Some Hamilton renters choosing condos as starter homes
Monthly mortgage payment equivalent to rent in central part of Hamilton, report finds
Hamilton's tight rental market has some tenants jumping to condos as their starter home.
With the carrying charges of a basic condo close to the rent charged for a two-bedroom apartment in some neighbourhoods, the switch is making more sense for more people.
Canadian Mortgage and Housing Corporation's latest rental market study says that's what's happening in the central part of the city.
Given that most people would prefer owning their own homes, that's sufficient reason to encourage people to move.- Abdul Kargbo, senior analyst, CMHC.
As of October, the average mortgage payment for a condo in the central part of Hamilton is $752 a month, the lowest across the Hamilton census metropolitan areas, which covers Hamilton, Burlington and Grimsby, according to the latest report from the CMHC.
In comparison, it costs about $775 a month on average to rent a two-bedroom apartment in Hamilton Central East.
"The difference is not significant enough, so given that most people would prefer owning their own homes, that's sufficient reason to encourage people to move," explained Abdul Kargbo, senior analyst with CMHC, Canada's national housing agency.
The affordability of the condos in the central part of Hamilton compared to the rest of the region is behind the current trend of renters moving out to become homeowners, Kargbo said. CMHC's 2013 rental market report also noted that the trend is more prevalent in the central part of Hamilton than in other areas.
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This unique trend also explains why the rental vacancy rate in the area remains largely unchanged, while the rest of the Hamilton CMA experienced a 12-year low, Kargbo said.
CMHC's latest rental market report, released earlier this week, showed that the rental vacancy rate in Hamilton CMS dropped to 2.2 per cent in October 2014, compared to 3.4 per cent a year ago. It has reached its lowest level since 2002, when the rate was 1.6 per cent.
Do your homework
But are affordable condos and the transition from tenancy to home ownership necessarily good news? Larry Huibers, executive director of the Housing Help Centre of Hamilton, said potential buyers still need to exercise caution.
"Sure, home ownership remains the Canadian dream," Huibers said. "If you can gain an equity position and grow your equity, that's good for everybody. If you purchase an asset and it becomes a depreciating asset, that's not a good buy."
One thing that can help potential home buyers make the decision is to consider the age of the property they are interested in, Huibers said. The value of a converted condo in Hamilton could be drastically different compared to that of a brand new lakeside condo Hamiltonians see when they drive to Toronto.
"If they converted a 40-year-old building and now call it a condo, that's quite different than [the Toronto condos]," Huiberts said.
Potential buyers also need to consider the costs of owning a home on top of the monthly mortgage payment, such as down payment and condo fees, Huibers said.
"You just need to make sure you're doing your homework if you're going to move into ownership," he said.