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Vancouver Market – Should you be investing? Yes! and NOW!

September 20, 2008

Filed under: Real Estate Market,Vancouver — Richard Morrison @ 4:08 pm
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vancouver real estate Market and Investment Property:

“But Richard, why should I be buying real estate in vancouver right now? Isn’t it risky? Do you not think we should wait?” Great question easy answer, buy low, buy on bad news, buy when there is no one else buying! I cannot begin to tell my investors what an extraordinary time it is to invest in the vancouver real estate Market and quite frankly I am happy that many of them are listening, despite all of the news! In 7 years from now they will thank us, just like all of our investors have thanked us for the past 7 years. This soft market makes me remember about 7 years ago when our family watched the attacks of September 11th and while everyone panicked at the onset of a great depression in the USA, our family bought more and more real estate. Seven years later we do not regret, but rejoice. They new that you make the most money the day you buy real estate regardless of the market – but especially in a tough market.

In the same way there are two obvious reasons (if not more) that investing in vancouver real estate right now is a brilliant idea. These reasons apply to both the purchase of vancouver homes and vancouver investment property.
If you are an investor, don’t worry about the Canadian real estate market fluctuations. Think long term and where your starting point is. There are very good buys now in the vancouver real estate Market, for example, amidst a high number of listings on the market. Less people buying homes means more people renting, which means landlords will continue to see vacancy rates of 1% or less.

Everyone knows the age-old investment philosophy, “buy low and sell high.” real estate investments are taking a beating in the media right now. No one is talking about investing in real estate. That means that the demand is down and prices are low. It is an ideal “buy low” time for real estate investors. On the way down there is less and less risk and the best buys come about in tough (low priced) markets. Investors should be buying in the down market. They rarely do, becoming thoroughly scared on the way down.

“But Richard, why would anyone be selling now?” Good question with an easy answer, people need more space or they need to downsize, people move for jobs, people retire, people want to cash out, people want cash in, people make bad decisions then need to sell something to pay off debt, just to name a few. The fact is that there is inventory on the market at good prices and even more inventory not on the market but available if you go looking for it.

So, the first obvious reason that investing now is a brilliant idea is that the prices are lower.

At the same time there is growing talk of inflation. It is not just talk. Without going into all the economic factors and indicators, they all line up to reveal impending inflation. What does inflation mean? It means that the price of nearly everything is going up. It means you buy less for your money. Your paycheck buys less. The price of oil and gas is driving the price of everything higher. Your dollar used to buy a loaf of bread. Now it takes a dollar and a half. Inflation spreads to all hard goods. real estate is one of those commodities that it will take more dollars to purchase.

Here are a few prominent articles to support the inflationary world we are about to experience (and have already been experiencing):

  1. The Return of Inflation about to afflict two-thirds of the world population – The economist – May 22nd, 2008
  2. Fear – China to push world inflation by 7% – The Guardian – February 2008
  3. Markets Shrug Worldwide inflation – Financial Express, May 16, 2008
  4. vancouver real estate Market and Investment Property” href=”http://www.business-standard.com/india/storypage.php?autono=35326&tp=on” target=”_blank”>“Inflation rates doubles in 3 months of 2008″ – Business Standard, Sept 21, 2008

Now remember that between 1975 and 1981 there was a period of rampant inflation. House prices in most of the US for instance rose by fifty to a hundred percent. real estate returns (meaning price increases went from 15% – 30% returns).This was during a recession. Interest rates were at those record highs you always hear about, 15% to 20%. And house prices rose dramatically.

real estate Market and Investment Property” />

Because we had a very loose way of lending, it created a huge influx of home buying followed that period which drove values even higher. Is this beginning to sound somewhat familiar? Its the vancouver real estate Market cycle, as well as every market cycle… Instead of the high interest rates driving up inflation and creating the pent up demand it is the cost of fuel, tightening of lending criteria (no more 40 year amortization and higher demands on beacon scores), and concern over the liquidity of the secondary market wholesale buyers of mortgages that is creating pent up demand. That, fueled by inflation will create an immense increase in home values – just like all hard assets do during inflation. Result? Higher interest rates, higher hard asset prices, higher real estate prices. Take a look at the graph below: vancouver real estate Market and Investment Property” href=”http://www.business-standard.com/india/storypage.php?autono=35326&tp=on” target=”_blank”>

real estate returns in inflationary periods” />

As you can see from this study, the average Canadian real estate returns on the values of property between 1974 and 1982 were 41%. Bottom line, as a strategy to winning in this market, begin to prospect for investment property in vancouver and Canada.

