Buy a vehicle? or buy real estate?
Buy a vehicle? or buy real estate?
I totally understand the government's concern on Canadian's high debt ratio. Their new mortgage rules have successfully cool down the housing market. However, this deters the public from owning a property they call home and having a roof over their head. These new rules may not help them to pay down their debt. Instead of buying real estate, they might be spending the money,(that was saved for their property's down payment) on luxury items because they can't qualify for the mortgage to buy a property anymore? It really concerns me when I hear the Canadian auto industry is having their best year ever in the last 10 years while our real estate market is having our worst in the last 10 years.
I totally understand the government's concern on Canadian's high debt ratio. Their new mortgage rules have successfully cool down the housing market. However, this deters the public from owning a property they call home and having a roof over their head. These new rules may not help them to pay down their debt. Instead of buying real estate, they might be spending the money,(that was saved for their property's down payment) on luxury items because they can't qualify for the mortgage to buy a property anymore? It really concerns me when I hear the Canadian auto industry is having their best year ever in the last 10 years while our real estate market is having our worst in the last 10 years.
I went through reports on how the auto industry sales have been doing since the beginning of 2012. The first half of the year sales up but pace slow. The second half of the year shown significant growth so far. Retails sales have been up as well. I am happy to see the Canadians are confident in our economic condition. However, it gives me a reason to believe that the tighter lending rules are actually stimulating the consumer to buy luxury items instead of paying down their debt, or buy themselves a home instead of keep paying mortgages for their Landlord. With the low interest rate which will last for a while longer, there is a reason for me to believe that the Canadian debt ratio will not be improving due to the cheap money. It provides great opportunity for investors with cash to buy into this market. Prime example: Warren Buffett just purchased Prudential Real Estate in US. Do you think he feels confident with the real estate market? I might be totally off on my own opinion but if the government's reason on tightening the lending rules is trying to control the debt ratio, I doubt how successful this move will be. Robert Klyosaki has a saying: "Rich people buy luxuries last, while the poor and middle class tend to buy luxuries first". This is a perfect market for investors with cash. Don't complain if the rich get richer. The rich just has more discipline on how they spend their money. So, are you disciplined enough to put money aside, and save a bit more to pay 20% down payment on a home in order to qualify for the 30/35 year amortization or just spend it? Food for thought!
