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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
7 I8 a  p8 q! |Affordability gap grows  
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2 y# S8 z+ P2 B3 e( Z2 yFinancial Post0 T$ K0 S: Q" }5 {2 x+ `9 z% P$ v
Published: Wednesday, October 18, 2006
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1 k  p; N, Q: ~4 oWhy own a house when you can rent the same property for a lot less?
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% _2 M0 t" c0 g7 CA new study from Bank of Nova Scotia says the pendulum has swung back in favour of tenants.7 O  s- e# |1 h* ]3 Q' b
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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.
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  P- O; w) S( K" Q, Z, TThe 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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"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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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.+ ^0 x# f- {1 n% }

9 S% S. f2 d" w  X# E; rMs. 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.& x1 J  F* U. a( s# r2 J

* [. |, ?8 b% c% ?2 e$ ]7 N6 COne 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.) u: F: m5 i( i

8 Q. h4 }5 f6 \( n" {0 bGenerally though, the trend across the country is home ownership costs are rising faster than rental rates., e4 Z/ e  J4 z, P( d) j- K

' |! x0 W! r8 n! z2 u" @5 p8 yBetween 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.' v2 a6 ~0 [" B7 ?

, @% z4 A5 O) a' Z& j' W1 F# dOne 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.( w! g/ b: f: L) M" u; s
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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 $1,073 per month under a 35-year plan.# ]2 [2 P  |& r+ P, m8 Z' ~1 Q
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Real estate author Don Campbell said there is no question renting has become a better deal for consumers over the last few years. "When interest rates come back down, the pendulum will swing back to the homeowner," he said.
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2 ?+ J+ H3 p* s1 A/ y7 D7 M! xHowever, Mr. Campbell said apartments are affected by rent controls in many markets.
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/ [$ K) f9 Y- M" C9 X1 _"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 $1,000," he said.( w; W$ u$ K. I+ j
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* H! y3 t" s' B0 DDisclaimer: This is just published research data and do not express my position.
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