Will Housing Prices Continue To Go Up?
With house prices soaring to new heights, it’s no wonder Canadians are wondering where the market will be in 2022. The Bank of Canada predicts that mortgage rates will continue to drop over the next few years and this could have an impact on house prices. So what does this mean for you? Read on to find out more about Canadian mortgage rates and housing price report 2022!
Will housing prices continue to go up? Here is how you can still get in.
Housing prices have continued to go up
No matter which country you live in, everyone says their housing prices are skyrocketing. However, none seem to compare to house prices in Canada. In fact, as of 2021 the average house price in Canada is over $716,585 which leads the work in largest home price increase since 2000. In addition, global housing prices have spiked during the pandemic.
This leaves many Canadians wondering whether or not they should buy now while prices are still manageable and interest rates are low? Or if they’re better off waiting until house prices go down before buying their dream home? According to the most recent report from RBC analysts expect that the housing market will "cool not collapse" in the last half of 2022.
Why are housing prices going up?
Housing price increases are tied to the ability of Canadians to bear the burden of higher and higher mortgage payments. Canadians have the highest disposable income only behind Costa Rica and Ireland. In other words, house prices will keep going up as long as Canadians feel comfortable paying higher housing costs and interest rates remain low.
When is the right time to buy a home?
Analysts don't predict that house prices will decrease in the future. This suggests the right time to buy a home now while you can still lock in a mortgage rate at low monthly payments. Keep in mind that analysts are predicting the growth in housing prices to slow in the back half of 2022. So you may see some relief if you are trying to save but don't have enough cash for a down payment just yet, as in, housing prices may no longer accelerate faster than you can save.
How to buy a home when you don't have the cash for a down payment?
The average home price in Canada is $716,585 and the required down payment is 5% on the first $500,000 and 10% on the next $500,000. But if you live in a major city, like Toronto, the average price of a home is $1,122,463 and you'll need a 20% down payment for homes over $1,000,000. That means for the average price of a home, you'll need $224,493. That is a huge down payment! You have a few options if you need help with your downpayment.
Family Gift
Your family can gift you the money for your down payment, but if they are not in a position to do so it may be very difficult.
Claim Your Inheritance Early
If your parents or grandparents own a home, they'll have equity in their home that they can withdraw using a home equity line of credit (HELOC). In this case, your parents or grandparents can take out a home equity loan on their house and give you the funds as a second mortgage. Although this is an option because interest rates are low right now, if interest rates increase, payments on their HELOC may increase also.
Borrow against your RRSP
If you have an RRSP and need to withdraw some of the funds, consider borrowing from your retirement savings plan. You can borrow up to $35,000 from your RRSP. You will be charged interest on the loan, but it is a great option if you can pay off this amount within five years because there are no penalties for paying back the loan early.
Grant
Ontario, BC, and PEI offer a first-time home buyer amount where you can save on the land transfer tax if you are buying your first home.
In addition, the Canadian federal government offers a tax incentive called a home buyers amount. You can claim $5000 as a non-refundable tax credit, which works out to about $750 saved in your pocket.
