Another season, another interest rate hike by the Bank of Canada. At this point, many consumers are adjusting to the new reality, but real estate values are still affected. Whether this latest increase will affect the market even further remains uncertain.
Housing prices have been falling since July, but so far, values remained higher than in 2021. In August, however, that changed. Prices dipped below 2021 levels for the first time this year to an average cost of $689,437.
That home sales were a little slower in August is not surprising. Summer is typically a slow season in real estate as people are focused on vacation and getting the children back to school. Last year’s rush was the exception, not the rule.
Now that Autumn has arrived, we will soon get a clearer picture of what is in store for the market. In the meantime, many investors may be alarmed at the changing conditions. Should you worry?
If you were hoping to make a quick profit by flipping houses, you might struggle, especially if prices continue to drop. However, if you’re investing for the long term, there is no need to panic. We’ve been through worse recessions than this, and Canada’s economy is strong despite inflation and other world events.
Following a few critical guidelines can help ensure your real estate investments continue to build your equity in the years to come.
Focus on Making Logical Decisions
For residential buyers, purchasing a new home can be highly emotional. New homeowners are often overwhelmed by intense and conflicting feelings. There is the joy of reaching such a significant milestone, paired with a sense of panic over what they’ve just gotten themselves into. Buyer’s remorse can also happen, especially when prices fall after the fact.
As an investor, it can feel discouraging, even terrifying, to see a property lose value after you purchased it. However, the last thing you want to do is make a rash decision based on emotion. Everything you do should be based on facts, numbers and statistics.
Every market has its ups and downs. If the roller coaster of the last two years has taught us anything, it’s that you can’t always get your timing right. However, real estate consistently gains in value over time, even if it does decrease in the short term.
The key to success is to stay the course and hold your property until housing values bounce back.
We love working with investors at all levels! Here are some other posts from our investment series:
- Stocks vs Real Estate: What’s Better in a Shifting Market?
- The Beginner’s Guide to Investing in Real Estate
- How to Find a Great Tenant
Have a Financial Cushion
A significant part of successful investing isn’t just buying a property; it’s the ability to hold on to it. You should look at your current financial situation before making any life-changing decisions. Creating an emergency or rainy day fund will help you through market fluctuations and avoid those panicked feelings when housing values drop.
A TFSA is an excellent way to create a financial cushion as your investment grows much faster than a savings account, and the money is readily available in an emergency. These funds can also cover you whenever your property sits vacant or needs repairs and maintenance.
Is Now the Right Time to Buy a New Income Property?
Fall is usually the busy season with many people looking to make a move, but all bets are off this year. We expect things to pick up now that summer is over. However, higher interest rates are still keeping many buyers away from the market. These conditions create the perfect opportunity to add to your investment portfolio. It isn’t just that prices are down; you have more options to choose from and less competition from other buyers.
With equity in a current property, you’ll likely find it easier to obtain financing than a first-time buyer. Secured loans usually offer lower interest rates because there is less risk to the bank.
The one downside is if you default on your loan, you can lose your property.
If you have the resources and a financial cushion, now is an excellent time to buy, but it’s always wise to look before you leap and analyze your situation carefully before jumping in.
Those who invest for a long time can expect a host of benefits:
- Long-term equity growth on all properties
- Streams of passive income from rental payments
- The ability to cash out at a profit in a few years
- A valuable asset that can stay in your family for generations
- A possible retirement destination or second home
Once you’ve decided to invest, the next question is where? There’s a strong case for Peterborough!
- Living in Toronto vs Peterborough: What’s Better?
- Relocating to Peterborough: A Case Study
- Everything You Need to Know About Retiring in Peterborough
The Peterborough Rental Market is on Fire
Real estate sales may be down, but the rental market has never been busier. Housing prices and rising interest rates make many hesitant to buy a home.
However, everyone who isn’t buying still needs a place to live. What does this mean for investors? It’s easier than ever to find high-quality tenants for your income property.
The recent work-from-home trend is boosting the rental market, especially in Peterborough. The lack of a commute has allowed many people to relocate from the GTA to places where the cost of living is more affordable. Students, retirees, families, and young professionals are all flocking to Peterborough at an unprecedented rate.
If you buy an income property in the current market, you’ll find your ideal tenant in no time!
Do you have questions or are you ready to get started as an investor in Peterborough? We’d love to help you. Reach out to us by email or call 705-775-2255.
