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Market Moderation – Solid Returns Continue

As the market balanced, the media focused on the negative stories about real estate. It’s nothing new.  Looking ahead, CREA forecast that the national average price will increase by 2.7% to $508,400 in 2019. This outlook reflects modest average price growth in several provinces and the return of the normal seasonal patter for sales and average prices in other provinces. 

The media is presenting this as an awful. But let’s pause for second. A 2.7% gain on a relatively risk free investment, that you can live in and build equity on, is fantastic. Especially considering that most of us don’t buy homes with cash, we use a down payment. We ‘leverage’. 

Let’s say a homes average price only increased by 2% a year.

A $50,000 down payment on a $500,000 homes that grows at 2% a year delivers an annual gain of $10,000 because of leverage. That’s a 20%  return on the downpayment. As you move up, a $300,000 down payment on a million dollar home at 2% growth delvers $20,000, still a 6.5% gain.

Return on investment is the bonus of home ownership. With the Bank of Canada nudging it’s key rate up to 1.75% on Sept. 24, some expect rising interest rates will hold price gains in check. Plus, there is long term equity growth from the amortizing a mortgage, even if there’s only a modest inflation of prices. There is no amortization from rent cheques. 

Like at investment, buying or selling decisions want solid information, good plans and terrific representation. A solid negotiator. Smart marketer. Just a phone call away. 

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