Low mortgage rates, strong job growth enable 67 per cent of all Canadian households to own their homes
Michael McCullough
Sun
Home ownership has hit a new high across North America, but rising home prices will likely halt or reverse the trend, a couple of bank reports released Tuesday predicted.
Aided by low mortgage rates and the affluence that generally comes with age, 67 per cent of Canadian households now own their homes, compared to 65.8 per cent four years ago, a Scotiabank Group report said. In the U.S., where mortgage interest is tax deductible, the rate has hit 69 per cent.
Home ownership in B.C. lags the national average slightly, at 66 per cent — likely because, as a separate report from RBC Financial Group noted, the province trails the country in affordability.
Part of the rising home ownership trend has to do with demographics, Scotiabank said. The baby boom generation is in its prime home ownership years.
But ownership rates have risen in virtually all age groups, especially among seniors.
“A number of factors, including rising disposable incomes, strong job growth and low mortgage rates, have brought home ownership within the reach of an increasing number of households,” the report said.
First-time buyers, who historically represented 40 to 45 per cent of the market, accounted for 70-75 of sales in recent years, Royal LePage Real Estate Services Ltd. president and CEO Phil Soper said in a real estate forum organized by Scotiabank. People who tended to rent in the past, such as single women and unmarried couples, now buy. People who get divorced increasingly go from owning one home to two.
Part of the change relates to costs. The gap between the cost of carrying a typical mortgage and renting a two-bedroom apartment — which stood at $600 a month in 1990 — narrowed to just over $100 in 1998. Thanks to the recent run-up in home prices, it has since widened to nearly $300, Scotiabank said.
The switch from renting to owning still works for Jamee Justason, 28, and her fiance, Charles Hough, 30. Currently paying $1,500 a month to rent a house on Vancouver‘s west side, the couple recently bought a three-bedroom townhouse in Champlain Heights.
“To buy a place, we’re going to end up paying less,” said Justason.
Despite rising home prices, affordability improved in the fourth quarter of 2004 due to declines in average mortgage rates and taxes and a rise in incomes, the RBC report said.
British Columbia remains the least affordable province and Vancouver, the least affordable city in the country, however. Average home ownership costs took up 47.7 per cent of average household income in Vancouver, RBC said, compared to 27.2 per cent in Calgary and 33.3 per cent nationwide.
“British Columbia‘s economy is resurgent, optimism is running high and there just isn’t enough housing supply to keep prices from shooting up,” the report said.
Both reports predict the rise in home prices — Scotiabank forecasts a further 4.5-per-cent rise nationwide in 2005 — and rising vacancy rates will tip the scales back in favour of renting and put a cap on home ownership levels.
“Low mortgage rates will maintain affordability, but some erosion is already underway due to the rise in home prices,” Scotiabank said.
REAL ESTATE TRENDS:
A series of real estate reports Tuesday highlighted key factors about Canada‘s housing sector, namely, British Columbia remains the most expensive place to own a home, and that although home ownership is at a high, rising prices will erode that trend.
66% of B.C. households own their own home. — Scotiabank
48% of average household income in Vancouver is spent on home ownership, compared to 27.2 per cent in Calgary and 33.3 per cent nationwide. — RBC
Scotiabank Group, Vancouver Sun
© The Vancouver Sun 2005