For those of us who own Vancouver real estate, there’s no doubt we have seen a huge increase in our equity in the past number of years. Home prices have sky rocketed and with that our net worth too.
If you are like many, our principal residence makes up a substantial portion of our net worth. Gains on our principal residence are tax-free making the gains even more compelling.
Depending on your age to retirement this may be an opportunity to lock in these tax free gains by selling your principal residence and downsizing to eliminate debt and park your capital elsewhere and/or better diversify.
If you are a firm believer that our real estate market is cooling and prices are potentially going lower, then keep in mind you are potentially losing equity in after-tax dollars. If your home goes down by $200,000 then in order to re-earn this $200,000 back you need to earn and save close to $400,000 pre-tax.
When the market peaked back in June only about 1% of homes sold in Vancouver actually sold at the top. Many sold on the way up and now homeowners are selling on the way down as prices soften. Overall if the market has corrected by 10% since the peak you are still way ahead of where you were 1 year ago!
No one knows which way the market will go but with all this new government mortgage regulation, vacancy tax & non-residence tax most of the speculators and non-resident buyers have left the market. The large drop in demand combined with building supply should cause homes prices to soften but I feel the true impact will not be seen until we enter into 2017.
If you are nearing retirement and counting on your home’s equity to fund a large portion of your retirement then you may want to consider selling now and locking in your tax-free gains.
If you are wondering what the value of your home is worth today you can call upon us anytime. We are always here to help and provide honest expert advice.
Sincerely,
Andrew & Jill Hasman
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