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Rentals cheaper as mortgages climb, study finds

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发表于 2006-10-18 10:29 | 显示全部楼层 |阅读模式
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Rentals cheaper as mortgages climb, study finds
- J4 \. R# p# rAffordability gap grows  
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Financial Post) v, \9 V' g2 ^; e
Published: Wednesday, October 18, 2006 4 p) E; s9 [& v) s
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Why own a house when you can rent the same property for a lot less?3 u( l6 F- [, l' e9 P! n
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A new study from Bank of Nova Scotia says the pendulum has swung back in favour of tenants.0 G3 T& _  s" B2 v
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"The affordability gap between renting and owning is at its highest level since 1990," said Adrienne Warren, senior economist with the bank.' i) p& U9 h3 Z
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The study found the average monthly mortgage payment in Canada in 2005 was $1,304 based on a $250,000 house with 10% down payment. That compares with an average rent of $731 for a typical two-bedroom apartment last year. That $573 gap is projected to climb to $800 in 2006.
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; ]/ @$ i1 n; i+ M9 }"This is a fairly typical pattern that you see in housing. As house prices move up, affordability becomes an issue for first-time buyers," said Ms. Warren, adding renting becomes a more viable option.1 m) o; A: m& ]& x& t3 @' ~' P
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The current gap between owning versus renting would be even wider if the Scotiabank report took into consideration home ownership issues such as taxes and general upkeep.
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Ms. Warren predicts a slowdown in the housing market with a tighter rental market leading to increased rents. "We will see a levelling off of vacancy rates. I don't think we will see landlords offering the same incentives, like free rent for a month," she said.& Y! y; p* `9 b( h" E6 ^  W
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One problem with the national number is it masks major regional differences, she said. The gap between owning and renting varied wildly across the country from a $31 monthly premium in Winnipeg in 2005 to $1,220 in Vancouver.$ b8 D/ x; @: S* A9 R# ]
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Generally though, the trend across the country is home ownership costs are rising faster than rental rates.
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8 X* A  d6 s+ h( x* a! @2 `" FBetween 2000 and 2005, rental costs have increased nationwide at a 1.3% annual pace. During the same period, home ownership costs nationwide increased 2.7% annually.0 j" q& v/ l9 d4 w

" I/ p3 K$ `: u  h; POne side affect of declining affordability has been a slew of new mortgage products that have had the effect of lowering the monthly carrying costs of a loan. More and more consumers are buying products that allow them to pay off their mortgage based on a 35-year payment plan as opposed to a 25-year plan, which had been the norm for years.
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1 Q9 L# B+ {4 mMs. Warren noted that the $1,304 monthly mortgage costs for a $250,000 home with a $25,000 down payment would go down to $1,073 per month under a 35-year plan.! C7 v4 q# c0 T$ D4 j% \6 i* u
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Real estate author Don Campbell said there is no question renting has become a better deal for consumers over the last few years. "When interest rates come back down, the pendulum will swing back to the homeowner," he said.$ W) e" [0 M$ N, h. q

. l& B3 A! ]! l3 z7 CHowever, Mr. Campbell said apartments are affected by rent controls in many markets.
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"In markets in the West, where it is not as controlled, rental rates are starting to take off. A two-bedroom unit in a 1970 building in Fort McMurray is $1,500, and that's in the middle of nowhere. Even basic townhouses in Edmonton that rented for $800 last year are up over $1,000," he said.
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Disclaimer: This is just published research data and do not express my position.
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