Apartment rentals can be an attractive alternative to home ownership depending on several factors in your life. Here, we breakdown some of the key reasons why the rental apartment industry continues to thrive and is an ideal alternative investment solution.
Affordability
Today’s housing market is experiencing unprecedentedly low mortgage rates, but property prices are increasing, creating a hurdle for renters saving for their deposit. CREA reports that the national average sale price (not seasonally adjusted) posted a 15.2% year over year gain in October 2020.
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Renters will need to save more or settle for fewer amenities. The interest savings are mainly going to those already ready to buy vs. turning renters on the precipice into buyers. Low mortgage rates also don’t make property taxes or repairs more affordable. Robin Taub, CPA, told BNN Bloomberg, “You don’t really want to get into a situation where you’re so tight that one little thing, one emergency, one unexpected expense can cause you to miss your mortgage payment.” Affordability is still a concern for many Canadians, and the demand for apartments remains.
Demographics
Both the younger and older generations are renting. The younger generation finds it hard to transition from renting to owning due to affordability and raising funds for a down payment. The Baby Boomers and empty nesters are downsizing to fund their retirement and reduce square footage and home maintenance.
Population Growth
As of July 2020, Canada’s population grew an estimate 1.1% (411,854) year over year from July 2019. This growth is down slightly from the last two years, with population growth exceeding 500,000. According to Statistics Canada, “The lower growth in 2019/2020 was mainly attributable to the border restrictions enacted in mid-March, which resulted in fewer immigrants and non-permanent residents entering Canada”.
Lifestyle Preference
Some, especially the younger demographic, prefer to rent if it provides them with more flexibility or the ability to live and work downtown. Daniel Himmel told BNN Bloomberg, “I’m not married, I don’t have kids. I really enjoy the city, the social availabilities,” he said. “That stuff is really important to me to experience at this age.” He continues, “the idea of forfeiting my life – being in a place where I feel like my day-to-day life is enriched – to say that 50 years down the road I will be more secure financially, that’s not a compelling argument for our generation, I don’t think”.
Demand for apartments continues, and they are a product of necessity. Privately held apartments can provide diversified income and may be an ideal alternative investment for your portfolio.
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