How Far Should Canadians Stretch To Buy Homes in 2015?
According to The Globe and Mail, the Canadian home market has evolved into outrageous bidding wars. The recent Bank of Canada rate cut is emboldening homebuyers and enticing them to capitalize on the current market rates. Toronto homes are regularly going through two, three or even four rounds of escalating bidding, while properties selling for six figures over asking price has become commonplace.
The Canadian Press has fueled the market by debating whether individuals should even go as far as tapping RRSPs and retirement savings to take advantage of the deals available on the market. According to some financial advisers through the Edmonton Journal, this is believed to be an acceptable move, of course depending on age and the amount of savings one has. While this may make sense given the market’s proven long term performance, security and returns versus other investment options, there may be other options available.
In February 2015 Bloomberg News reported that some Canadian property stocks jumped up as much as 20 percent, while the nation’s largest banks including RBC and National Bank of Canada have been outperforming expectations.
While stocks may not be the safest bet for investors, it can certainly be smart for Canadians to invest first before stretching with loans they can’t afford or draining retirement savings.
Diversifying investments and savings into Canadian commercial real estate first and letting the passive income and cash flow pay for homes can be another good option.
It eliminates overstretching on emotions and eliminating pressure to keep up with earned income or relying on residential home prices to provide for retirement, building a nest egg, or leaving an inheritance.
Ultimately, this is a fantastic time to buy homes in Canada; especially considering low interest rates. However, instead of taking on more debt and depleting assets, another option might be to leverage current trends for investing in commercial real estate first, then using those proceeds to purchase homes.