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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
: T0 W! c7 M; KAffordability gap grows  
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6 }) B$ B1 d8 Q; n  pFinancial Post. |7 I* |$ Y3 V9 b" W
Published: Wednesday, October 18, 2006 6 M4 K" M1 S& p' \9 c6 Y
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Why own a house when you can rent the same property for a lot less?! {$ z; |8 M, T" C$ P

% G) K3 M& d, q/ WA new study from Bank of Nova Scotia says the pendulum has swung back in favour of tenants.& u% P: e/ [  R' l5 i, U, _
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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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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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8 ^! F1 R) I0 @4 g"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./ g: H+ u0 `5 A

& J  R  o+ I3 Y6 s; {# dMs. 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.1 S5 v, T# o9 R! S. l9 j9 Q

+ G$ Q, S' M- q' a: Q+ vOne 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.- k3 }, {. Q4 ^9 l4 @

. i  o% l( b8 F/ ~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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6 _* e5 Q2 n* K; fOne 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.! I* {7 f( Y/ T# I
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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 $1,073 per month under a 35-year plan.4 N! L5 [4 o4 d7 ^) G# s
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Real estate author Don Campbell said there is no question renting has become a better deal for consumers over the last few years. "When interest rates come back down, the pendulum will swing back to the homeowner," he said.$ E* k* ]+ a6 M1 ]  B
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However, Mr. Campbell said apartments are affected by rent controls in many markets./ J: ]: a4 v# a' P( [; X
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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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