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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- A, Z& M9 `& ~, H
Affordability gap grows  ; E# z1 L3 [. y6 N9 b1 W
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Financial Post3 P9 L3 F2 @' O4 R4 D+ y
Published: Wednesday, October 18, 2006
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Why own a house when you can rent the same property for a lot less?* z' H. B$ E" X+ t5 F
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A new study from Bank of Nova Scotia says the pendulum has swung back in favour of tenants.& m3 h5 X) B2 M
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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.8 m) q6 Y% u/ b+ ^4 X+ K7 |8 _
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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 $800 in 2006.# M- }6 O# a. T$ b( B/ K$ T  V

1 q) {# Y1 d% P) @"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.- \  U% x! k! b! a( c2 D  b
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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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/ g  w6 O" s$ lMs. 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 $1,220 in Vancouver.
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( c7 g" P% @- @* N$ L( b: q! rGenerally though, the trend across the country is home ownership costs are rising faster than rental rates.) b8 ~. a  @9 K( 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.
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# g$ D7 ^2 J$ P4 y. |! n. l- ]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.) i2 M* a' V/ M7 k

- z5 u7 X. y( e  N3 iMs. 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.
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, L0 d1 R1 Z& H# a# Y5 l: E& F- VReal 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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7 @! k8 C! r6 d9 v& ]"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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