Photo: James Bombales
Alberta’s housing market appears to be on the road to recovery.
In May, the average home price in the province was $412,832 – a 4.3 percent jump from the previous year, according to the Canadian Real Estate Association. That same month, Calgary posted its first year-over-year gain – 0.2 percent – in almost two years. Home buyers forked out an average of $485,444 in Calgary and $379,019 in Edmonton.
It was encouraging compared to Canada’s other red-hot markets. In May, the average house in Vancouver commanded $1,110,376 and $863,910 in Toronto.
With Alberta slowly rebounding from the oil collapse, home sales are forecasted to rise by 3.5 percent this year, says the Canadian Real Estate Association. And as markets in Ontario and British Columbia increasingly push out first-time buyers, realtors anticipate that Alberta could emerge as the country’s new hot housing market.
Despite less competition, first-time buyers in the province need to stay savvy. One thing to watch out for are new regulations from the Canada Mortgage and Housing Corporation. That includes the new “stress test” imposed on all financial institutions. The test requires buyers to qualify at the Bank of Canada’s posted rate, currently 4.64 percent on a five-year fixed mortgage.
“The purpose is to ensure there’s some safety for a buyer to be able to afford payment increases if the mortgage interest rates increase during the term of the mortgage,” says Roger Marion, Director Mobile Mortgage Origination at Servus Credit Union. “The buyer needs to qualify at the higher-than-the-actual rate the mortgage is written. The stress test affects purchasing power and a first-time homebuyer may have to set their sights differently because of the qualifying requirement.”
Buyers must also budget for other costs: the down payment; the mortgage, including principal and interest; property taxes; and monthly condo fees, if applicable. Often overlooked are funds for future repairs. “A home is one of the highest value assets an individual will own in their lifetime,” Marion says. “It’s important that the home is well maintained and repaired as required. There are also appliances like a water heater and furnace that will eventually need replacing and that can come at a significant cost.”
How else should Albertans act smartly about home-buying in 2017? “A key step for a first-time home buyer is to stay organized,” Marion says. “It’s not unusual for a first-time buyer to spend over nine months looking at homes before they purchase their first home. This doesn’t necessarily include the time requirement if they are having a new home built by a builder.
“Secondly, it’s not uncommon to have situations where they mix up homes that they like. Most buyers want to purchase the perfect home the first time they enter into homeownership. With a simple checklist system, revisiting their likes and dislikes becomes that much easier to manage.”
It’s best to seek out expert mortgage advice from a financial institution. Servus Credit Union offers tailored advice every step of the home buying-process. It typically starts with pre-approval. Buyers should know how much they can afford to spend and avoid looking at homes outside of their budget. They can then turn to the Mortgage Calculator, designed to help buyers pinpoint how much of a mortgage they can afford.
Servus also pays buyers to borrow from them. On a five-year fixed rate closed mortgage, buyers can receive a cash incentive of up to $1,250 with their First Time Home Buyers Cash Back Mortgage. And with Servus’ Profit Share program, buyers can earn $570 per year with a Servus mortgage of $285,000. It’s a great way to earn some extra money for closing costs or furnishing a new home. For home buyers looking to upgrade, Servus offers a special rate home equity line of credit. Home equity can be used to borrow money at a preferred interest rate – great for items like home upgrades and education costs.
There’s more to buying a home, however, than setting up a mortgage. “We take a look at our members’ overall financial health,” Marion says. “We refer to this as Financial Fitness. We help individuals set financial goals for what is important to them and determined as part of the overall application experience.
“We also look for opportunities where we can help our members reduce their overall debt costs and increase their monthly cash flow. It is our commitment to ensure our members can shop with confidence and support knowing we have their best interests in mind.”