Before you buy a house (part 2)

People flock to certain areas.  There are other areas that are practically barren.  Buying a house can be profitable if you know how to buy one.

BC houses are in huge demand, but only in certain areas.  The houses are cheap up north, but there is no people.  There is also lots of snow, little jobs, and/or few publicly available amenities.  Therefore, if you buy a house up north, you can get one for less than $200 000. The average prices can be found here.

If you buy a house up there, you will also find that is very difficult to sell it afterward.  Someone who is retired would probably not mind living up there.  It is peaceful and inexpensive, but someone who works will find it difficult if he/she works two or three hours away. Most of the jobs are located in southern BC. Therefore, the houses in southern BC will always be easy to sell.

This holds true for other parts of Canada and most likely the world.  The farther away you are from the heart(s) of business, the cheaper the houses get.

Northern Alberta has the oil sands.  Lots of high paying oil workers.  If you own a house nearby, you can charge $1000 or more for a room.  If you have four vacant rooms, you can make $4000 a month from rent.  If the house is worth $400 000, I am pretty sure the owner would want one or two million for his/her house.

This is quite surprising since Alberta’s weather is less than ideal.  At 9am, it could be 15 degrees celsius.  At 5pm it could be -15 degrees celsius.  The weather is unpredictable. Unlike Greater Vancouver where the weather is quite predictable.  It is rarely too hot or too cold.  I consider Greater Vancouver the ideal tourist and immigration destination of Canada.  Therefore, Greater Vancouver house prices will continue to climb.  Greater Vancouver is the Hawaii of Canada.  Alberta, on the other hand, is dependent on high paying jobs.  If the oil sands leave, so do the high valued housing market.

Before Alberta drilled for oil, the house prices used to be half of what it is now.  See the article here.  The house prices were even cheaper the farther back in time you go.  You can still buy cheap houses, but they would be at least a three hour drive from the nearest large business.  Remember that the price of the house is largely dependent on what jobs are available nearby.  Therefore, house prices are driven by what is around the house.

Interest rates are also concern.  The prime interest rate fluctuate all the time.  It can go up and down without warning.  A list of the prime interest rates in the USA can be found here.  You will notice that the prime interest rate can vary from 1.5% up to 20% or more.  Therefore, if you want to buy a house, do not assume that the interest rate will stay that way until the house is paid off.  It could double or triple in ten years.  So, if I buy a house, I would look at the current interest rate and add 5%.   If I can still pay off the interest on the house, that is the amount I can afford to get for a mortage.  If the interest rate goes higher than that, I may have to sell the house.  Either that or find some other way to pay for the house.

Leave a Reply