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John Helfrich, Broker, Real Estate Homeward , Brokerage | 416.698.2090 | Direct: 416.464.8920 |

Why Toronto Real Estate Market Will Keep Chugging Along Despite Stock Market Woes

August 17, 2011

Low interest rates continue to tempt First Time Buyers into Toronto Real Estate Market despite rising home prices and falling stock markets

Toronto Real Estate Market

An article published in Canadian Business Magazine quoted two economists who believe that Canada's real estate market is more likely to grow this year rather than decline. They expect that Buyers will take advantage of the low interest rates that were left in place recently, to offset the recent economic turmoil.

Benjamin Tal, the deputy chief economist for CIBC said recent stock market uncertainty due to the European debt crisis and the United States credit downgrade is actually helping boost sales in the Toronto real estate market and all across Canada.

TD's economist Sonya Gulati, said the bank is anticipating that sales will be a bit more subdued in the next two months, but Buyers, especially first time buyers and immigrants won't likely be deterred in the longer term as interest rates stay low.

Low Interest Rates More Important to First Time Buyers Than Almost Anything Else

Say you and your partner have reasonably secure jobs, a combined income of $100,000 per year, and you want to buy your first home with a 5% down payment.

With interest rates at 3.9% on a 5 year fixed rate mortgage, you'd qualify to buy a $460,000 house. That assumes $4,000 per year in realty taxes, and a Mortgage + Tax payment of $2,671 per month.You might find a modest 3 bedroom semi in Danforth Village or the Upper Beaches at that price. (there were about 15 on the market when I wrote this) Search Danforth Village Listings

If interest rates rose to 5% (still way below historical averages or 'inflation-fighting' rates) the same couple would be maxed out to qualify for a $410,000 property, and paying about the same monthly payment. But you'll be lucky to find a 'fixer upper' in Danforth Village or Upper Beaches at that price.

The key concept here is that you'll make the same payments for a $410,000 property as you would for a $460,000 property, if interest rates were 1.1% higher!  For those first time buyers who do their math based on monthly payments, it's as simple as 'get into the Toronto Real Estate Market now and save $50,000' (in purchasing power)!  Or wait until next year when interest rates are higher and get $50,000 less of a house with the same payment.

Add to that the fear that prices in next years Toronto Real Estate market could be even 3% higher than today, and you get a compelling argument for buying now.

And that's why I believe our Toronto Real Estate Market will keep chugging along.

So is this a good time for first time buyers to get into the Toronto Real Estate Market?

Sure, if you can afford it. It really depends more on you and your financial circumstances than anything else. Don't buy more than you can afford, regardless of what the market is doing. Things can change quickly in our economy. Have a plan that will help you survive a setback, should you be temporarily unemployed.

A year in advance isn't too early to start planning for your first home. Get in touch if you think I can help. Or have a look at the following articles to begin your education.

Advice for First Time Buyers

Mortgage 101 Guide - Get advice on Mortgages Before You Talk to the Bank

Find Out How to Stop Renting and Start Owning



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