Is the dream of home ownership and debt-free retirement out of reach for many?
Recently, the Ontario Real Estate Association conducted a poll on renters on the topic of home ownership. Approximately 70% of the respondents indicated that they have the intention of purchasing a home rather than renting.
An interesting fact was that 81% of respondents thought that it’s more difficult to own a home now than in previous generations and 89% thought that it would be more difficult in the future.
I want to discuss a couple of ideas on this topic to display just how these same feelings most likely resonate right across the country. The affordability of housing has to be kept under control and many factors need to be taken into consideration such as an aging population and job creation.
We have been experiencing quite a low interest rate environment for some time now which has bolstered economic activity, but we need to ensure that once rates go up and affordability declines, that those who are spending now are able to ride the wave once rates normalize again.
Moving forward, inflation is another point to consider. We are seeing a constant hike in fuel prices as well as the cost of food. Along with a sputtering global economy, things like geo-political influences and natural causes such as the earthquake in Japan affect us at home and in a big way.
Even the new accounting rules are affecting our lives. Basically, the new International Financial Reporting Standards (IFRS) means that lending institutions are required to include any securitized assets in their balance sheets when they are calculating things like capital ratios. Ultimately, this is more costly for the institution, and therefore, for the client. We have actually seen lenders increase their fixed rates and now the discounts on variable/adjustable mortgages have been cut by some lenders over the past few days.
Another key point of the survey is government intervention. Many respondents felt that there should be grants and tax incentives to help first time homebuyers. However, there is the Home Buyers Tax credit for first-time home buyers in the amount of $5000. Also, there is the Home Buyers Plan in which first-timers can use their RRSP’s towards the purchase of a qualified home. Some may say that it isn’t enough and who can accumulate that amount in RRSP’s, but it goes to show that if you cannot afford the down payment and weren’t disciplined to save, then you’re probably not ready for the responsibility of home ownership. However, you can’t assume everyone is alike.
Also, recent studies by Statistics Canada shows that 1/3 of retired citizens are in some form of debt. Couple this with inflation and minimal retirement income support from the government, and it doesn’t paint a pretty picture for our aging population.
It may not be actual housing debt in all cases, but just look to the future. If young families today are struggling for home ownership, doesn’t this put them further behind when it comes to retirement planning?
All I am saying is that we need to be cognizant of the future. It’s fine for homeowners that their values are skyrocketing (as long as they don’t borrow to the tilt), but for those trying to crack into the home ownership game, it’s much harder as prices climb, rates go up, and wage increases are marginal.
How difficult do you think the dream of home ownership and debt-free retirement is to reach?
Not much…………….lets talk and make turn your dream in to a reality!!!!
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This blog communication is for public awareness and public responsibility, for client and customer benefit and best interest in mind. Some conditions apply
Vijay Gandhi is an Re/max Real Estate Sales Rep. & independent mortgage planner- industry insider & CENTUM Agent. If you are purchasing, refinancing or renewing your mortgage, contact Vijay or apply for a Mortgage Check-up to obtain the best available rates and terms.
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