Riches with Rentals

The Canadian housing market is one that has experts scratching their heads because it is not following the trends of other markets around the world. Instead of decreases that are seen in other housing markets, The Canadian house market continues to increase. But there is a chance that it may falter and have a severe effect on the economy. And evidence is pointing in that direction according to many housing experts.

The growing economy, low interest rates, and a somewhat conservative mortgage market all support the housing prices in Canada for time being. Some believe that this is because in Canada there has been a strong demand from homeowners. However, the debt levels that are being carried by Canadians and the high amounts of investment in construction in residential home may result in a major correction that could have a severe impact on the real estate market. Those who are considering buying a house now could find themselves paying substantially more than they would two or three years from now.

When home prices are compared to household income, they are very high. House prices compare to income are now at about 5.5 and in the past it was fairly stable at 3.5. It makes sense that the price will have to decrease eventually, since there are already signs of stress. The household debt levels continue to increase with the average family in Canada owing about $100,000 in 2010. There had been an increase of almost 50% of families that are behind in their mortgage payment since the last recession. Families are suffering and our economy will have to adjust somewhere to account for that – and it will most likely be in the housing market.

Another factor that affects the Canadian housing market is the new mortgage rules that have come into effect in early 2011. The intention was to decrease the accumulation of household debt that many families are experiencing. One of the new rules includes a shortened amortization period. Previously, 35 years was acceptable and now 30 years amortization is the maximum. The second rule has to do with refinancing. In the past 95% of the value of a house could be refinanced and now only 85% can be used for refinancing.

More and more people are reconsidering renting as an option. Although buying a house has always been the thing to do when you “grow up” and is considered an investment, many people see renting as an option for them. The rent is stable and they don’t have to worry about the rise and fall of the housing market. This can be an advantage to those who are willing to become landlords, as well as homeowners.

As more people consider renting, there is a bigger demand for quality rental units and this investment can pay off. The right location, the right type of house and some skills in renovations can turn a liveable house into a renter’s dream and they are willing to pay good money for this. You can continue to rent for as long as you like or you can wait until the Canadian housing market is just right and sell the house when it is most profitable for you.