Begin to learn about buying and selling investment property in vancouver real estate Market! Begin to communicate and network with investors or simply contact us! We have the network of investors ready for you.

Don’t just Take this article and discuss it with your family and friends. Take decisive steps! We have very innovative techniques that will get you into this market even with low money down! The savvy ones are going to understand that this is very likely a perfect time to be buying investment property in the vancouver real estate Market. And if they are selling, they will realize that your sharp thinking and insight is just what they are looking for to get them the most.

If you would like, we can make sense of all of this in more detail. Feel free to contact our team or email us at any time.

My cell is always on: 604-767-3703 or click here to fill out our investor form!

Happy Investing!

Richard

3 Responses to “vancouver real estate Market – Should you be investing? Yes!”

  1. John Surabathula Says:
    I have invested in a couple of properties this year. I keep hearing of impending real estate downfall.Considering the real estate market today, do you think we could expect a fall in the home values in about one or two years? What are your thoughts? 

    Thanks
    John

  2. seo blog Says:
    This is a really interesting blog post,I have added your blog to my favourites I really like it,keep up the good work!
  3. Richard Morrison Says:
    Hi John, 

    In reply to your question October 15th, 2008, I believe the risk is always lower in a downwards market. In fact, risk always increases in an upward market and always lessens in a downward market.

    We are calling out for a bottom in the next 10 months, however, as Warren Buffet would say, “I would rather be approximately right, than precisely wrong.”

    This simply means that its rather difficult to find a bottom of a market. What we always advise our clients is that they are buying a deal, not the market. As real estate investors, when you purchase a deal, you must follow the principles of positive cashflow, low vacancy rates and a reasonable price.
    In essence, as investors, match these criteria together, and you will wake up 20-25 years later with a stream of rental income far greater than any RRSPs could ever provide for you.

    Between these 20-25 years, the market will go up and they will go down. However, the important thing is that your tenants are paying for your investment. If it also important to note is that after every crisis, there has been a recovery: Black Monday 1987, The Asian financial crisis 1997, The Russian Financial crisis 1998, 911, and many more.

    These crisis have always occurred throughout many centuries but a snapshot of real estate values in Greater vancouver through 1977-2009 would reveal that had you bought at the time of any crisis during 1987, 1997, 1998, or September 11, 2001, you would have been far ahead, because long term, you would have made tremendous gains. Even if the market hadn’t moved upwards, your tenants would have been providing you with retirement income for years to come!

    The number 1 consideration as a long term investor of real estate or ANY hard asset is Inflation. With the billions of dollars of money literally being printed to bail economies out, we will go through a period of inflation in the near future. Remember that stimulus packages lag about 1 year until they take effect. Inflation lags even a little long. Warren Buffet has mentioned that inflation will be the number 1 consequence of the actions we are taking today (bailouts and stimulus packages). Hard assets rise in periods of inflation as there is more money in circulation.

    Therefore, in a nutshell, we are advising our clients that we would rather be approximately right than precisely wrong.

    You have the following advantages on your side right now:

    1) It is a buyers market
    2) We have RECORD low interest rates
    3) Sellers are fearful and are rolling out the red carpets
    This means that you have a great advantage.
    4) We can still get financing. Canadian Banks are the safest and as a result we can still acquire great mortgages and lock them in!
    5) If you are a foreign investor, our Canadian Dollar has depreciated quite substantially, which for you is a great advantage.

    Hope this helps clarify some of your questions!
    Kind Regards,
    Richard Morrison

 

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