sold in the neighbourhood and you should check that property’s value against the one you’re considering. Understand why the seller is selling and shape your bid towards his or her plans. Also, understand that while the size of your bid is important, it isn’t always the deciding factor because some homeowners care how the new owner will treat the property.

When you purchase insurance, there are three types to consider: basic, standard and comprehensive. An independent broker can help you get the best rate and if you bundle your auto and home insurance with the same company you could receive up to a 15 per cent discount.

Tap into your RRSP for first-time home buyers.

First-time homebuyers can withdraw $25,000 from their RRSP as a part of the federal government’s homebuyers plan. If you’re buying a home with a partner, you can both take out $25,000 from your individual plans. If this equals a 20 per cent down payment, you can avoid mortgage default insurance, which tacks on several more thousands of dollars to your mortgage. If you do tap your RRSP, there is a tax loophole that lets you receive up to $20,000 in tax refunds. But one drawback with using your RRSP is that you must repay the amount you withdraw within 15 years or you will face a penalty based on your personal income tax rate.

Buy a smaller space.

One in eight households lives in a condominium. With the gap between the price of a house and a condo hitting record highs in Toronto, more families are becoming condo dwellers. The average size of a home in Canada was 2,300 square feet during the mid-2000’s. But that number has now dropped to 1,900 square feet and will probably keep shrinking. The size of your family will determine the size of your home. While you may have grown up in a single detached home with a backyard, in housing markets such as Vancouver and Toronto it’s important to manage your expectations.

Budget for your closing costs.

Tapping into a mortgage offers homeowners leeway in paying off their property, but along with your down payment there are other upfront closing costs you need to budget for. The Canada Mortgage and Housing Corporation suggests that you set aside an additional 1.5 to 4 per cent of your property’s purchase price to account for closing costs. Closing costs include a land survey that ranges from $1,000 to $2,000, an independent home inspection costing from $350 to $600, legal fees for a title search and paperwork that run to about $1,000, and a land transfer tax that varies based on your city and GST/HST.

Source: Josephine Lim, MSN Money

Real estate is making British Columbian families richer, according to Statistics Canada’s latest report on financial security, though that is not necessarily making them better off.

British Columbia saw the median family net worth, which measures total assets minus total debts, rise 128 per cent between 1999 and 2012 to $344,000 from $150,700 13 years previously — the highest among provinces in Canada compared with the national average of 78 per cent to $243,800 from $137,000 over the same time period.

“From a financial planning perspective, that (gain) is irrelevant,” said Ian Black, a registered financial planner and principal with Vancouver firm Macdonald Shymko & Co., “unless you’re looking to get out of the market and (move) to another jurisdiction to release some of that equity.”

Black said the difficulty, particularly in the Lower Mainland, is that even if homeowners sell to downsize, they will still be looking to buy in an already expensive market.

“You’ve got to live somewhere,” he added, and “that (increase in property value) isn’t going to generate any higher income.”

The report did not contain a demographic breakdown for B.C., but on a national basis found that the families with older income earners saw bigger gains in net worth than those where the top income earner was younger.

However, those family units have also accumulated more debt: a total of $1.34 trillion in 2012, up from $864.6 billion in 2005. Most of the debt — about $1 trillion — has been used to finance home purchases. All figures are in inflation-adjusted dollars.

“That is a very significant increase … after-tax disposable income has increased by 10 per cent across all income brackets,” said federal Employment Minister Jason Kenney.

However, the high prices are also a potential problem, according to economist Andrew Jackson of the Broadbent Institute, because prices are widely projected to moderate or even fall in the next few years.

“The big question is if and when we get a housing price correction, individuals will still be holding the debt and that is a cause for concern,” he said.

High prices are also a concern in B.C., particularly the Lower Mainland, because the rising value of real estate assets can come at the expense of other savings, said James Cripps, a chartered financial analyst and certified financial planner with Vancouver Financial Planning Consultants Inc.

“What I’m seeing, actually, is more of people taking on mortgages so big they’ve finally figured out they won’t pay them off in their lifetime,” Cripps said.

So they focus on paying down their mortgage so that they can eventually downsize without debt, “and they’re not saving in RRSPs or (tax-free savings accounts) as a result.”

“From a risk diversification point of view, it’s not a great thing, especially when you consider that affordability or real estate relative to median income is right off the charts,” Cripps said.

North Vancouver realtor Helen Grant said her clients looking to downsize base their decisions on “the margin,” meaning whether or not they are able to move to a smaller home and bank some money.

“They may have purchased their home for $200,000, they turn around and sell for $1 million, then they’re sitting in a market that’s already elevated, where do they put their money?” Grant said.

Many choose to “follow grandchildren” or move to slower-paced communities on the Sunshine Coast, Vancouver Island or Okanagan, she added.

To others, depending on age and circumstance, Grant says she advises to sell and rent, because they are unlikely to see the same gains in condominium price increases that they’ve experienced in single family homes.

The average single family home price rose 221 per cent between 1999 and 2012 in the region of Metro Vancouver covered by the Real Estate Board of Vancouver, compared with 148 per cent for the average condominium.

However, Cameron Muir, chief economist for the B.C. Real Estate Association, said Metro Vancouver condominium prices have seen almost no gains since 2010.

Source: Derrick Penner, Vancouver Sun