Taking Advantage of a Renter’s Market
The property market’s slow yet steady recovery is not a result of new home-owners entering the market, but instead can be attributed to the purchases being made by investors to capitalize on the market’s vulnerability and the current amortization restrictions, which were tightened up last year. Though the market seems unfruitful for new home-owners, investors are cashing in while contributing to market recovery.
The unfortunate circumstances of the adjusted amortization restrictions (increased down-payments and shortened amortization periods) have resulted in this paradoxical recovery, wherein existing owners are the ones who appear to be scooping up properties at the affordable rate which they’ve been lowered to. Purchasing a second home to reap the benefits of a mortgage that pays itself while increasing equity and (potentially) profiting from the value increase of the property.
New home-owners, as previously stated, are in a bind when considering the adjusted mortgage restrictions. Instead of being able to contribute to the market’s recovery directly, these parties are indirectly supporting its recovery by their participation in the renting of these secondary properties from investors.
The nature of the market’s recovery seems rather cyclical in this sense; investors buy the properties, and potential buyers instead rent from these investors and property owners while contributing to their mortgages and increasing the value of their properties. Unfortunately, this divide is one that may not be sustained for long, as every co-dependent relationship will eventually reach a threshold for its functioning potential.
Without loosening the belt on mortgage restrictions, we can expect this cycle to continue until it flops. Do you feel that the mortgage restrictions should be revised to encourage new buyers to enter the market, or should we continue down this path benefiting only the investors? Share your thoughts with us on Twitter @enviromint.
image courtesy of EraPhernalia Vintage