When determining a property’s affordability, your clients will likely bee-line to the price tag, but it’s actually the month-to-month expenses that you should be directing them to.
Talking about the drivers of the Canadian real estate market, Royal LePage president and CEO Phil Soper said it’s the monthly expenses that come with home ownership that dictates market behaviour.
“It’s not the sticker price on a home,” he told the audience at an Empire Club of Canada breakfast event earlier this month, “it’s the carry cost that drives the behaviour in the marketplace.”
In Toronto, agent Justin Kua says he recommends his clients work to pay down their mortgage debts, regardless of the interest rate. That’s especially important as many analysts believe historically low interest rates will have to rise at some point, despite at least two major banks predicting further rate drops.
“As interest rates rise, the cost of housing remains the same because of the cost of interest and the monthly payments,” Kua says. “When it comes to lifestyle changes, you’re paying one way or another. It comes down to your aggression in being able to pay down the mortgage in the first five to 10 years.”
That kind of fiscal responsibility is something all agents should instil in their clients – whether they’re first-time buyers looking to purchase a condo, or families looking to upsize.
“My advice always remains the same: make sure you can comfortably afford your monthly obligations,” Kua says. “If you’re hyper aggressive and you can take on a little bit more risk, I don’t advocate it, but everyone is different.
“You just have to make sure you can make your payments.”