Tag Archives: home ownership

How Property Investment can help you reach Findependence (Financial Independence)

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By Rebecca Lee

Special to the Financial Independence Hub

Financial Freedom is a way for anyone to escape the grind of the 9-5 work life to live the life they desire without relying on anyone else for money. Almost all of us trade our time for money to pay our bills, eat, travel and live in general. Without trading our time, it would be impossible to pay for the things we need and want. Many of us are stuck doing this until we have just enough to retire late in life.

Those who find financial freedom, AKA Findependence, do so by acquiring assets that generate wealth on their own. As the saying goes, “don’t work for your money, make it work for you.” One of the most popular types of these assets is real estate. Here’s how you can achieve financial freedom through real estate investment.

Have a strategy

Financial freedom, what it is and how to achieve it is different for everyone. Everybody has their own needs and wants and will require a different amount of cash flow to live on. Therefore, you must have a personalised strategy based on your income, savings and liabilities.

Without a plan, you won’t know what opportunities to take advantage of and what ones to pass up on. A strategy that’s designed for you will help take the emotions out of your decisions, avoid making mistakes and minimise risk.

Get the mindset

Wealth creation and investing requires a certain mindset to be successful. A lot of people are selling “Get rich quick” schemes but unless you get super lucky, this is not a realistic approach. Real estate in particular is a long-term investment game.

Real estate investors understand that their wealth will grow not overnight, but over years of gradual growth. Understanding this and knowing yourself enough to be able to commit to such a long-term plan is key to reaching financial independence. Investing in real estate isn’t as simple as buying property and waiting for its value to grow. Continue Reading…

Could the First-time Home Buyer Incentive be used in Canada’s largest markets?

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

When the federal government announced in March that it would be wading into the shared equity mortgage market in efforts to improve home buyer affordability, it stirred up some controversy.

The program, called the First-Time Home Buyer Incentive (FTHBI), was teased in the budget as a ground-breaking approach to helping buyers get into the market by providing interest-free down payment loans of 5% for resale homes, and up to 10% on brand-new builds.

In exchange for the upfront funds, which are designed to reduce the overall size of the mortgage and monthly payments, the Canada Mortgage and Housing Corporation (CMHC) will take an equity percentage the homes’ value, which must be paid off when either the mortgage matures, or the home is sold.

This paid-back amount fluctuates along with appreciation and depreciation in the market. For example, let’s say the CMHC provides a 5% loan of $25,000 for a home purchase of $500,000. The homeowner sells the home several years later, and its value has increased to $550,000. The homeowner would then need to pay the CMHC back $27,500 to reflect 5% of the increased value of the home.

Critics say FTHBI too restrictive to be effective

Mortgage analysts have called the effectiveness of this equity sharing program into question, as the total amount owed to the government could be significantly more than what was loaned in the first place, especially in a market that experiences rapid price growth.

However, the most contested features of the FTHBI are its mortgage and purchase price restrictions, which critics say render the program useless in markets like Toronto and Vancouver where home buyers arguably need the most help. Continue Reading…

How did the Fair Housing Plan impact home prices?

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

The past two years have been tumultuous times for the Ontario real estate market. Not only have prospective home buyers had to contend with the nationally-implemented mortgage stress test, but a round of policies introduced at the market’s peak have contributed to a vastly different price environment in some of the province’s municipalities.

Called the Fair Housing Plan, this 16-part set of measures was introduced by the former Liberal provincial government with the intention of rebalancing supply and demand as well as out-of-control price growth. It was announced in April 2017, prompted by a year-over-year home price spike of over 30% in the Greater Toronto Area.

New rules spooked sellers

The tangible measures included a 15% foreign buyers’ tax as well as beefed up rent controls, the resulting market chill was likely psychological. Sellers, concerned they had missed the market’s price peak, reacted by flooding MLS with listings while buyers waited to see if the opportunity to get into the market at a lower price point would present itself.

That combination, along with the impact from the stress test — which requires borrowers to qualify for a mortgage roughly 2% higher than the actual rate they’ll get from their bank — effectively led to a housing correction. (Text continues below the ad)

However, in the two years since the measures were introduced, the dust has largely settled in markets across the province; though some cities have weathered them better than others, according to new data from Zoocasa.

Some markets harder hit than others

The study, which compares average sold home prices in April 2017 to the same month this year, reveals which markets have sustained an overall drop in home values, while others have actually continued to appreciate. It also examined the sales-to-new-listings ratio in each municipality, which is a metric used by the Canadian Real Estate Association to determine the level of competition in the market. A ratio between 40 and 60% can be considered a balanced market, while below and above that threshold indicate buyers’ and sellers’ conditions, respectively. Prices were sourced from various real estate boards across the province.

Of all the Ontario housing markets, those located in York Region have absorbed the brunt of the new measures, with steep price declines and a considerable change in buyers’ conditions over the two-year time period.

