this post was submitted on 21 Nov 2023
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[–] [email protected] 11 points 10 months ago (1 children)

the cost of rent is directly tied to the mortgage rate

Who told you that?

[–] [email protected] 12 points 10 months ago* (last edited 10 months ago) (2 children)

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.

[–] [email protected] 4 points 10 months ago (1 children)

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.

[–] [email protected] -1 points 10 months ago (2 children)

The price of everything is based on demand and offer. The price of production affects the offer.

[–] [email protected] 1 points 9 months ago (1 children)

Mostly no. The major drivers of price are supply and demand, not cost and demand. However, the β€œmost profitable price” ( 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.

[–] [email protected] 1 points 9 months ago

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.

[–] [email protected] 1 points 10 months ago (1 children)

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.

[–] [email protected] 2 points 10 months ago

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

Interest rates are rising and the house-buying market is cooling off, putting more strain on rentals

The cost of rental housing is rising throughout Canada, according to Rental.ca. Analysts say rising interest rates are part of the problem.

[–] [email protected] 3 points 10 months ago (1 children)

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.

[–] [email protected] 1 points 9 months ago

If not greed, how would you describe yourself in the paragraph above?