Riding out the housing crisis
Credit to Author: Baisakhi Roy| Date: Wed, 30 Nov 2022 02:32:46 +0000
With exorbitant rents and burgeoning home prices, it’s not an easy time for a newcomer renter or potential owner. Experts say that moving to smaller cities where rents are lower and buying to build equity are some of the ways to deal with the current housing scenario.
Abhay Garg
Abhay Garg says that job opportunities outside major cities like Toronto or Vancouver are few and far between, but he’s determined to explore his options.
“Toronto has become unlivable right now. Before the pandemic, I wouldn’t spare a thought when buying clothes or shoes, but now I’m always budgeting because I need that money for rent,” he says.
The Brampton resident who moved from India to Canada in 2017, works as a field technician and is sharing a three-bedroom house (with one washroom) with five of his friends, paying $540 per person. After spending up to $1,400 on gas and car insurance, and rent, Garg hardly has anything left for his expenses. Friends of his who moved to Calgary last year are advising him to do the same, given the city’s lower rents, lower taxes and a better standard of living.
“I have good work experience now so I am hoping to land a well-paying job so that I can at least have a good lifestyle,” Garg says. He is regularly applying to positions that become available in his field of expertise in Calgary and other cities in Alberta including Edmonton and Red Deer.
A housing affordability report released in 2021 by the Ontario Real Estate Association (OREA) found that 46 per cent of new immigrants in Ontario like Garg would consider moving provinces for more affordable housing. Another 42 per cent said that they were planning to move by 2023.
What can you afford?
Naween Thomas
Sri Lankan-born mortgage specialist Naween Thomas who specializes in working with new immigrants, first time home buyers and real estate investors, recommends that newcomers consider buying a home if they can afford it, but to do so meticulously, given the challenges in the current housing market.
“Every day you do not own a house when you can is a day lost in building equity. Do not try to ‘time’ the market. If you are personally in a situation to buy, do it,” says Thomas. “In the current housing market, you don’t have to deal with bidding wars, overpaying, and these are advantages in my eyes.”
Although he favours buying, he also suggests restraint. “Home ownership is not a competition and you do not want to be cash poor. Do not rush into buying a home if you are not financially ready or buy something you cannot afford.”
Praveen Kalra, Director, Canadian Settlement Operations – International Division at SaveMax Real Estate Inc., says that despite the rising interest rates and inflation, buying can be an option, depending on the location.
“Newcomers who have good jobs, families with double incomes, could be approved for as much as $600,000. Unfortunately, in the GTA one can’t buy even a condo at that price,” Kalra says.
Kalra, who’s previously worked in the newcomer settlement services sector, further explains that renters too are affected by steep home prices. “Newcomers find it hard to get rentals because they are also competing against people who’ve been here for one or two years but cannot afford to buy houses. They’re still in the rental market,” Kalra says.
Then there’s the issue of there not being enough housing inventory to match the number of immigrants who came to Canada during the pandemic and the ones expected in the next few years.
On November 1, 2022, the federal government announced its immigration plan, which will see Canada welcome 465,000 new permanent residents next year, 485,000 in 2024 and 500,000 in 2025. The gap in supply and demand is worrying. Newcomers are often found to be doling out huge amounts in rent for subpar living conditions.
Praveen Kalra
“It is absolutely devastating. You know how property for sale would have 20 to 30 offers? That trend is happening with rentals – there are four or five offers for a rental and people are bidding for these accommodations, paying huge amounts that are beyond their means,” Kalra says.
According to a recent report by rentals.ca, the average rent for all property types across Canada in September 2022 was $2,043 per month – an annual increase of 15.4 per cent. The average rent is up 4.3 per cent monthly and 21.9 per cent from the recent market low of $1,676 per month in April 2021.
“Not everyone can afford to outbid the other and often end up living in basements with no contracts in very unhealthy and unsafe conditions. Renters are known to pay upfront, six or even 12 months in advance, which is illegal. But sometimes, there’s just no choice,” Kalra says.
“I mean you have to live somewhere. That’s basic! I know people who’ve been sitting in Airbnbs and hotels for months now and paying huge amounts because they’re not able to get accommodations,” he adds.
No quick solution
Negotiating with landlords to lower the rent, seeking government-funded resources, looking out for incentives and discounts being offered by landlords and seeking out neighbourhoods where the vacancy rate is high are some of the ways that one can find affordable housing.
Organizations like The Housing Help Centre offer customized programs like subsidized housing options for permanent residents and refugees in the GTA. Initiatives like The Affordable Home Ownership program, run by the region of Waterloo, help renters with buying their first homes.
For aspiring homebuyers like Garg, who doesn’t want to rent forever, buying a home seems like an achievable goal. “However hard I work and how much ever money I earn, it won’t be enough to buy in the GTA. But according to my current research, in Calgary, in 200-300K, I could get a nice two-bedroom apartment with parking, which I can also rent out. So that’s a much better deal for me. Hopefully everything works out,” he says.
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