this post was submitted on 21 Nov 2023
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So⦠the cost of rent is directly tied to the mortgage rate. Are we done with rate hikes now?
Who told you that?
Well, when our glorious landlords own multiple properties with variable mortgages and rates go up, they pass on the increases to the tenants. So it's not directly tied, but there is a connection.
Not really. Rent is based on demand and landlords will take as much as the market will bear. It's pretty much independent of mortgage rates.
Case in point, rent in Southwestern Ontario exploded in 2020 & 2021, when interest rates were low and have stayed pretty level since, even with the significant increase in rates.
The price of everything is based on demand and offer. The price of production affects the offer.
Not really. In a system where demand is fairly inelastic (everyone needs somewhere to live and the only real flex is having roommates/living at home/homelessness or renting two apartments) and where the supply is currently extremely constrained, expenses are going to have next to no impact on rental prices.
For example, I was fortunately able to buy a townhouse two years ago (when interest rates were low) to live in. My mortgage is ~ $1,200/mo. Other units have been going on the rental market pretty consistently for ~$2,000/mo. Even with the increased interest rates, new landlord's would still have a net positive of ~$500/mo between the rent they receive and their mortgage payments. There might be a loss of profit, but with profits already so high, it's not going to affect rates on a macro scale.
the area where you live sounds like the exception, not the rule (and this is an article from last year): https://www.cbc.ca/news/business/rising-rent-housing-market-canada-1.6525075
Mostly no. The major drivers of price are supply and demand, not cost and demand. However, the βmost profitable priceβ ( which is rarely the highest for those unfamiliar with economics ) does increase with the marginal cost. So the cost of production does play a role.
I'm not an economist so I could be wrong, but this is my thought process about it: If a product becomes too expensive to produce for some companies, those companies will stop selling it. Less companies selling the product = less offer less offer = higher price.
Those "glorious landlords" you're referring to should have their multiple properties seized or have their financials squeezed to the point of blood. Fuck every last one of them. People have by and large turned into greedy fucks and it's disgusting.
If not greed, how would you describe yourself in the paragraph above?
That stood out to me, too. Stripping out mortgage interest, inflation is at 2.1%.
It can't completely be looked at in isolation like that, of course; part of the reason prices are lower on most things aside from groceries and housing is because people just don't have money left over for these things after paying for essentials. If mortgage interest were lower, demand for other goods would be higher and prices would rise faster.
Still, this adds support for BoC rates to stay frozen in the near term and decline in 2024.
Can I be one to say that despite all the shit on reddit that was given about the BoC not doing enough, or doing too much... So far they've done a damn good job at managing this given the fact that Jesus Christ are we dealing with once in a century issues. I will also give the Liberals props and the OPC props. We know what bad leadership looked like (see Alberta) but by and large most provinces and the country have turned out surprisingly well compared to their global partners.
Yet here in Canada on a global scale we are still prospering and doing well. I"m speaking broad generalizations here. So if you're not doing well on an individual level I hear you, it sucks and we should be doing better.