This week is all about Halloween festivities and spooky decorations bedecking the front porches of homes across the province. But what seems to be scaring many of those 小蓝视频 homeowners is the alarming state of the current real estate market.
While some – mostly non-homeowners – are rubbing their hands with glee at the prospect of real estate prices coming within their grasp, others are facing the reality that at least some of their home equity is vanishing like a ghoul in the night. Poof!
Although values at the top end of the real estate market are disintegrating and regular detached homes sliding, condo and townhome prices are still largely hanging on, white-knuckled, to their record heights. But the market may soon have other ideas and also loosen even those grips, finger by finger.
What should worry you is relying on your home equity to fund your retirement, if you haven’t otherwise been saving sufficient funds for your non-income-producing golden years. For those who are about to retire and planned to free up retirement cash by downsizing from a house to a condo, you’re looking at a much smaller windfall than you might’ve been planning for these past few years. Same goes for retiring boomers who were planning to cash it all in and live off their home equity in Panama.
These people are not few. A found that 43 per cent of 小蓝视频 residents aged 54 to 72 plan to downsize their home to help fund their retirement, and more than a quarter of the province’s boomers have more than half of their retirement funds tied up in their home or other real estate.
Aside from that kind of over-reliance on paper equity, most homeowners have little to fear – as long as you’ve been smart. Hopefully you have enough of a financial buffer that the current and imminent interest rate hikes aren’t going to hit you too hard (that’s what the mortgage “stress test” is designed for, after all). As long as you can pay your mortgage each month, and have enough equity to refinance when that mortgage comes up, and don’t need to cash in your equity, you’re can shrug off those worries.
That’s also true of those who are using a buy-and-hold investment strategy to produce income, whether now or for their retirement years. It’s not a good idea to rely on uplift in value, as prices can change – but if you’re simply renting out a property for the foreseeable future and not planning on selling it, you don’t need to fear a market correction.
Where I'm based, in Metro Vancouver, we’re beginning to see the return of the sub-$1 million detached house, reappearing like ghost ships through the fog of listings. But for the gleeful hand-rubbers hoping this will give you a chance to get into real estate, you might have more to worry about than you think, unfortunately. With interest rate rises and the mortgage stress test making home ownership more expensive to get into, this could cancel out any gains that have been clawed back (see my ).
It's a scary prospect, but one that has, for me, always been worth it. My motto on real estate buying and home ownership?
Happy Halloween to you all.
