“A+” tenants—people with high incomes and good credit—used to rent for about a year before purchasing their own homes, which would repel investors, however, they’re becoming long-term renters.
“With the mortgage rules changing, what we used to consider an A+ tenant, who would usually only stay in a rental unit for about a year and then move onto purchasing their own home, are now staying for two to four years on average,” said Crystal Ross, owner of Investors Property Management.
“It’s very good news if you’re an investor. Investors used to back away from A+ tenants because they’d have to find new tenant the following year. I think they’ve given up on the idea of owning a home and decided there’s comfort in being long-term tenant. They’ve accepted the lifestyle.”
Ross noted that the Greater Toronto Area housing market has normalized, but the new mortgage stress tests will remove about 40% of middle-income earners from the purchasing market. Coupled with a rental shortage in Toronto, they’re looking elsewhere.
“We’re seeing a lot of renters are willing to go outside big cities,” said Ross. “There is a lot of construction and building development being done on the outskirts of big cities, like Toronto and Hamilton.
Peopled aged 25-39 are increasingly putting roots down in smaller towns like Grimsby, Beamsville and St. Catharines.
That doesn’t mean Toronto’s condo market isn’t still the best real estate investment in the region.
“I think the condo market will remain strong because it’s the only market younger people can afford; it’s the first step to getting into the real estate market,” said Engel & Völkers Toronto Central’s Owner and Broker of Record, Anita Springate-Renaud. “Investors will buy them to rent them because there’s a shortage of rentals.”
Springate-Renaud is confident the market will assimilate the new mortgage rules and that market fundamentals, like the GTA being the fastest growing region on the continent, will carry the day.
Montreal has recently emerged as a hot market and Springate-Renaud says that will continue provided things don’t change.
“Montreal is still going up,” she said. “It was depressed for a long time and things would take time to sell, but now it’s a hotter in-demand market. As long as the government stays stable and the separatists don’t win, it’s going to stay strong. Montreal is a great place, a fantastic city, and a lot of people are investing there as well. There’s surprisingly a lot of development going on.”
Market showing signs of rebounding
Stress test to hit 'move-up' home buyers the hardest
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The new mortgage stress test, in addition to rapidly escalating housing prices, is keeping an increasing number of people in rental accommodations, and that’s good news for investors.