Credit to Author: Baisakhi Roy| Date: Sun, 07 Apr 2019 12:32:04 +0000
Impossibly high real estate prices, unreasonable rental landlords and credit history woes are just some of the house hunting horrors that newcomers face in Canada
Such is the ordeal of finding a home to rent or buy in Canada that when we zeroed in on a couple of newcomer families who were in the midst of house hunting, they did not really want to speak about their experiences. They were simply too stressed out!
“The first eight months in Canada were a nightmare for us,” recounts Satish Pandya (name changed for privacy), who bought a home in Mississauga this fall with his wife and five-year-old son. “Initially we thought about renting because we were told that we do not have a strong credit history in the country to qualify for a mortgage. But we were stunned by the steep rental rates — we were paying $2,100 for a two-bedroom apartment!” he says.
After much debate with his wife about putting down a healthy amount for their down payment and being realistic about what their first home should be (he wanted a detached, but his wife convinced him to go for a less lavish semi), the Pandyas finally settled on a semi-detached home in a reputable school district. “At least we aren’t bleeding money on rent. Though the monthly mortgage payments are going to be slightly stressful, we are hoping to manage,” he says.
Some interesting stats came up recently in the annual mortgage consumer study conducted by the Canada Mortgage and Housing Corporation (CMHC); 85 per cent of first-time homebuyers reported spending the most they could afford on their property. This means a lion’s share of their monthly income, leaving little for other expenses. Despite stretching themselves to the limit, 76 per cent of the respondents said they were determined to make their monthly mortgage payments.
“Real estate is a great investment and it is the immigrant dream to buy their own home in Canada. Times are difficult as prices are rising from coast to coast. But my mantra is, ‘Don’t wait too much; do your research, get your information in order … and just buy it!” advises Brazilian-born mortgage broker Andreia Guariento.
That may be easier said than done.
The price of real estate is high
According to the recent Demographia International Housing Affordability Survey, Vancouver housing is the second least-affordable in the world after Hong Kong. Toronto isn’t that far behind.
Discouraged by these high rates and not being able to qualify for mortgages, newcomers and young Canadians are flocking to rent. But the surge in the cost of homes and the number of renters have paved the way for unreasonable demands and increasing rental rates from landlords. A Toronto realtor not wishing to be named relates how landlords have been asking for six months’ rent in advance as opposed to the standard first and last month’s rent for the deposit.
“This young family from Sri Lanka was all set to move into a downtown condo in Toronto and it was a hole in the wall, with space fit only for a bachelor, but he had a family of three. He had to shell out $300 extra because he was a new immigrant. We were told it was because he was new to the country, with no guarantee of employment, though he was working with a company downtown at the time. Inflating the rent for newcomers is just adding onto the stress of renting a suitable home, especially when rates are skyrocketing,” says the realtor.
Affordable housing, for both renting and buying, has been a hot topic for a while, and solutions have been hard to come by. In this year’s federal budget, the Canadian government launched the First-Time Home Buyer Incentive, which will see CMHC provide interest-free loans to eligible first-time homebuyers, equaling 10 per cent of the purchase price of their newly built home or five per cent of a resale. The government has earmarked $1.25 billion toward this “shared equity mortgage” strategy, which is meant to help first-timers take out smaller mortgages and lessen their monthly payments.
But many feel that this measure, though welcome, is still not enough help for newcomer buyers. Top 75 finalist Garry Bhaura, president of the Toronto Real Estate Board (TREB), Canada’s largest real estate board feels more can be done. “It is encouraging that the government is also proposing to increase the limit on the RRSP Home Buyer’s Plan from $25,000 to $35,000, something which we have advocated for many years,” he says. The RRSP plan allows first-time homebuyers to withdraw money from their RRSP for a down payment without paying tax. “Nevertheless, this budget leaves some important issues unaddressed, including the mortgage stress test and restrictions on 30-year mortgage amortizations,” he says. Currently, you can only amortize a mortgage for 25 years.
But, for families of a lower income level, affordability is just the tip of the iceberg.
Multiple housing barriers
According to Samar Kassem, who works with the immigrant community in Surrey, B.C. on settlement and housing issues, finding a home for newcomers is a tedious process. And particularly for those who face difficulties communicating in English or who are of a certain race and colour.
“Immigrants are vulnerable with added challenges when it comes to renting and buying. The families I work with have limited financial resources, they have big families, some of them are availing of government support and they have languages barriers. All these factors work against them when looking for a home. It’s heartbreaking,” says Kassem who works with non-profit agency DIVERSEcity Community Resources Society.
Kassem speaks emotionally about a client from Africa who was looking to rent. She had all her documents in order, her deposit amount was ready, but she was rejected — Kassem believes because of the colour of her skin. “Rentals often nitpick and discriminate on the number of kids in the family. They say that it would be too noisy. Or, if they are from another country, they question if they would know how to operate the washing machine. Some of the reasons are downright ridiculous. We work with newcomer families facing these barriers, educating them about their rights and responsibilities, and also coaching them one-on-one on how to communicate with potential landlords,” Kassem says.
From newcomer to homeowner
As the Pandyas example above shows, home ownership is an ultimate goal for many immigrants, allowing them to put down permanent roots in their new country. Data shows rates of homeownership among immigrants is high, and Gauriento says, with planning and thorough research, it’s achievable. Understanding the numbers behind it is important.
“If buying your first home, remember that you don’t have to go all out. Be realistic and run the numbers to make sure that you can make the monthly payments. And do your research,” says Guariento. She learned from her own harrowing experience of buying her first home in Canada; she and her husband didn’t have any knowledge of the intricacies of the system and after the bank declined their mortgage application, Guariento set about learning everything there was to know about establishing a credit history, financing and mortgages.
Kassem agrees that financial literacy is critical when it comes to buying a home in Canada. “What I learned from my personal experience is that getting all the relevant information is very important. Speak to more than one financial professional and compare quotes from them. Read as much as you can about the process and seek out local financial institutions who provide workshops for newcomers. Be patient and stay motivated to achieve your dream of becoming a homeowner,” Kassem says.