I
live in Montreal and I can say there is a real disconnect in the real
estate market. All areas in Montreal is having this problem.
I
was shopping a few month ago for a 2 bedrooms condo and I decided to hold my purchase for at least 2 years. I'm a first time buyer.
Why?
In
500 meters radius there was 60 units for sale (new, old, etc).
- A
brand new condos from a developer (350 000$)
It has been sitting there empty for 2 years. I asked the
developer : is it negotiable? He answered : NO. Funny
because a few days ago he lowered the price for the unit to 309
000$. He has been calling me and sending me special offers every
month since then. Always trying to sell me one of his unit......
Condo fees were 150$/month
- A
15 year old condo (350 000$)
It
was comparable in term of size as the new one but...... kitchen and
bathroom was 15 years old so I was expecting to put 50000$ in
renovation. Why buy a used condo when it is the same price as a new
one??? Also, condos fees were around 350$/ month
- A
brand new condos from a speculator (375 000$)
It
that has been sitting there empty for 1.5 years. I asked the
speculator: is it negotiable He answered : NO. Funny because in his pictures (on the real estate website) had snow from the last
winter. Also, it is not really interesting because your warranty is
not as long as a brand new one because the unit is 1.5 year old. You
can't chose the fit and and finish because it is build already. Condo
fees were 150$/month
Then
I was looking of the municipal assessment of these units above. All
of them had were priced at least 75 000$ above municipal assessment.
How much do you need to afford one like this one?
I
decided to make a simplified budget to see if it was possible to « survive »
with a mortgage max out and 5% down payment for a 332000$ mortgage @ 5.14%.
A pdf to help you to do your budget : www.desjardins.com/en/simulateurs/calcul_budget/budget.pdf
A pdf to help you to do your budget : www.desjardins.com/en/simulateurs/calcul_budget/budget.pdf
Mortgage :
1957$/month
Municipal
taxes: 300$/month
Heating:
100$/month
Condos
fees: 150$/month
Home
insurance : 30$/month
Car
insurance : 100$/month (assume the car has been paid already)
Internet
+ tv + cell phone: 120$/month
Car
gas : 120$/month
Food :
300$/month
--------------------------------------------------------------
3177$/month
How much do you need make a year to only break even???
Approximation(@45% taxation rate Canada+Quebec)
3177 = 55%
x = 100%
I'm sure, I
forgot many thing such as restaurant, entertainment, saving, starting cost (http://www.desjardins.com/en/simulateurs/demarrage_maison/demar_qc.pdf), etc.
Don't forget, for this condo, you're not living in a palace. It is a small 850 ft2 area.
Bottom
line : wait for more price decline in Montreal. It has started already in all segments (condo, house, etc). It is going to hurt a
lot of people.
Salary increase didn't match RE price increase.
Salary increase didn't match RE price increase.
Just
take the last 5 year where inflation is ~10% (usually salary
increase) and RE price increase by 32% on cheap money.
Can
you explain the 32%-10%= 22%???
DEBT!
Links
"Buyer’s logic argues that the time to buy is now, before rates move higher. But this view fails to recognize that rising rates are bound to catch up with you at renewal time. Does your job offer potential for the pay increases you’ll need to carry a more expensive mortgage in the future, as well as the additional financial obligations you’ll almost certainly acquire as time passes? Nothing in the latest data on pay increases suggests an encouraging answer to this question."
Links
"Buyer’s logic argues that the time to buy is now, before rates move higher. But this view fails to recognize that rising rates are bound to catch up with you at renewal time. Does your job offer potential for the pay increases you’ll need to carry a more expensive mortgage in the future, as well as the additional financial obligations you’ll almost certainly acquire as time passes? Nothing in the latest data on pay increases suggests an encouraging answer to this question."
"L’endettement des consommateurs est en hausse de 6,1% au deuxième trimestre par rapport à l’an dernier, selon un rapport d’Equifax publié lundi. "
"Et encore, à supposer qu’ils travaillent, les prix de l’immobilier en ville –même un petit appartement- ont tellement gonflé qu’il est difficile de trouver à se loger. Même en louant. "
"I believe we're seeing the crash in slow motion, but the market has been so defiant that timing the correction is risky business," Peterson told CNBC. "A soft landing in home prices would require a truly unbelievable combination of artful policy making and the ability of consumers across the country to remain calm in the face of losing home equity while paying more."
"Les ventes au détail ont reculé au Québec en juin. C’est la troisième fois en quatre mois, selon les données de Statistique Canada. Au Québec, la valeur des ventes au détail a diminué de 1,3% de mai à juin."
Good summary.
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