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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$ Q1 z" v  R" l1 h6 L5 r8 e
Affordability gap grows  / _8 q/ f* j* o2 U& v! Y- S
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Financial Post
8 x# V* b7 o9 F; g' N8 e+ KPublished: Wednesday, October 18, 2006 3 ]9 t4 }9 V# S) S- {! A: I

4 G) ~# W* s3 ?2 ^* }& S: o' `! YWhy own a house when you can rent the same property for a lot less?
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( S; e. J* g2 ]& u1 kA new study from Bank of Nova Scotia says the pendulum has swung back in favour of tenants.
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* S0 o9 _* b# ~7 v* K3 h"The affordability gap between renting and owning is at its highest level since 1990," said Adrienne Warren, senior economist with the bank.
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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 $800 in 2006.* f2 @) T& \. x6 i& u3 v4 A& s
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"This is a fairly typical pattern that you see in housing. As house prices move up, affordability becomes an issue for first-time buyers," said Ms. Warren, adding renting becomes a more viable option.
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. }7 n/ }6 ]$ V2 QThe 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.- J2 Q: N  X% k( b  j

- @/ z6 M/ R! N- Z* H" hMs. 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.
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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.: c' ^( f& O4 q0 L
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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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Between 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.
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One 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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Ms. 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.2 G! l+ |* |! k6 m' H0 @6 z

; B% m6 J( K  b* I1 K) T, ?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.5 [$ A, d+ v( [. h. t( D+ M
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However, 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 $1,000," he said.* m; g0 ~, |. D
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0 I( k; ?$ m$ i0 I/ P9 D6 [Disclaimer: This is just published research data and do not express my position.
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