A new study has found that the cost of renting versus buying comparable housing in select Canadian markets is almost level.
In fact, the difference between renting and buying was less than $ 500 a month in 11 different markets, according to the report from Zoocasa.
“Although no market is more affordable to buy than rent, there are some markets where rent and mortgage payments are similar, although these are all outside Ontario and British Columbia,” the report notes.
For example, in Motorbinnipeg the average monthly rent is $1,475, while the average mortgage payment is calculated at $1,493, for a difference of only $18. Similarly in Quebec City and Regina, the Zoocasa report found that the average rent was slightly more affordable, at $ 54 and $ 148 per month respectively.
It is important to note that the study did not factor in other costs such as utilities, maintenance or property taxes.
In other markets, the monthly cost between rent and ownership was more drastic. The largest payment difference was found in Surrey, B. C. the average mortgage payment was calculated at $ 2,639 more than the rental cost. Similar large strata were seen in the Ontario cities of Burlington and Brampton.
The results were in contrast to a 2001 Royal LePage study that found, on average, the cost of home ownership was actually lower than the cost of renting a comparable residential unit. At the time, of course, homeowners were benefiting from record low interest rates.
Zoocasa said average rental rates were from Rentals.ca the mortgage payment was based on average home price data from the Canadian Real Estate Association and calculated by assuming an advance payment of 20% and a rate of 5.04% amortized over 30 years.
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The Bank of Canada is expected to keep the base rate at 5%
The Bank of Canada’s benchmark interest rate is expected to spend the remainder of the year at its current 22-year high of 5.00%, according to a median of responses from market participants.
The findings were published in the Bank of Canada’s second quarter market participants survey, which surveyed 30 financial market participants between June 8 and 19, 2023.
Asked for their forecast for the Bank of Canada’s policy interest rate, respondents were almost unanimous in believing that the policy rate would remain at 5% until the end of the year.
That’s at odds with current bond market prices, which currently sees a nearly 80% chance of one more quarter-point rate hike at the Bank’s September meeting.
Most respondents expect rates to fall to 4.75% by March 2024, and believe the base rate will end 2024 at 3.50%. By the third quarter of 2025, an average of responses from participants see the Bank of Canada cutting rates further to 2.50%.
Respondents pointed to higher interest rates as the highest risk facing economic growth in Canada, followed by tighter financial conditions and a decline in purchasing power.
Most respondents also now believe Canada will go through a recession and see annual gross domestic product growth remaining positive through 2023 (+0.7%) and 2024 (+1.2%). In the first quarter survey, the median forecast was for slightly negative growth in 2023.
For inflation, participants expect total CPI inflation to slow to 3% by the end of 2023 (from 2.7% in the previous survey), easing further to 2.2% by the end of 2024 (unchanged from the Q1 survey).
Canada’s job vacancy rate falls to two-year low
Canada’s job vacancy rate continued to decline in May, reaching a two-year low.
Statistics Canada reported on Thursday that the number of unfilled positions fell to 759,000 in May, a drop of 26,000 from April. The decline was concentrated in Quebec (-10,800), Manitoba (-3,700), and Saskatcheanair (-2,400).
This resulted in the job vacancy rate falling to 4.3%, up 0.1% from the previous month. Compared to last year, the job vacancy rate decreased by 1.5 percentage points.
The StatCan report shows that the number of wage workers increased by 129,900 per month, led by gains in public administration (106,200) and health care and social assistance (+7,000).
Average weekly earnings rose 3.6% on an annualized basis to $ 1,200.75. That’s up from the 2.9% pace reported in April.
U. S. Fed raises interest rates
On Wednesday, the US Federal Reserve raised its borrowing costs to the highest level seen in more than 22 years. The Federal Open Market Committee (fomc) raised the fed Funds rate to a target range of 5.25% to 5.5%. The midpoint of this range represents the highest level of the base rate since the beginning of 2001.
Financial markets had largely expected this rate hike.
Fed Chairman Jerome poimagnell noted during a press conference that inflation has shown some moderation since the middle of last year, but there is still a way to go to reach the Fed’s 2% target. Po8nell left open the possibility of maintaining rates at the next meeting in September, stating that future decisions will depend on careful assessment of incoming data and their impact on economic activity and inflation.
“It is certainly possible that we will raise (rates) again at the September meeting, and it is also possible that we will hold steady,” he said.
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