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Mortgage Broker News | 10 Feb 2014, 07:11 AM Agree 0
Traditional thinking among Canadians is that homeownership is favourable to renting; an attitude that has boded well for mortgage brokers who have a large majority of the population looking for mortgages to tap into. But what if attitudes shift and biases toward renting decrease?
  • M. Robertson | 23 Jan 2014, 10:06 AM Agree 0
    The reality for the new generation is that although home ownership is a way to increase your assets, the cost to do that is prohibitive. Take Vancouver or Toronto as prime examples. More of the younger generation want to live where the action is, and that means in the core of the city. The prospect of commuting for two hours a day is unattractive as is the distance and cost to live a socially active life. For about $350,000.00 you can purchase a one bedroom apartment – that means about 500 square feet of space. At a 5 year rate of 3.29% and amortized over 25 years the mortgage payment is 1586.81 per month – not including condo fees, utilities, or property taxes. Condo fees in Vancouver for that apartment will come in at about $250 per month on average, property taxes $100 per month utilities maybe also around $100. All in the cost coming out of the pocket is $2036.81 - To some that might not seem like much but to most that is a heavy housing cost. It is even more in Toronto because of the amounts that people pay for condo fees.

    I ran a search in Craigslist for rentals in Vancouver, 1 bedroom apartments. I found some for as low as $980.00 per month, the high end apartments were running about $1700.00 per month – the average was $1200.00. Two bedrooms were running from $1600 per month to as high as $2400.00 per month. Toronto was even cheaper. Live in a one bedroom and you pocket as much as $1000 extra to as little as $300 per month. Get a two bedroom with two incomes, and it works out to the same per person.

    I spoke to a young woman (23 years) who rents and when I asked her why she told me it was about lifestyle. Something goes wrong, and the landlord fixes it. She likes to travel and she likes to go out. She rarely has people over. She also told me that by renting she has been able to put aside a minimum of $500 per month in RRSP’s and investments and still be able to live the lifestyle she wants. Last year she claimed she socked away a little over $10,000 and that does not include her work RRSP’s or benefits. She said that eventually she might buy, but only if she has the ability to maintain her lifestyle – if not she will be quite happy to rent.

    I think that homeownership is a great thing, it builds equity and net worth. The reality for most people however is that in the end it is about how much money comes out of your pocket on payday and how that impacts your ability to live the lifestyle you want. Younger people want to travel more, they want to be social. That costs money, and if they have to choose between being house poor or being able to do the things that they want to in their youth… well for most the choice is simple.
  • Paolo Di Petta | | 23 Jan 2014, 01:57 PM Agree 0
    I don't think they're "more willing" to rent, I think buying for many people is simply cost prohibitive with these insane property valuations.

    With double digit youth unemployment, they don't have much of a choice
  • Paul | 24 Jan 2014, 02:56 PM Agree 0
    I have to agree with M. Robertston. For most people it is about lifestyle, it always ends up being how much money comes out of your pocket at the end of the day. Yes homeownership is important, but the cost of housing has far surpassed the growth in income in this country and that has created an imbalance. In the past renting was more expensive than owning, and so it made sense, today the opposite is true. I can rent a house in Vancouver or Toronto for less that it would cost for me to purchase it. The same applies to condominiums. An extra $500 or $1000 in my pocket makes all the difference in the world.

    I myself rent, even though I am in the industry – and why? Lifestyle. I live in a 1700 square foot high rise penthouse apartment on English Bay beside Stanley Park in Vancouver with unobstructed 360 degree view of the Ocean, Mountains, City, etc. The condo, if I purchased it, would be worth close 6 or 7 million dollars. I pay less than 1/3 to rent my place that the mortgage payment alone would cost me, add in taxes, etc and it works out to almost 1/4. I live in my ideal location, spend far less on housing that most people, I have a 12 minute commute to the office, and I get to live the lifestyle I want. Sure I am paying rent, but you know… there is something to be said for having full time caretakers as a part of that bill. I need something done, and bingo it gets done.

    Eventually I will purchase a home, I could easily afford to buy a nice place in DT Vancouver, or a house in the outlying areas. The thing is I am young, single and truth be told there is a certain appeal to living in a home that only about 20 other people in the world have (given the number of similar places in the area) in what is considered to be one of the most beautiful and desirable places to live in the world. And I get to do it for less than most people pay to live in an 800 square foot, two bedroom, condo in either Vancouver or Toronto.
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