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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 finds3 a9 ~6 X$ k: M1 g, N
Affordability gap grows  
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$ F- W% @" l7 {7 E, `5 NFinancial Post. G& ^  _6 [% u
Published: Wednesday, October 18, 2006 - V) b$ b+ u/ k4 S

/ m2 L  v8 Q- r& k" ~( ZWhy own a house when you can rent the same property for a lot less?
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A new study from Bank of Nova Scotia says the pendulum has swung back in favour of tenants.
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% s- J+ z7 U0 U"The affordability gap between renting and owning is at its highest level since 1990," said Adrienne Warren, senior economist with the bank.- m2 V  b( @- J1 e8 O* s3 f" U& }5 ]1 ]
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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 $800 in 2006.
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* n" Q1 _1 F5 B' K8 ]"This is a fairly typical pattern that you see in housing. As house prices move up, affordability becomes an issue for first-time buyers," said Ms. Warren, adding renting becomes a more viable option./ Q7 F, u$ E8 Q7 @. S4 J
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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.- \! V. @; r8 g) I

2 V; K. e+ E# NMs. 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.9 g7 S% m5 O5 Z
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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 $1,220 in Vancouver./ b2 Q$ h; o9 R
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Generally though, the trend across the country is home ownership costs are rising faster than rental rates.' x; o( R. G3 N# e( {& o
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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./ C$ G% x5 E3 P0 h; F+ ]0 Z
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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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. i' ~0 E( H! ?3 ]2 D& e3 `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 $1,073 per month under a 35-year plan./ M: _$ R$ ^* I3 a

2 m' \, ]. g) ~* d* zReal 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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However, Mr. Campbell said apartments are affected by rent controls in many markets.
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# g) Q& K8 z. ^+ B. d# y( C7 ^" t4 @"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.  e( ]. h3 c) i! G. e. |' @) g+ ^* q
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6 P5 O" u% u4 j/ U* KDisclaimer: This is just published research data and do not express my position.
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