Daily Archives: March 8, 2009

By James Strathy Warren

The good times are here again for people wishing to purchase their first home or for those wishing to move up to a bigger house or even those wishing to buy a secondary home in the country or cottage area.

The current reality is that mortgage rates are currently at an all time low;  offering prices have pulled back in favour of the Buyer;  the first time Buyers (subject to some restrictions) will find that the existing land transfer tax is most favourable for those purchasing a home under $400,000.00; and finally there is less competition when submitting an Offer to Purchase in today’s market place.  This offers ample opportunity for those wishing to buy a home.

I often tell my clients that buying a home is a long term investment.  It is something you are going to live in and enjoy,hopefully for many years.  It is not like a stock or a mutual fund, which is predicated on greed and liquidity (that is making money and  is fairly easy to sell from from day to day).  Real estate is based on emotion.  I often say to my clients the best thing that can happen when you are young and ready to move up is for the market to pull back, as the spread between their existing house and the move up house is smaller.

As an example, a person’s existing house is worth $600,000.00 and the move up house is worth $1,000,000.00, if the market declines by 10%  the spread to the Buyer is $400,000.00.  And, relatedly the savings are passed on with respect to the real estate fees, land transfer tax, lawyer’s fees,insurance and title insurance.  The same can also be said of buyers who are looking to purchase a secondary home.  Here again is opportunity.  Look at this from another perspective, when the market goes up 10% using the same figures… the Buyer is paying more for the property by $450,000.00.  It certainly takes along time to save $50,000.00 and there is also all the other associated increased costs.

Obviously, someone loses in a down market and that is those that are selling the family home for the last time.  They may see a decline in their gross price, however, given that most people own real estate and many homes over the course of their life, most people are still in a positive gain position.

It all depends upon how you look at it.

And, keep in mind and assuming it is your principal residence, this is probably your largest investment,  and fortunately the Government allows you to have this as a tax free haven. On the lighter side, I like to  tell my clients, that they are not making any more land, except in Dubai and South Africa.  So, it will prove to be a good investment.

Stocks may come and go, but land is fixed.

So, when buying in a Buyers’ market, remember there are many positive factors in doing so, why wait till the market starts to move upward and you will probably be subject to higher rates,competitive bids and all the other closing costs?  Why follow the crowd?

In the 19th century in the US, the vast majority of newly minted millionaires all held land to create their vast empires.  Henry Flagler, who took the State of Florida, which was virtually swamp land, and successfully turned his investment into a playground for the rich.  And, his new found wealth allowed him to go on and create a fortune with his friend John Rockefeller.  History does repeat itself.  At the time, the US had just come out of a Civil War and the 1890′s were in a time when the US was in a recessionary period, which was followed by the Spanish – American war in the early 1900′s.

Buying up in this this market is a good thing – when thinking long term, and that is exactly what Henry Flagler did.

James Strathy Warren, Hons. B.A., C.F.A.C, an award winning agent, is a Sales Representative with Royal LePage Real Estate Services Limited/JOHNSTON & DANIEL DIVISION.  James can be reached at jameswarren@trebnet.com and his website is located at www.jameswarren.ca.