Even though interest rates have increased dramatically over the past year, homeowners have become enormously richer due to the increase in real estate values during the pandemic, bankruptcy trustees note.
An abysmal wealth gap has thus been created in recent years between property owners and tenants, observers assure.
“A gap has opened up, we can see it. Two classes of people have been created,” remarks Pierre Fortin, of Jean Fortin et Associés.
Despite a tightening of the real estate market since mid-2022, the median price of houses in Quebec remained up 64% between January 2020 and June 2023, according to the Professional Association of Real Estate Brokers of Quebec (APCIQ).
As a result, mortgage holders are currently less affected by the increase in payment defaults, Equifax reported in March.
Even if holders of variable rate mortgages have more difficulty making ends meet than before, “they have options,” says Pierre Fortin. He notably mentions the possibility of refinancing or selling a property.
“They have less money in their pockets, but they are still richer,” he explains.
We must also not forget, he emphasizes, that 45% of home owners in Quebec 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 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.
She says she has friends who have to work two or three jobs at the same time to meet their obligations.
A study by the specialist firm Point2 highlighted in June that it was increasingly difficult for first buyers to access property.
In 36 of the 50 largest cities in Canada, renters simply no longer have the income to purchase an entry-level property (starter homein English).
However, owning real estate does not provide foolproof protection against bankruptcy.
Mathieu Roy, trustee at M. Roy et Associés, predicts that insolvency proceedings should start to affect more homeowners, as mortgage renewals are done at higher rates.
“What I predict is that in two years, we will start to see more proposals from people from Blainville, Mirabel, near the 640, people who have good employment levels, assets, but who with inflation, the significant rise in interest rates, are going into debt at the moment. The world is refilling its cards,” he says.
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2023-11-11 14:05:38
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