Kim Pemberton
Sun
Record low interest rates, falling house prices and buyer incentives are adding up to the perfect time for British Columbians wanting the Canadian dream — owning their own home.
In a buyers’ market, first-time buyers, in particular, are discovering they can not only finally get their foot in the door but a very inviting welcome mat has been laid out allowing their dollars to stretch further. Where they once would have considered themselves lucky to afford a small studio apartment, these same buyers have climbed further on the property ladder and are looking at two-bedroom condos and townhomes in some areas of the Lower Mainland.
Katherine Tung, 35, of Richmond is one such first-time buyer. She initially thought all she could afford would be a one- bedroom condo. Instead, Tung is happily searching the MLS listings for a two-bedroom condo in the $300,000 to $350,000 range.
“It would have been more difficult, and there would be a limit on what I could have afforded last year,” says the software developer, who wants to remain in Richmond close to her work, family and friends.
“Before, I could have only afforded a one-bedroom but with prices coming down and low interest rates that’s the main reason I can afford a two-bedroom condo.”
And while it is tempting to stretch further and go for a townhome, Tung says she plans to play it safe and factor in what would happen if today’s interest rates climbed higher.
The best rate she has found is a 3.3-per-cent variable but her budget could handle six per cent, she says.
“I’m going for a variable [rate] and when it looks like it’s going up I’m locking in for five years. A friend of mine purchased a condo five years ago with a closed rate close to four per cent. Five years later there’s another down cycle. He lucked out.”
The B.C. Real Estate Association’s Spring 2009 Housing Forecast reported recently that housing market conditions have started improving more quickly than expected thanks to the increase in home affordability for many first-time buyers.
“The majority of the decline in home prices has already occurred,” Cameron Muir, BCREA chief economist said in press release. “Balanced markets are emerging in Victoria, Vancouver and the Fraser Valley. There’s now little downward pressure on home prices in these area.”
He noted affordability reached a three-year high in April with the lower home prices and low interest rates reducing the carrying costs of the average priced home 24 per cent over last year.
“A significant increase in affordability has brought many first-time buyers into the market. First-time buyers were largely absent in the late fall and winter, making it more difficult for move-up buyers to sell their current homes. The chain of ownership is now being oiled.”
A recent report by Royal LePage Real Estate Services concurred, stating when first-time buyers stepped out of the market in the fourth quarter of 2008, at the height of the global recession, their “absence was profoundly felt.”
“Without significant volumes of entry-level homes trading hands, the entire market limped through the winter months. First-time buyers are back in force this spring, and with them the beginnings of a market recovery,” said Phil Soper, president and chief executive officer of Royal LePage Real Estate Services in a press release.
“While these consumers appreciate government incentives such as tax credits, greater RSP deduction limits and rebates on home renovations, it is markedly improved affordability that is proving to be the powerful drawing card.”
Burnaby resident Ashley Ostenal, 25, has been saving since the age of 20 and managed to stash away a $60,000 deposit. thanks to living rent-free with her parents all that time. And now that prices have dropped along with interest rates, Ostenal says she’s ready to take the plunge.
“It’s a really good time to buy. The market is at a great place for first-time buyers. It’s incredible,” she says.
She’s looking for a two-bedroom townhome in the $250,000 range in the Tri-Cities, Surrey or New Westminster. Just completing her teaching degree, Ostenal says she doesn’t know where she’ll end up working so she wants a central location.
She’s been to a few open houses since starting to look seriously but it wasn’t until she took a Greater Vancouver Home Builders’ Association first-time-buyer seminar that she says she realized she needed to expand her knowledge base.
Helping her through the maze is her sister, who recently bought a house in Burnaby with her boyfriend for around $500,000 — a price that Ostenal says wouldn’t have been possible last year for a detached home in the same neighbourhood. And like Tung, Ostenal says she plans to play it safe when it comes to interest rates. When she finds the right place she plans to opt for a mortgage she knows she can afford should the interest rate climb.
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