Even as interest rates have risen dramatically over the past year, homeowners have gotten hugely richer because of the rise in property values during the pandemic, bankruptcy trustees say.
Thus, in recent years, an abysmal wealth gap has been created between owners and renters, say observers.
“A gap has opened, we 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 average price of houses in Quebec remained 64% 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 rising defaults, Equifax reported in March.
Even if variable-rate mortgage holders are having a harder time making ends meet than before, “they have options,” says Pierre Fortin. He especially mentions the possibility of refinancing or selling a property.
“They have less money in their pockets, but they are still richer,” he explains.
Nor should we forget, he emphasizes, that 45% of home owners in Quebec do not have a mortgage. They are therefore less affected than others by rising interest rates.
Difficult for young people
At the same time, the average rent for a four-and-a-half-room apartment in Quebec rose by nearly 20% between October 2019 and October 2022 (from $815 to $973 per month), according to the Housing and Mortgage Corporation of Canada (CMHC). ). This situation creates financial pressure on tenants.
“The rent price is terrible!” judges Stéphanie (fictitious name), a 23-year-old who went bankrupt in 2020.
He says he has friends who have to work two or three jobs at once to meet their obligations.
A study by specialist firm Point2 highlighted in June that it was becoming increasingly difficult for first-time buyers to get into property.
In 36 of Canada’s 50 largest cities, renters simply no longer have the income to buy entry-level property (start at homein English).
However, owning real estate does not offer foolproof protection against bankruptcy.
Mathieu Roy, liquidator of M. Roy et Associés, predicts that bankruptcy 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, close to 640, people who have good levels of employment, assets, but that with inflation, the significant rise in rates of interest, are in debt at the moment. The world is filling its cards,” he says.