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Coming Soon! HUGE 1 bedroom in the Observatory!

#606 – 10899 University Drive, Surrey BC

Coming soon to MLS! Welcome to the Observatory – Surrey’s concrete high-rise 1 block from the Gateway Skytrain. This HUGE, North-East facing 1 bedroom unit boasts mountain, river, AND city views! Everything you need within steps – access Downtown Vancouver in less than 40 mins, steps to Chuck Bailey Recreation Centre and Whalley Athletic Park, and shopping centre to be completed right beside Gateway Sky Train Station. Facilities include exercise room, sauna and hot tub.

Listed at $269,900. Bring your offer today. This deal will not last long!

Open House Saturday Aug. 19 and Sunday Aug. 20 2-4PM

Call Sibo with your questions: (604) 779-7992

Penthouse with a View Coming Soon to Brookland – Ideal Location!

Not on MLS Yet!

We’re preparing to launch a 2 bedroom penthouse with a view. Awesome location! Open-concept design with stylish stainless appliances, luxurious granite countertops and elegant finishes throughout. Located in the growing Surrey City Centre and just moments from BC’s most expensive homes – but for great value. One of the best parts about living on the top floor? NO noise from above!

Enjoy the convenience of the lifestyle offered by living in the Brookland. Commuting, shopping, exercising, and even going to school is easy! Walk just 2 minutes to the Gateway Skytrain Station, with easy routes to Surrey, New West, Burnaby, and Vancouver in under 40 minutes! Easy access to all of your shopping, fitness, recreation, schooling, and even the Surrey Memorial Hospital and the stunning City Centre Library. Quality built by Woodbridge Homes.

Inventory in our attached market is HOT. Nothing is lasting!

Give Sibo a call today: (604) 779- 7992

Bank of Canada’s rate hike – there is more coming

In my last post I looked at the recent interest rate hike by the Bank of Canada and its effect on mortgage payments. Now I want to discuss why the country’s central bank adjusts this key rate from time to time. Obviously, when banks lend money at a lower rate this encourages people to borrow and spend more. A period of low interest rates is generally associated with an economy that is struggling to get improve its productivity which can lead to increased manufacturing, consumer purchasing, more jobs, more real estate transactions, and so on. One of the downsides during a sluggish economy and low interest rates is that savings accounts and other savings instruments also pay low interest. Remember, banks pay interest based on the “spread” between what they pay for their money (prime) and the rate at which they lend it. So, while many younger people may enjoy lower rates because they want to buy things now and see they have a long time ahead of them to pay back their borrowed money, others such as senior citizens on fixed incomes or pensions, are unable to get a good rate of return on their savings accounts, which may be their only way to keep up with price increases in their daily lives.

You can see now that a change in the central bank rate is a good focus for many issues in a national economy. To examine them all would be like a complete introductory course in economics. I will just cover a few basics in a very general way to give you an idea of how monetary policy works in practice, that is central banks and interest rates. Look at another recent event in the Canadian economy that took place during the current low interest period – the big deficit financing that the federal government has launched to pay for such things as infrastructure and other necessary social programs. In a simplified way, this means that vast amounts of money are being injected into the economy. Combined with low interest rates, the lurking danger is inflation, meaning prices can rise simply because there is too much money chasing goods and services. This is also what a rise in central bank rates attempts to control. In theory, higher interest rates should reduce borrowing and consumer spending, thus helping to keep price inflation under control. However, economies are complex and different sectors of the economy can behave in ways from other sectors or industries. That is why we get “bubbles” as in hot real estate markets, where there is more economic activity than in another part of the country’s economy, say manufacturing or exporting. Interest rates can also affect market in other ways. Consider the viewpoint of someone who wants to sell a house. That person wants to list when the market price is high or rising. Higher interest rates may cause prospective buyers to hold off, so during this period there are fewer listings. Then we see prices on the available inventory of houses go up based on the dynamic of supply and demand.

As I said, a central bank rate adjustment is a good focal point for studying many aspects of economics. One last thought regarding monetary theory. Like any theory, the best it can do is generate a hypothesis to be tested. In the case of a rate hike, the experiment takes at least a year to determine if it worked the way it was intended. Let’s watch it carefully.

Bank of Canada’s interest rate hike – should you freak out?

Everyone’s talking about the Bank of Canada’s interest rate hike announced on July 12. This increase of 25 basis points (i.e. 0.25 %) seems relatively small to get so much attention. So, I’ll give a brief explanation about why it’s important to understand before I show you the direct effect on your mortgage payments.

First, the Bank of Canada rate is called the key rate, or technically the overnight rate, which is what Canada’s chartered banks pay for money. The term prime rate is then used by the chartered banks or credit unions as their base rate upon which they add different percentages for their various consumer loans, lines of credit, and mortgages. These loans are quoted with annual rates and the interest is calculated according to the terms of the loan, e.g. daily, monthly, etc.

