It’s not surprising that housing affordability has become a contentious election issue in BC. Due to skyrocketing prices and unsustainable growth in the real estate market, many Vancouverites have a written off owning a home in Metro Vancouver, resigning themselves to owning elsewhere or a life of long-term renting.
With speculation that Vancouver’s red-hot real estate market may be headed for a slowdown, some aspiring home-owners have been given a glimmer of hope, thinking that they will be able to buy in Vancouver if (or when, depending on who you ask) the market corrects.
While there are signs that Vancouver’s market may be slowing down, buyers shouldn’t expect the foreign ownership tax to trigger a large correction. DLC Economist Dr. Sherry Cooper notes that the tax of foreign owners will not make the market more affordable:
“The fact is, as other countries have seen, this [foreign ownership tax] might take some of the steam out of the markets, but it will not make housing affordable for average earners in Vancouver. It just won’t.”
She notes that even if prices fell 30%, we would simply be where we were a year ago, which many people also considered out of reach.
Instead of just waiting for the market to correct, those eager to become home owners should be actively preparing for their home ownership dreams.
First, prospective buyers should create a realistic budget of what they can afford, including if interest rates increased. A mortgage broker can help you determine what you can afford, and get you a pre-approval before you start house shopping. A pre-approval will give you a much better idea of what you can afford and how much your monthly payments will be.
Prospective buyers should also continue to save up as much of a down payment as possible. Buying a home costs a lot of money, and even if the market corrects, it will still be very expensive to buy a home. If you are serious about buying a home, you should be have a serious plan to save for a down payment. For more on how much of a mortgage you can afford, check out my First Time Home Buyers Series on how much you can afford and the down payment.
Building and maintaining your credit score is also crucial to getting approved for a mortgage. Having a great salary and good down payment may not be enough to secure a mortgage approval. While you are saving or waiting for the market to slowdown, you should be actively working to improve your credit. First, you should check your credit score for free with Equifax or TransUnion, to know exactly where you stand. If you decide to go ahead with a pre-approval, a mortgage broker may also do a credit check, in case there are issues you may have to address. Lenders are changing the way they evaluate credit, so it is important that you don’t wait until you have a down payment ready before you look at your credit.
If prices drop in the future, the most important thing you can do is to take concrete steps towards home ownership now. If you are serious about buying a home, start preparing now, even if you are not in a position to buy just yet. Prepare now to put yourself in a much better position to realize your home ownership dreams. Call me today to let me help you prepare to buy your home.