I know it is hard to purchase a home in a Seller’s market and that you don’t want to overpay. Let’s look at the true cost of waiting.


Here are some outlooks on price increases for property values in 2022. The Canadian Real Estate Association predicts a 7.6% increase in house prices over the year. Re/Max predicts a 9.5% increase, Royal Lepage a 10.5% increase, Royal Bank of Canada a 3.3% increase and TD Bank a 7% increase.  Economists forecast rising home sales, prices in 2022 - Western Investor


You want to buy a home but think that the price is going to go down, or that the house is already priced too high, or that the market is going to correct.


Let’s look at the straight math on this.

What are you currently paying for rent? Let’s say it is  $2000/month.  


Do you have any savings? A potential tax refund? An RRSP possibly that you can use for a down payment. If not, start by saving money in an RRSP, keep it in the RRSP for at least 90 days, withdraw the money for your down payment.  Call me about how this works! 


Once you have the down payment saved, here is the math to purchase an example home:


Price of house: $750,000


Property tax on house: Approx. $4500/year – $570 Home Owner Grant = $3930


Down payment: $50,000 (5% on 1st 500K, 10% on remainder) minimum


Mortgage: $700,000 + High Ratio Insurance Premium of $28,000 = $728,000


Mortgage interest rate: 3% = $3445.23/month


Annual interest (first year): $21,434.15


Annual principal: $19,908.61


Closing Costs: $15,500.00


So let’s look at monthly net cost:


Mortgage $3445.23


Property Taxes  $327.50


Increase in Insurance $125.00


Total = $3897.73 – current rent $2000.00 = $1897.73 more per month cost to you. Can you afford this?


Annual increase in cost of owning over renting is $22,772.76


Of note: $19,908.61 of the mortgage payment went to principal so the “loss” is $2864.15

With a conservative property value increase of 5% the value of the property will increase by $37,500

Add this property value increase of $37500, to the $50,000 down payment and the $19,908.61 you paid off the mortgage and you have $107,408.61 in equity in one year.


Let’s now assume you think property values are going to drop in 4 years. So your $750,000 property goes up in value of 5% per year for the next 3 years and then there is a massive 10% correction. What does that look like?


Year 1 $750,000 + 5% = $787,500.00

Year 2 $787,500.00 + 5% = $826,875.00

Year 3 $826,875.00 + 5% = $868,218.75

Year 4 $868,218.75 - 10% Correction = $781,396.88


During those 4 years you have paid off $83,320.70 in principle. With a Correction you have an outstanding balance on your mortgage of $644,679.30 and the value of your home has dropped to $781,396.75. So you have made $136,717.45 with a 10% market correction.


There is no better investment.


I can run these numbers for you based on any price point. If you cannot afford a $750,000 home, the best way to get there is to purchase a less expensive, smaller property and let the property increase in value just like the above scenario.