Updated: Feb 13
When news reports present a consistently gloomy view of rising rates and the distinctly negative impact on the housing market, it’s easy to feel discouraged. But the news frequently doesn’t tell the full story, especially when it comes to the opportunities presented by uncertain times. Historical evidence indicates that for most Canadians, a housing market investment remains the most important wealth-creation decision they will ever make, providing a resilient foundation with leveraging opportunity to build out a strong portfolio.
How it stacks up
The Bank of Canada’s most recent rate increase of 0.75% markedly slowed the housing market. With speculation of more rate hikes to follow, fewer properties are available and potential buyers are very carefully considering where and when to invest.
Simultaneously, a shortage of rental units has driven up rental prices and has potential renters clamouring for fewer units. In just 13 months, rental rates have increased by a whopping 16.8%, including a 13% increase for single family homes, 7% for condos and 5.5% for apartments. As demand for rental units continues to surge, the upward trend for average rent prices is likely to continue, creating an opportunity for those wishing to expand an existing portfolio of rental properties, and for first-time rental property investors.
Compared to just a few months ago, rental properties may be available at lower prices, and expected cash flow from rental investments may be higher. The currently slower market also provides more time for investors to find the right rental property at the right price, and to carefully consider financing options in alignment with their personal wealth-building goals.
For existing homeowners feeling the pinch of rising rates and inflation, it’s also a uniquely opportune time to consider creating a rental property within their own home. Compared to a year ago, it’s relatively easy to find qualified tenants who are willing to pay higher rental rates for in-home apartments, resulting in potentially increased positive cash flow, with lower effort for the homeowner.
Whether you’re interested in a new home, a rental property or a renovation to create or upgrade rental units, mortgage restructuring can help mitigate the challenges of cost-of-living increases while enabling you to achieve your goals. I look forward to customizing a mortgage solution that helps you take advantage of these opportunities.
Hold that rate!
The next Bank of Canada interest rate announcement is a few weeks away and another rate increase is widely anticipated. If you’re considering a rental property purchase or a renovation to create a rental suite in your home, a pre-approval is a smart first step. You’ll have a better understanding of what you can afford and you’ll also get a rate hold for up to 120 days which means you’re protected from possible rate increases.