1. low interest rates
3. average household debt increase
4. average household income increase
5. lack of commitment
1. INTEREST RATES| Interest rates are low. When interest is low, positive cash flow is easy for investors. With some of the lowest interest rates in our country’s history, you would think everybody would be buying up real estate, but some other very prominent trends are preventing this... all the more advantage to investors! What if the rates rise? Fewer people will qualify for a mortgage, demand for rentals will increase.
2. DIVORCE| with over 50% of marriages ending in divorce- finances are disrupted! When a couple separates often times the home goes up for sale. It's an unfortunate reality. What does this mean for an investor? Not only does this create opportunities to purchase distress sales, but it wrecks credit and household cash flow which usually means at least one of the two resorts to renting until things are stabilized.
3. DEBT| High Interest loans: credit cards, auto loans (new or used), student loans, payday advances, unsecured lines of credit, etc… People of all ages are wrecking their credit! Regardless of how much money they may make, many are living outside of their means. BUT people need a place to live. Even though getting approved for a mortgage may be out of the question because they don't save enough for a down-payment or have the necessary credit- that doesn’t necessarily mean they don’t keep room in their budget for rent/utilities. The average Canadian household is carrying about $22,000 in debt (not including mortgages)!!!
In 2014, the average Canadian spent $1.66 for every $1.00 of income... yikes!
4.INCOME| The average Canadian household income has risen from $59,900 in 2003 to $76,000 in 2013, likely higher now. Minimum wage is higher than ever. People are making more money than ever, and can often afford rent, but as gone through in the debt section, they are unsuccessful in saving for the down-payment that could introduce them to ownership!
5. COMMITMENT| a scary word these days!
Commitment to places and people are less and less common all the time.
People are trying out new cities, provinces and country’s all the time, but without committing right away. They may move for a job, towards a new person in their life (or away from an old one), move for school, or a handful of other reasons. Most often people rent for a trial period, so in case they don’t like the area- they don’t have to worry about losing on the investment of a short term home ownership.
A more and more popular trend is moving in together without the commitment of marriage. Whether effected by divorce, weary of commitment, or another reason, often many couples move in together without marrying and without combining finances. In that situation ownership can be confusing, but splitting rent is easy
Let me know your thoughts!