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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
  ~0 s) `) `# _8 Z0 a" p4 |+ {5 JAffordability gap grows  
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Financial Post
6 j% b( b' i* X# b! x" {Published: Wednesday, October 18, 2006
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Why 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., e% f7 P7 w+ ]1 U4 h
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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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) N$ Y* z; @. m( s$ w5 D- WThe 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.- |4 t( ^% b& W8 J, k3 q" D
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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.2 x+ {+ I+ \2 L

* t# O+ @7 f2 i: RThe 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.1 ?$ H" e; i0 r8 `* ~

7 L+ w, i6 b9 E8 a( R4 A. qMs. 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 $1,220 in Vancouver.
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Generally though, the trend across the country is home ownership costs are rising faster than rental rates.
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7 n7 e$ C1 A8 V8 `' S) y/ JBetween 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.+ |. J" J% J9 ~

/ c7 A: p+ _6 l8 wOne 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.5 K3 Q3 @% Q1 d" }0 U

, |' b7 n% q+ 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 $1,073 per month under a 35-year plan.) S' p( ]" v" c% S/ p" a
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Real estate author Don Campbell said there is no question renting has become a better deal for consumers over the last few years. "When interest rates come back down, the pendulum will swing back to the homeowner," he said.
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6 s1 L$ c, y& e! W9 z7 l2 K6 ~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 $1,000," he said.! K9 }: R: V! Q1 l$ e

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( n; T! Y( g, `9 g, _4 SDisclaimer: This is just published research data and do not express my position.
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