If you are planning to buy your first home, upgrade or downsize, the sky-rocketing real estate prices in the GTA are likely to have you on edge.
First-time home owners are the hardest hit as they struggle to qualify for the huge amounts. A situation that is made worse by the outrageous bidding.
A home in the Mount Pleasant area of Brampton, for example, recently sold for approximately $200,000 over the asking price. Yes, not in Toronto like we are used to hearing about, but Brampton.
Assuming you had been pre-approved for a mortgage amount that matched the original listing price, coming up with the extra cash to compete at that bargaining table might be next to impossible for you and many other buyers.
Yet many are jumping in to the market, resorting to any means available to qualify for higher mortgages. As one mortgage agent stated of-the-record, “Anyone with a heartbeat can qualify for a loan”.
Others are reaching out to extend family and friends in the community to fill in the gap.
While some potential buyers have adopted the now-or-never approach because expectations of further price rise makes them fearful that they will be completely out-priced in the future, others see a home as an investment with the fastest returns. Encouraged by unscrupulous realtors who show them the dollar signs.
However, over reaching or resorting to nefarious means to qualify for huge mortgage amounts that regular family income will not support, have impacted quality of life.
Many homeowners are camping in their basements and renting out other areas of the house (often to multiple renters) to afford their mortgages. Their motivation—the quick appreciation in value of the property. Word on the street is that even garages are now being renovated into living quarters to maximize earnings on every part of the house.
Many are looking to upgrade to larger homes for similar reasons, greater rental potential. The result is substandard multi-dwelling living spaces that lack basic safety features like functional fire alarms or a second exit in the basement.
While the cause of the tragic Brampton fire that claimed three lives and seriously injured a 9-year-old is still under investigation, the Ontario Fire Marshall confirmed there were no working smoke alarms here.
The Ontario Fire Code which mandates that homeowners must have smoke alarms on every storey and outside all sleeping areas was put in place to avoid a tragedy like this, and other dangerous situations that occur in unsafe rental properties.
Added to this mix are homeowners who utilize whatever equity they have accumulated in their primary residence to invest in second and third properties. Once again for their rental potential. Most are stretched on their first mortgage and resort to dubious means to find financing for their investment properties. Supported mainly by the rental income (often in their primary residence as well) they are the willing ‘house poor’.
With most of their income divided between mortgage payments, property taxes, maintenance and utilities, there is very little left for extra-curricular activities for children or family vacations that contribute to a healthy lifestyle. For those looking to make more, every dollar that can be scraped together is put towards investing in yet another property.
Given this scenario, Millennials, rarely stand a chance of being able to afford a home and family at the same age their baby boomer or Generation X parents did.
Already burdened with student loans and struggling to find permanent, reasonably-paying positions, buying a house in the GTA area is beyond a dream. With demand for rentals being high and property owners looking to maximize their earning potential, most are forced to live indefinitely with their parents or share rental accommodations to make ends meet.
Any attempt at correction, like the new mortgage stress test rules, seems to have had little impact on real estate prices except to lower supply and push up demand.
Unofficial reports indicate there are buyers no matter what the listing price. With many homes selling over the asking price within a week of being listed on the market. A new way to generate interest being the ‘Coming Soon’ boards that are now becoming a familiar sight.
One friend secured a substantial offer as soon as this board went up. The interested party did not want to wait. The ‘For Sale’ was a formality and she was spared the inconvenience of the house showings to say the least.
While you might be tempted to plan your retirement based on the rising property values, it is far too soon to celebrate. With kids being unable to afford a home or grand kids needing help with post-secondary tuition, many baby boomers are chipping in for down payments, university/colleges fees and wedding expenses. Often this means working longer or taking reverse mortgages to fund their own retirement! Now doesn’t that make you want to take the giant pin of logic and burst the bubble? – CINEWS