If you’re looking at buying a house, then you already know that it’s one of the best long-term investments you can make. Although the COVID-19 pandemic has led to fluctuations in the housing market, studies show that the majority (80%) of Canadians still think that home ownership is a good investment. Over 56% of Canadians aspire to purchase a home in the near future.
This is in contrast to the housing market rates, which are quickly rising up again. Home prices are largely unaffordable, with the average home-buying budget being around $450,000 and the average home price being around $610,000. This data from the Canadian Real Estate Association highlights the discrepancy between spending power and buying price.
So, what’s the solution? Many Canadians are now considering moving out of cities to purchase a home. Suburban neighbourhoods, commuter cities, and even rural neighbourhoods are all in the running when it comes to the race of buying a home. Urban cities simply do not allow for easy home ownership: the houses are smaller and the mortgage rates are higher. Contrast this with non-urban areas, where the living is spacious with low down payments and mortgages, and it explains why many Canadians are moving outside of cities to buy homes.
Why is leaving cities easier now than before?
With the COVID-19 pandemic hitting us, where and how we work has become more flexible. Many Canadians are now working from home and will continue to do so for the foreseeable future. Workplaces are considering hybrid employment, with a portion of the work done at home and some in a physical office space. As the need to commute has either diminished or drastically reduced, many Canadians are leaving their small, rented houses and looking to buy homes in less populated cities.
The Benefits of Moving From a City to a Small Town
There’s so much that urban spaces offer us, from entertainment and outdoor dining to accessible shopping and public transit. However, with these changing times, the access to amenities has greatly reduced. City dwellers from Vancouver to Toronto are realizing that these conveniences are simply not worth the money and are instead learning to adapt without them.
In addition, in larger cities, it’s harder to get a bang for your buck. Young professionals are used to living with roommates to make ends meet, not to mention the square footage just isn’t adequate for most to live comfortably. Monthly mortgages are skyrocketing in addition to an already high down payment. Compare this to a small suburban town, where it’s possible to manage both your down payment as well as your monthly mortgage for the cost of rent living downtown in a major city.
Avoiding Becoming “House Poor”
In large cities, it is easier for new homeowners to become “house poor” or “mortgage poor”. The cost of maintenance and repairs that come with home ownership can be staggeringly high, causing individuals to fall back on their monthly payments. The interest rates add up and sometimes total more than the original cost of the home itself! This is the phenomenon of becoming “house poor”, which something many city dwellers should be wary of.
In suburban and commuter cities as well as smaller towns, it is easier to avoid becoming “house poor”. Mortgage rates and down payments are more manageable, especially if you’re still earning as much as you did when living in a city. In addition, the cost of maintenance and repairs is cheaper, with smaller communities offering competitive rates for homeowners. As the spaces are larger, there is less chance of prolonged wear and tear, which helps reduce day-to-day costs.
The Costs Simply Don’t Add Up
In addition, many report that city living is just too pricey to justify. For example, the average price of a home in Toronto is $1.03 million, whereas in Stratford the average price is $319,000. Include the cost of commuting, parking, food and drinks, and innumerable other small expenses, which just add up in a big city.
Moving as an Investment
Getting competitive mortgage rates is also easier in smaller towns. As you pay off your mortgage, the market value of your house could appreciate until you’re making a profit just by owning a home. Many Canadians are choosing to buy, use, and then sell homes in smaller towns. Especially for first-time homeowners who can’t quite afford their dream house yet, buying and selling property at the right time is a great investment option. The property can be sold or rented when the market appreciates, thus providing passive income that can support individuals and families for years.
Although the market is currently great if you’re looking to buy away from the cities, remember that the market fluctuates incessantly. Between July 2019 and July 2020, over 50,000 people left Toronto for smaller locales; similarly, Montreal lost over 24,000 people to rural areas in Quebec. What these numbers indicate is that while the non-urban markets are great right now, with the demand for homes in smaller towns increasing, the housing prices there are going to go up as well. With rising home prices come increased down payments, increased mortgages, and all the other factors that cause people to leave their small, pricey city homes.
If you’re thinking of joining so many other Canadians and moving outside the city, then think hard about the kind of life you want and how you spend your time. Living within the city or outside of it both have their advantages, so doing your research on which benefits you prioritize is important.
Are you interested in joining the thousands of other Canadians moving outside of cities? Reach out to our team at Canadalend for a free consultation to help get you started. To book an appointment or learn more about home equity loans, call us at 1-866-422-6536 or contact us here.