this post was submitted on 28 Mar 2024
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Young people paying 'astronomically living expenses': insolvency trustee (www.bnnbloomberg.ca)
submitted 7 months ago by [email protected] to c/[email protected]
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[–] [email protected] 58 points 7 months ago* (last edited 7 months ago) (22 children)

Is anyone else annoyed by the advice that young people should give up hope of paying their own mortgage for their own home in favor of paying their landlord's mortgage via rent? "People need to shift the idea that to be successful you have to own a home. It’s just not going to be in the cards for some people, and they’re in a worse position for trying to own a house,” she said."

I say that instead of telling young people to give up on goals we should, as a nation, protect owning a home as if it was a basic necessity and do something about large %'s of homes/condos being owned by investors. It was possible to buy a home on a single income just a few generations ago. I'm sure it can be again if we make housing security a priority.

[–] [email protected] -3 points 7 months ago* (last edited 7 months ago) (17 children)

I don't think that's the advice. Rather that renting can be significantly cheaper and less risky to your savings in the current market. Here's an anecdote from where I live. If you were to buy the unit I live in today, you'd have to pay $3700/mo in mortgage, $1000 in maintenance, and $250 in taxes. That's $4950/mo to "own" this place. Instead you could rent it for $3200. That's $1750 difference. That's a lot more than what's going to be going towards your principal, your equity in the purchase case. Out of the $4950/mo, only $860/mo would be going towards equity. Everything else goes in someone else's pocket. The renter would be able to stash more money than you till your 13th year in the mortgage. If this is the reality you're looking at renting is significantly cheaper. I think that's what the advice is about.

[–] [email protected] 2 points 7 months ago (2 children)

$1k in maintenance is rather a lot.

[–] [email protected] 1 points 7 months ago

Ours in 2 bedroom condo is about $450 to the strata for building maintenance, but then there are in unit maintenance like appliances breaking, etc

[–] [email protected] 0 points 7 months ago* (last edited 7 months ago) (1 children)

Not in my experience in the GTA. The cheapest all-inclusive maintenance I'm aware of is in the $600 area and that's for 2-bedroom units in much, much worse building. Larger 3-bedrooms (1200-1500 sq.ft.) in decent buildings cost $800-$1200. Whenever I see cheaper maintenance for such units it typically doesn't include hydro/water. Let alone Internet and cable.

[–] [email protected] 3 points 7 months ago (1 children)

it typically doesn’t include hydro/water. Let alone Internet and cable.

I have literally never lived anywhere that had included utilities. Nowhere I have ever rented in 24 years of renting has done literally any maintenance per month. It's basically "Did you water heater explode?" They always use some family friend they pay 50 bucks to cut a hole in the wall, replace a plastic pipe, and then just screw in a cover over it.

Rather that renting can be significantly cheaper and less risky to your savings in the current market.

I can't tell if you're joking or not.

The value of owner-occupied homes grew by almost 40% between 2016 and 2021.

While both owning and renting come with a cost, those who own their home have been lucky enough to offset those costs by way of a significant increase in the value of their homes. That isn't the case for anyone who rents. Worse still for renters, the average cost of keeping a roof over their head has increased by more than what those who own have experienced. The average cost for shelter among renters grew by 17.6 per cent in the past five years, from $910 a month, on average, in 2016, to $1,070 in 2021.

Get out of here with that 'oh woe is the landlord' garbage.

[–] [email protected] 1 points 7 months ago* (last edited 7 months ago) (1 children)

I don't think you understand what I'm saying and what you cited here doesn't contradict any of what I said. Perhaps I'm not explaining well enough. Back in 2016 I had no doubt that I would be buying if I had the money to.

those who own their home have been lucky enough to offset those costs by way of a significant increase in the value of their homes

That said this part is simply false for people who own just one property - the one they live in. If you own a 1-bedroom condo which went from 400K to 800K between 2016 and 2021 and want to take the difference, you have to sell it. Great, you have 400K extra. Now where would you live? Unless you're moving to a less expensive area or downgrade (to .. a studio?) you have to buy another 1-bedroom condo. Guess what, that also went from 400K to 800K between 2016-2021, so the extra 400K you made is gonna go to cover that. Price appreciation only makes money if you switch to living somewhere cheaper, in smaller property or a cheaper location; or if you buy an additional property that you rent.

Get out of here with that ‘oh woe is the landlord’ garbage.

We're talking about what's better for a person looking to house themselves via renting or buying, not sure what you're going on about.

[–] [email protected] 1 points 7 months ago (1 children)

That said this part is simply false for people who own just one property - the one they live in. If you own a 1-bedroom condo which went from 400K to 800K between 2016 and 2021 and want to take the difference, you have to sell it. Great, you have 400K extra. Now where would you live?

I don't know, but based on your previous comment where you said you'd save about $1700/mo renting you'd be 15 years of savings ahead of the renter.

[–] [email protected] 1 points 7 months ago

My previous comment ($1700/mo) speaks of the status quo today and as I said in other comments it doesn't bet whether the market would go up or down from here. It considers a sideways market.

The scenario where a condo doubles in price between 2016 and 2021 already has embedded in it the buyer winning the bet that the market would go up. I was merely clarifying the point that these savings aren't realized unless the buyer changes accomodations for something cheaper, or as you point out, begins to rent. The article states it as if this money is available to spend when in the vast majority of cases it never becomes available.

Personally I did bet the market would go up back in 2016. If I have to bet today .. I cannot picture how condos that were 400K in 2016, which are 800K today would become 1600K in 2031. We're already at the point where the median household in Toronto has to pay 45% of its gross income to own the median condo, not a house. The median income has to increase significantly to sustain significant further growth in my opinion at this point. At 2% interest, the 45% number goes down to 32%, so lower interest rates are probably gonna pump it a bit higher, however inflation has already eaten up quite a bit of income so I think the effect would be softer than the typical.

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