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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
  u0 {8 ~2 U4 y4 y% xAffordability gap grows  6 h4 q8 ?6 B1 f% B
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Financial Post+ |" I; t# s" M  c- r/ Z
Published: Wednesday, October 18, 2006 " b& h) d3 F& t0 Q! ^" K9 V7 z* W

4 E% G# S- l: @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.
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! s; ?2 [' @$ N: r"The affordability gap between renting and owning is at its highest level since 1990," said Adrienne Warren, senior economist with the bank.: g% t& n; @6 ^% u
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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 $800 in 2006.! h+ }, m7 c  C0 @. K3 w: U$ \

& v! [+ N/ D$ _"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.5 i  X3 M1 a: o

" {2 T5 z6 O/ GMs. 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.; g$ _+ Z0 c; S) ?5 w

7 E" v4 D2 p/ A/ P% n' V  \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.( D2 D. C- @7 \% ]2 K. u

( U  b4 I: A' h9 Q4 ^Generally though, the trend across the country is home ownership costs are rising faster than rental rates.0 K- ~: [% `0 C& w+ g7 M' k

4 f- M- ~$ K( F* EBetween 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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3 d3 D3 `( W  `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.# Q) l; Y8 A  D7 q* K/ M3 J" m
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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 $1,073 per month under a 35-year plan.6 I. e. a0 ?6 n6 c$ l5 ~
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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./ `/ R2 P$ T, D

1 A2 M0 m' `2 J' |However, Mr. Campbell said apartments are affected by rent controls in many markets.
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/ @' t# E- S0 {8 ^* {& s8 ~"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.6 ?; u" @3 Q( w

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- b' z* S5 J3 @7 k3 r" m" W; d1 rDisclaimer: This is just published research data and do not express my position.
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