First of all, I am not a realty agent, just interested in learning in the domain of investment or house rental in my spare time.
In my opinion, inflation is a double-blade sword. It happened in Canada back a couple of decades ago (I forgot if it was in late 80's or early 90's) when the mortgage rate rised to over 10% (almost 20%???). This means that your monthly mortgage cost will double, or even more than double. That's when many people will lose their house and cause the house price really go down.
But on the other hand, if you have extra money, or your mortgage is locked at a good rate, when the house price reaches the bottom, it will be a good time to buy, because, with inflation, if you keep your money in your saving account, or invest in mutual fund, or stocks (I have colleagues who have suffered almos 60% lost in his RRSP already), you will lose not only the face amount of your investment, but make it worse, with the inflation, in a few years, the buying power of your savings will worth nothing. That's why in the long run, it will never be bad to invest in real estate.
That's why I think if you need to get a mortage now, get a 5-year fixed rate. You can get a 5 year fixed rate at 4.24% right now, and this rate might go lower to about 4.20% in April. Compared to variable at 3.3%, it is about 1% higher, but you are protected. At least split the mortgage to two parts, put 40% to variable, put the other 60% to 5-year fixed. When you have more extra money, you can put in annual pre-payment. Some lenders allow 25% of annual pre-pay.
For the house price in Ottawa, my guess is that the price will drop, but not at a very big margin. For example, in Kanata, how much the house price has jumped in 2008? A 50 lot single at 3,000 sq. ft. would cost around $450K at the end of 2007, but in late 2008 the same house, the price has jumped to about $510K. This is approximately 14% increase. So I guess the price will drop at the end of 2009 or early 2010 at the maximum to the level in 2007. But I do not see further reduction. Hopefully the economy will recover in 2010.
Though overall the government influence in the economy of the whole country will not be significant, but in Ottawa, with so many employees in federal, municipal governments, and they do have stable jobs and decent income, I still think Ottawa will be one of the most secure cities in Canada.
Of course I think we immigrants need to hope for the economy to go better. In my opinion, we are among the most vulnerable group. The local people here definitely have more resources compare to us. I have local friends, when they lose their jobs, they have their parents to go to, they have relatives working here and there who can set up a network for them... and so much more... For us, we need to be independent and strong and do our best!
Again, just my TWO CENTS!
[4. Inflation. The mortgage rate is so low that nobody can imagine that it can reach 7%, 10%, 15% or more in a few years. Look back the history chat, the average is 7%. Also the inflation is inevitable almost based on the current circumstance and the historical analysis. Do you know what a 8% mortgage rate means? It is a double of 4% and the monthly payment will be increased dramatically. ]
