The day before the last Bank of Canada interest rate announcement CP24 news reported that 80% of economists now think the BofC would be raising the bank rate the following day with most agreeing by 0.25 basis points. Others felt 0.50 basis points would be the outcome and the small minority thought no rate adjustment would be taken. I make mention of this point for two reasons: 1) to highlight that opinions varied widespread with economists (most of whom work for competing banks) on what path the BofC would be taking on a topic that receives much heated debate. And 2) that mere days leading up to the rate announcement the forecasts by said economists were all over the map on what the outcome would be!

What does this have to do with a housing bubble you might be thinking? Well for one thing, that it is common practice for industry professionals to publish conflicting opinions on if Canada will experience the U.S. style housing bubble or a separate version of its own bubble. There are many mixed theories on this but most people think Canada’s housing values will not go down in flames like many parts of the U.S. have. Point being just because this topic gets debated to the cows go home doesn’t mean its valid in all markets across the country.

In the central and central/east markets of Toronto that I specialize in I have assisted dozens of buyers across all categories (first time, move-up, trophy home etc.) in the past year navigate the murky waters of the oft discussed bubble tidal wave. And in all cases here is what I have come to know:

• that although banks allow for up to 35% of income to cover mortgage and property taxes the extremely high majority of my clients are probably not exceeding 25%. Plain english this means they are not purchasing property at the top end of the range that they can comfortably afford. I myself purchased in 2009 at 20%.
• interest rates and where are they going? A good guess would be up eventually but this necessarily doesn’t spell disaster. There are so many different mortgage plans and options out there (and new ones continue to enter the market) that I can’t keep track of all them! Align yourself with a reputable mortgage planner or banker (reputable doesn’t mean the one who will give you the cheapest rate or free swag) who will not only guide you through the maze of products but most likely save you thousands of dollars in the process! My mortgage planner has been pretty much bang on with where the market is going for the past 10 years at least (he will probably say forever) with interest rates and he has saved me lots of money. But his value goes further than telling me he can get me the lowest rate. How to structure my mortgage, do we need to consider tax implications, what’s my overall financial plan? This information is valuable to me maybe more than what rate I pay regardless if I have bubble concerns or not.
• purchase good property and for fair market value. Yes market value will fluctuate up and down over time. You make your money with your time in the market, not by timing the market. I point out all potential pitfalls to my buyer clients upfront before they are considering putting in an offer. Just because someone else purchased a property and is now selling it doesn’t mean its a good property. There are too many factors to list here on what to consider but “buyer beware” is always prevelant when buying real estate. Bottom line do yourself a favour and let a reputable agent navigate this jungle for you. I promise you I could point out a thing or two about a property most people don’t even consider.

Simple in principal but if you add buying within your affordability range, a well planned out mortgage strategy with purchasing good property at current market value I’m willing to wager bubble or no bubble you will sleep soundly at night. Regardless of what the “experts” are predicting will happen. I’m one of them and I know I do!