“The chasm has opened, we can see it”: homeowners have become enormously richer compared to renters

Although interest rates have risen dramatically over the past year, homeowners have gotten enormously richer thanks to the rise in property values ​​during the pandemic, bankruptcy trustees say.

Observers assure that in recent years a huge wealth gap has been created between property owners and tenants.

“A gap has opened, we can see it. Two classes of people were created,” notes Pierre Fortin of Jean Fortin et Associés.

Despite the tightening of the real estate market from mid-2022, the median home price in Quebec remained 64% higher between January 2020 and June 2023, according to the Professional Association of Real Estate Agents of Quebec (APCIQ).

As a result, mortgage holders are currently less affected by an increase in defaults, Equifax reported in March.

“Before the pandemic, every fifth person who came to us had a house. Now the owners represent only one in 20 customers.”

Jonathan Roy, administrative director at Pierre Roy et Associés

Photo Photo taken from the website of Pierr Roy & Associés

Although variable-rate mortgage holders are having more trouble making ends meet than before, “they have options,” says Pierre Fortin. In particular, it mentions the possibility of refinancing or selling the property.

“They have less money in their pockets, but they are still richer,” he explains.

We must also not forget, he points out, that 45% of Quebec homeowners do not have a mortgage. They are therefore less affected than others by the increase in interest rates.

Difficult for young people

At the same time, the average rent for a four-and-a-half-bedroom apartment in Quebec increased by nearly 20% between October 2019 and October 2022 (from $815 to $973 per month), according to the Canada Mortgage and Housing Corporation (CMHC). ). This situation creates financial pressure on tenants.

“The price of rent is terrible!” judges Stéphanie (fictitious name), a 23-year-old young woman who went bankrupt in 2020.

He says he has friends who have to work two or three jobs at the same time to meet their commitments.

A study by specialist firm Point2 highlighted in June that it is becoming increasingly difficult for first-time buyers to obtain a property.

In 36 of Canada’s 50 largest cities, renters simply no longer have the income to buy entry-level real estate (home starterin English).

However, owning real estate does not provide reliable protection against bankruptcy.

Mathieu Roy, administrator of M. Roy et Associés, predicts that insolvency proceedings should begin to affect more homeowners as mortgage renewals are carried out at higher rates.

“I think in two years we’ll start to see more proposals from people in Blainville, Mirabel, near 640, people who have good levels of employment, assets, but who with inflation and a significant increase in interest rates are going into debt at this point. The world is adding to its cards,” he says.

Consequences of bankruptcy

  • Negative impact on credit score: credit score is reduced to R9 level, the lowest level. This makes it difficult to get loans and they are offered at much higher rates.
  • Bankruptcy information remains on the credit file for six years for a first bankruptcy and 14 years for a second bankruptcy.
  • You are not free from all your debts. You will have to agree to pay a monthly amount to your creditors.
  • Obligation to report your monthly income to the administrator.
  • Two mandatory financial consultations with your manager.

Source: debts.ca

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