Rising interest rates: Hold, fold, walkaway or run? With peak summer behind and back to school looming, families are finally getting back to their regular routines. Heads-of-households can finally ponder their next big moves. Many wonder if it’s better to buy now into a market with higher prices and lower interest rates or waiting to buy into a future market with slightly lower prices but slightly higher interest rates. Sounds like a wash. Is it potato-potato… Or is there a difference?
According to PwC’s recent report “Emerging Trends in Real Estate in 2018,” condos are poised for success this year. Single family homes are also expected to yield modest growth. In Montreal, multi-purpose condo projects and rental complexes are seeing success, and are expected to dominate the market in the upcoming year. Unsurprisingly, the senior market is something to look out for. More than half of PWC’s survey interviewees recommended investing in the “age-restricted housing” sub-sector.
With the economy heating up, the Bank of Canada will raise interest rates to curb inflation. This will make borrowing more expensive and mean that fewer people will be able to borrow. Housing prices will drop because there are fewer overall shoppers.
There are a couple of ways this scenario could play out:
Lots of people are talking about buying smaller houses so when the rates go up they can actually continue doing there other activities. Smaller house but bigger life style!
I personally think that what we have seen for the last few years is something that we will not see again soon. Taking advantage of it is clearly a good option!
Even if you do all the calculation at a 5%, 6% or even 10% and factor in dropping house prices, the fact is that you should take advantage of what you have now because the chances of seeing rates like this again during any of your lifetimes are slim to none.
All told, Montreal still ranks as the third city in Canada for investment prospects, after Vancouver and Toronto.
If you have any questions or if you are looking for some guidance in selling or buying a property, please do not hesitate to contact me.