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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 Y5 U( X6 z9 qAffordability gap grows  
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Financial Post
/ |/ G* i! C1 h/ f+ F* e) oPublished: 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.
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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.3 F  c" R6 c4 G# g1 s, Z$ E
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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 $800 in 2006., t3 c& e# {* b+ [" }$ Z6 l, h
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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 h- k/ P4 @) k% `1 ~

3 Q; R7 Y+ T7 I4 T& r$ KThe 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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0 a/ [1 q0 G6 S8 oMs. 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 $1,220 in Vancouver.
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Generally though, the trend across the country is home ownership costs are rising faster than rental rates.
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" V1 R) B: R$ u1 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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0 s( ?9 h" ]# U& l8 \) i5 dOne 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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( X7 ?; ], |( V: jMs. Warren noted that the $1,304 monthly mortgage costs for a $250,000 home with a $25,000 down payment would go down to $1,073 per month under a 35-year plan.) B8 Y3 N  E: x$ A. Z0 M, P2 K: ^
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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.0 a/ B( y) f! u' q, G3 U

$ f# d/ d8 x. _2 fHowever, Mr. Campbell said apartments are affected by rent controls in many markets.+ y( w; ^3 a: {

) D2 t: `0 R/ K- A& ~"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 $1,000," he said.$ ~% T! X7 O3 h$ ?

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7 @: M4 e5 B7 e0 E! x& YDisclaimer: This is just published research data and do not express my position.
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