Section 1 should set out how the economy and housing markets affect one another (LO1). It should introduce:
the economic factors that affect housing supply and how these shape housing markets;
Low and regulated mortgage rates
The housing market is highly affected by the low rates and increased regulations in the mortgage market. There are new rules insured via the Mortgage and Housing Corporation as well as other insurance providers in the private sector. The rules have some effect on homebuyers since it required buyer to makes less than 20 per cent as down payment in order to success in their processes. The maximum amortization period has reduced to 25 years. They are also able to borrow a maximum of 80% based on the homes values (Leong, 2013). The maximum gross debt service ratio (GDS ratio) is now limited to 39 percent while the total debt service ratio is set at 44 per cent. Besides, government-backed mortgage has been established.
Stable employment rates
With stable Employment rate in Canada, people are able to purchase houses and pay rent in timely manner. Canada being a developed country has stable employment rate, which makes people have confidence in acquiring mortgages. The mortgage firms also find it secure to issue loans to both investors and house buyers. This aspect increases not only the supply of houses in Canada but also the demand of houses in the market. The demand is also influenced by population. This makes Toronto have better investment opportunities than other cities.
Encouraging immigration policy
Immigration is highly encouraged in Canada. Investors from the United States are highly encouraged to invest in the housing industry in Canada. Canada does not require any citizenship for one to own property. The only condition is to follow the legal emigration requirements. This aspect attracts investors from the US and beyond (Leong, 2013).
the economic factors that affect the management and maintenance of properties in each sector.
Diverse Investment Choices
The housing sector has various choices to invest in. One can decide to invest in condos, houses such as detached houses, apartments, bungalows, or vocational homes. Each of the choices has different benefits in terms of risks, costs, and returns. Dues to risk of uncertainties, people may decide to invest in houses whose demand would not change with time. An example is the investment is rental houses in which investors may not be ready to withstand any future uncertainties. The best choice in this case could be condominium investment. Many individuals would be able to afford it (Canada Mortgage and Housing Corporation, 2013). Canada has an increasing rate of immigrants as well as upcoming families. New employees can only afford relatively cheap houses. Investing in single family in Canada would include the purchase of fixer uppers, foreclosures, or even other properties that are considered undervalued due to their locations. This is done in order for the investors to buy undervalued housed, fix them up and then sell them for quick profits. Investors can as well rent them out to single tenants or single families.
Risks to Your Investment
The risk of investing in Condos include the rising ownership costs in Canada. This high cost of ownership may discourage buyers or tenants. Besides being smaller properties that lowers the cost of investment to the investors, some of the buyers may overlook such houses. Condos may also be limited to certain areas implying that the investor may lack the perceived number of buyers or tenants for rental investments. Again there are many economic uncertainties, implying that the investors may lose their investments or gain less returns. The forth risk is related to the ability of failing to get ready buyers. As people advance socially and economically, they may be willing to look for larger and better house (John, 2013 ).
Opportunities and Forecasts
Canada has seen some stagnating trends in the housing sector in the past two years. This aspect has made it difficult for investors to fully restore their confidence in the housing sector investment. The housing sector is a bit scary especially due to the unclear customer needs and expectations. Future trends seem to be attractive with sustained low rates investment. It is also expected that there mortgage rates would decrease in the next few years. The country is fully developed with signs of going through improved employment situations. Such improvements in the employment sector depict a better chance for real estate inventors. Future trends sometimes seem to give mixed signals. Each day has some non-projected trends but the future of housing market is generally bright for both local and international investors. Most of the forecast data shows that home prices would be higher in the coming years, a factor that may decrease the demand for new investment structures. Dues to mixed trends in the market for house business and real estate investment, the market seem to be unchanging. Future trends may only be affected by increased immigration policies, mortgage rates, and population growth (Pellegrini, 2013).