Canadians have enjoyed low mortgage rates for several years because the Bank of Canada key rate has been intentionally kept low as a stimulus to the national economy. In 2007 the key rate was 4.5 per cent. In 2009, it dropped dramatically to 0.25 per cent. You will recall that this is when the financial crisis that started in the USA in 2007 was threatening economies globally. The key rate in Canada has varied a bit over the past 10 years, with a high in 2014 of 1.00 per cent. By 2016 it was back down to 0.05 per cent. With the latest increase, it is up now to 0.75 per cent. Ironically, many Canadian home buyers have benefited from the Bank of Canada’s low mortgage rates by making lower monthly payments possible. For those who have negotiated fixed rates, the current increase will not affect your payments until the fixed term expires. However, for those with variable rates, even the modest increase this July can mean you may need to adjust your monthly spending, particularly if you make your mortgage payments schedule on a tight budget. Take this basic calculation as a guide for how the rate increase can impact you. I have used the Canada Mortgage and Housing Corporation online mortgage calculator for this example. If you want a precise calculation for your specific mortgage, you can easily do you own calculation at https://www.cmhc-schl.gc.ca/en/co/buho/buho_021.cfm

Consider a 25-year mortgage on $500,000 with monthly payments at a fixed annual interest rate of 2.5 per cent over the term of the mortgage. This would mean you paid $2,239.34 monthly. Now, with the increase to 2.75 per cent annually, your monthly payment will be $2,302.56. This is an extra $63.22 each month in costs to you. It will mean you may have to cut something from you monthly expenditures. If, for example, you enjoy a Tim Horton’s latte for $2.99 each working day, then eliminating this one item would cover your new mortgage payments. However, you have probably heard the news that the Bank of Canada may have additional rate increases to announce this Fall and again at the end of the year. These could seriously impact your mortgage payments well beyond the price of your daily coffee break. It may be good idea to discuss with your financial advisor or bank how you can make the necessary adjustments to meet your mortgage payments. Keep in mind, your bank does not want to take over your house; it is not in the real estate business. And you will not be alone if you perhaps have to negotiate an new payment schedule. But it’s time to start looking at these hard realities.

In my next Blog, I will discuss some of the reasons that central banks have to raise their key rates.

July 2017 Real Estate Market Update for Greater Vancouver and Fraser Valley

Metro Vancouver

I’m offering a prize for my clients in Metro Vancouver this month. Can you correctly guess when the composite benchmark price for a residential property in Greater Vancouver will exceed $1-million, and by how much? Here are some clues: In April this year it was $906,700, which was a 1.2 per cent increase over January 2017. In June, it was $998,700, a 1.8 per cent increase over May. Based on the recent rate of monthly increases, it could break the $1-million (Canadian) mark very soon. For the person who guesses the closest price over $1-million and in which month this occurs, as reported in the MLS Home Price Index of the Real Estate Board of Greater Vancouver, I will prepare a customized Comparative Market Analysis (CMA) of your current property. Each CMA is an estimate of the owner’s house value using its condition, location (neighbourhood study), real estate market study, and recently sold homes in the same area. Send me your guesses zhangsibo@hotmail.com by the end of this month (July 2017), and our winner(s) will be announced in a coming newsletter in mid August 2017. Be sure to include your name and phone number so we can collaborate on your CMA. And please be assured, this isn’t a sales pitch or a solicitation. I love to crunch numbers for my clients.

The Greater Vancouver area includes Whistler, Sunshine Coast, Squamish, West Vancouver, North Vancouver, Vancouver, Burnaby, New Westminster, Richmond, Port Moody, Port Coquitlam, Coquitlam, Pitt Meadows, Maple Ridge, and South Delta. The composite benchmark price for residential properties is an average for comparable residential properties in Metro Vancouver, including Single Family Detached homes, Apartments, and Townhouses.

Fraser Valley

I’m making the same prize offer to my clients interested in Fraser Valley properties. Here the combined benchmark price for all residential properties was $703,900 for the month of June 2017. This was a 10.3 per cent increase over six months ago and a 2.0 per cent increase over the preceding month of May. The recent rate of monthly increases suggests a similar price rise in coming months, although the $1-million mark for the combined benchmark price will likely lag Metro Vancouver by a few months. One interesting observation in the Fraser Valley market is that apartment sales are currently the hottest driver of demand pricing, with 27 per cent of all sales activity in the Valley in June – a 12.2 per cent increase over May sales. Apartment and townhouse price increases in the Valley have the fastest rate of price increases at present, so watching how they factor into the overall benchmark price is important. The benchmark price for a Valley apartment in June was $325,300 and for a townhouse, $467,000. This represents a three-month increase of 9.4 per cent and 7.7 per cent respectively. I will look forward to your guesses for breaking $1-million mark in the Fraser Valley’s combined benchmark price, in like manner to my Metro Vancouver challenge above. And if you happen to win both predictions, you can designate one of your prizes of my Comparative Market Analysis to a friend of your choice.

The Fraser Valley area includes North Delta, Surrey, White Rock, Langley, Abbotsford, and Mission. The combined benchmark price is for all residential properties described as Single Family Detached, Apartments and Townhouses as reported by the Fraser Valley Real Estate Board.