Vancouver is a fascinating city with a population of over two million people, many of them immigrants. Surrounded by mountains and the Pacific ocean, this Lower Mainland city has amazing weather and beautiful scenery. As a result, several Canadians are considering moving to Vancouver from other cities, especially for retirees who want to sit back and enjoy the rocky mountains while living in much milder weather compared to the rest of Canada.
However, because of its unique nature, the Vancouver real estate market poses a big obstacle for anyone planning to move there, because of its unique nature. Here are some vital questions to be answered about the Vancouver real estate market:
1. Is it Really Overpriced?
The Vancouver real estate market is generally considered to be overpriced, as the prices of real estate don’t match the average yearly income of Vancouver residents. Here’s why Vancouver’s house prices are so high: foreign money.
Immigration driven population-growth and foreign investors are directly correlated with rising prices of real estate in Vancouver because many of the home buyers in Vancouver typically have an international source of income not necessarily indicated in their tax forms.
Many of these home buyers also fall under the category of ‘circulatory migrants’, which means they invest in Canadian property while working offshore. With this documented flow of money from Asia into Vancouver, there is notable price growth and as long as this doesn’t change, prices in Vancouver are not likely to decrease- instead, they’d rise in the near future.
2. How Much Money Should You Budget for Buying a Property in Vancouver?
The Greater Vancouver area has a range of property prices from between $700k in Surrey and $2.2M in West Vancouver. However, the average property price in Vancouver is over $1.3M.
What this implies is that if you would be going for an average property in Vancouver valued at over $1M, a 20% down payment of over $200,000 is needed for property purchase.
In retirement, you don’t need a large property, so consider downsizing to an affordable condo apartment which also helps you manage less stuff. In comparison to most Canadian provinces, Vancouver affords you the opportunity of carrying out more outdoor activities and this is certainly another reason to consider it for a retiree who wants to enjoy his/her environment.
3. How Much Down Payment Should You Make?
Most homes will require you to make a down payment of at least 20% but for properties less than $1M you can provide less down payment. However, if you make a payment of less than 20%, you would have to pay a fee for CMHC insurance. For this reason, it is wise to make a larger down payment by using part of your RRSP, selling other assets like your current home etc. to finance as much as a 35% down payment on your new home to get the lowest mortgage rate.
Note: Many finance bloggers such as SavingsHippo have predicted that interest rates are expected to be lowered soon by central banks; which means the mortgage rates may decrease too.
4. How Important is Getting a Top Local Real Estate Agent?
Very important- especially if you don’t know a lot about the Vancouver real estate market. Getting an agent who is conversant with different neighborhoods in Greater Vancouver is vital to your choice of a good property.
An excellent online platform where you can find the best local Vancouver real estate agents is WOWA, since this platform allows you to compare the real estate agents’ experience and even their commissions.
Choosing to buy a property on your own, without the aid of a knowledgeable real estate agent can be catastrophic as you might end up with an overvalued property, or in a neighborhood that is poorly suited to your needs.
5. What Should You Know About Mortgage Rates Before Your Purchase?
Before buying a property in Vancouver, you should shop around for the lowest mortgage rates possible as this can make a huge difference on your eventual total payment for a property. Getting lower mortgage rates are more important for bigger, more expensive properties as the interest payments on these properties are larger.
How do you get good mortgage rates? You need to shop around and compare the mortgage rates of different mortgage lenders. You can check the best mortgage rates for a 5-year fixed in Canada here. Also know that there is always room for negotiation even if you think you’ve landed a good deal. Online platforms that discuss current mortgage rates are very helpful guides in choosing the right mortgage lender with the best rates.
Metro Vancouver is likely to experience continued population growth especially from the influx of immigrants and visa students and this has solid impacts on the Vancouver real estate market. Since Greater Vancouver is a landlocked area and new houses aren’t being built, house prices will keep surging. However, with the right local realtor, shopping for low mortgage rates and making a sizable down payment on your house, you can land a choice property in Vancouver.