An article in today's Ottawa Citizen talks about tenants buying condos and driving up the vacancy rate… [Click here for article]
In short, "completions of condominiums, which continue to attract renter households looking to move into home ownership, are decreasing demand for rental housing," according to CMHC.
What surprises me is how many renters are unaware that they are actually in a position to buy a condo, and that affording one is within their reach with just a 5% downpayment and a steady job; or not a steady job, if you're self-employed and have a good credit history. Factor into this equation the ridiculously low mortgage rates seen over the past few months and it makes buying a condo too good an opportunity to pass up in many instances.
But don't take my word for it, consider the following real life example:
Two identical 1-bedroom condos, both brand new, were recently listed in Claridge Plaza at 200 Rideau Street, one of which sold for $262,500. Assuming that the Buyer put down a minimum of 5% (which would be $13,125 in this instance) and got a 5-year fixed term at 3.75% (thanks to a mortgage broker), her payments are now $1278/month.
Meanwhile the other condo, the exact same model located just 3 floors below, was rented out by a savvy investor for $1300/month.
While the mortgage payment of $1278 certainly doesn't include condo fees ($210/month in this case) or property taxes, neither does rent pay back in the form of equity when it's time to move. Even factoring a modest 3.9% annual increase in property values, should the Buyer head to the 'burbs in two years, she could be looking at selling that same unit for $289,500, hence cashing out with a profit of $27,000 plus her original downpayment of $13,125... for a grand total of about $40,000 in equity/personal savings/whatever-you-want-to-call-it, in just 2 years.
Obviously these numbers are just an example and don't work for everyone. But if they do work for you, and you'd like to talk about buying your first condo, I'd be happy to get together and chat.