Home prices in the city of Newmarket, for example, have plunged -30% over the 24-month period, dragging the average below the $1-million mark to $725,710. That decline was prompted by a -31% drop in sales; however, as the supply of new listings also declined by -42%, market conditions actually tightened to a ratio of 45% from 37% last year, well within balanced territory, despite the lower price point.

The City of Aurora also saw prices fall by -30%, down to $888,387, following a -35% drop in sales and a -30% drop in new listings, leaving buying conditions unchanged at a ratio of 42%. The community of Richmond Hill also experienced a significant price drop of -27%, though still remains at a high-priced $1,016,216. It remains in a sluggish buyers’ market with a ratio of 38%, down from 40% in 2017.

Prices for Oakville homes for sale were also among the most affected, dropping -18% over the last two years to an average of $1,019,751. However, the market remains balanced with a ratio of 46%. However, homes in some municipalities, such as on the Hamilton MLS and in the Mississauga real estate market, were impacted by a far lesser extent; both cities saw values fall just 4%, to $528,286 and $767,283, respectively. In contrast, conditions are more favourable to sellers in these markets, with ratios of 63% and 59%.

Check out how prices and market conditions have changed across Ontario between April 2017 and 2019 in the adjacent infographic.

Penelope Graham is the managing editor of Zoocasa.com, a real estate resource “that uses full brokerage service and online tools to empower Canadians to buy or sell their home faster, easier and more successfully.”

 

 

Retirement #2 priority but four in ten Americans don’t see it happening

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Retirement is a close second to home ownership, according to a LendEDU survey of American saving priorities

While having enough money saved for Retirement is narrowly behind buying a home, more than a third of Americans don’t expect they’ll ever be able to retire, according to a survey released Tuesday from LendEDU.com.

Retirement saving was cited by 19% of 1,000 respondents, versus 20% prioritizing “buying my own house or apartment.” Paying off credit-card debt was cited by 14% and building an emergency fund by 10%.

While there was only a minor lack of confidence about paying off credit cards and building an emergency fund, 17% don’t believe they’ll ever become homeowners and but almost four in ten Americas (39%) don’t believe they’ll ever be able retire.

Of those doubting their ability to retire, 52% were over age 54, 30% were between 45 and 54, and 15% were 35 to 44.

As for emergency savings, 33% said a major bill resulting from an injury would destroy their savings and therefore their long-term financial goals; another 14% cited some form of debt that could quickly get out of hand. However, 28% felt “relatively secure” and did not believe their financial goals could be derailed.

Secondary priorities

After home ownership and retirement, the most cited financial priorities were some form of getting out of debt: 14% cited paying off credit-card debt, 7% paying off student-loan debt, and 4% cited paying off other forms of debt apart from credit cards or student loans. 6% answered “Building my credit score,” 5% wanted enough saved to move out of their parents’ homes and rent a home or apartment, 4% said “Buying a car,” and 3% wanted to start a business.

1% wanted to invest in real estate, another 1% wanted to buy a second home and yet another 1% wanted to buy a second or third car. 3% want to “create a retirement account” and 2% want to “invest in the market outside my retirement account.”

Money a bigger priority than Love?

Of the 37% who were not currently in a long-term relationship, 72% were more focused on their financial targets, versus a minority 23% who prioritized finding a romantic partner. (The rest preferred not to say). The survey sees this as a “glass half full” finding: “It is good that Americans are quite serious when it comes to realizing their personal finance goals. But, on the glass empty side, sometimes one’s finances can’t buy happiness, or in this case love, and it is always important to understand what is truly important in life.” Continue Reading…

Just how steep is housing affordability in Toronto and Vancouver?

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

It’s no secret that in order to purchase a house in Toronto or Vancouver, you’ll need to have considerable financial assets; however, a new study from Zoocasa reveals just how elite income earners need to be in order to afford the benchmark single-family home in these cities.

According to the data, which is based on benchmark home prices sourced from the Canadian Real Estate Association as well as income tax filings from Statistics Canada, a Torontonian buyer must be within the top 10% of earners to afford a house priced at $873,100, while only Vancouverites within the top 2.5% could do so for a home priced at $1,441,000.

The numbers also show that prices for entry-level housing, such as condos, remain out of reach for many; buyers must be within the top 25% of income earners to afford the benchmark unit, which costs $656,900 in Vancouver and $522,300 in Toronto, respectively.

Affordability is greater in Southern Ontario, Prairies

However, the study also highlights the comparative affordability in other cities; several of the secondary markets in Ontario, as well as in the Prairie provinces, are much more accessible in terms of housing prices.

For example, those interested in markets within proximity of the GTA, such as Waterloo real estate, need only be within the top 50% to purchase a condo priced at $320,857, though houses are still only in reach for those within the top 25%, at a benchmark of $523,720.

London is also a reasonable alternative for first-time buyers; those looking to purchase a house priced at $426,236 must be within the top 25%, though condos for sale in London are accessible to the top 50%, at $307,359.

Regina takes top spot for affordable Real Estate

Continue Reading…