Wednesday, July 4, 2012

Understanding The Real Estate Inflation Game

In the Fraser Valley's rapidly expanding real estate market there are several elements to consider. You are probably aware of the concept of inflation. But just to recap, inflation means that the increasing cost of buying a service or a product (tangible or intangible). This decreases your purchasing power. For example, an item that cost perhaps 10 dollars ten years ago, now cost 50. People in today's world that are on fixed incomes are very aware of their purchasing power of the Fraser Valley rental dollar.

This factor is very important to consider when renting your new home, apartment or townhouse in the lower mainland. The inflation rate in Canada varies at different times of the year and in different regions across the country. At one time Canada had what's known as double digit inflation. However, currently in the Abbotsford, Burnaby, Coquitlam, Surrey, Langley, New West and Richmond area, inflation has stayed relatively low.

Naturally, the appreciation of property value over time includes inflation factors. And historically, land appreciation value for residential homes has been between 4 and 5 percent greater then inflation rate. When you buy a home in the Fraser valley your buying a home with inflated dollars. That is, you are probably getting more money now in terms of salary increases to pay off lesser-value money when you took out that original mortgage. So your beating the system!

Renting in the Fraser Valley can often be a disadvantage given our appreciating real estate in Abbotsford and Vancouver. In fact Every city across the Fraser Valley has been hit by the real estate boom and has experienced some level of Appreciation. This includes Richmond real estate, Burnaby, Coquitlam, New West, White Rock, Mission, Maple Ridge, and all other major cities across the lower mainland. Appreciating simply means the increase in value of the property over time. It is the growth in value of your original capital investment.

The national average of appreciation with real estate in the Fraser Valley is 5%. However, real estate in the lower mainland has seen gains as much as 25%. It's important to understand that trends will go up and down. But with the 2010 Olympics coming up, interested rates staying under 10% and our economy the way it is, you'll notice the real estate market will continue to clime. The rent BC option has rapidly changed into a wealth building endeavor for any middle class investor.

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