By Tom Albrecht | Aug 26, 2017 | Buyers Advice
If you’re new to town, or thinking about moving to the “Great White North”, then you’ve probably heard horror stories about the cost of living in our region!
A member of the public reached out to us this week and wanted to get a sense of what it might cost (monthly) to own a home here, so I decided that this week’s post would simply answer that question.
Fort McMurray is relatively expensive compared to plenty of places, but in recent years, home costs here have adjusted down, while, in much of Canada, prices have risen. This has taken some of the sting out of Fort McMurray home ownership.
That being said, there are many costs, related to the actual owning of the home, which have been rising, and therefore, somewhat offsetting those lower home prices.
Let’s look at some of these costs, starting with the mortgage!
Today, I find that the most common mortgage that my buyer clients secure look like this:
25-year amortization 5-year fixed rate 15% down payment
I think, in part, this is due to tighter federal lending rules, but also because during harder times, there has been a resurgence of prudence - a new-found financial conservatism if you will (we always support careful thought!).
$600,000 is what you could expect to pay if you were going to purchase a brand new, fully developed “jewel box” 1,500sqft 2-storey home with a double detached garage in the rebuild area of Stonecreek (north of the bridge).
I took a poke around the RBC online mortgage calculator and it tells us that a mortgage on a $600,000 home for with the terms listed above would cost $2546.15 per month. Eric Dunham, RBC mortgage specialist, can be contacted through the page we have made specially for potential buyer clients.
That’s now, but what about the future? Well, it’s a double-edged sword:
On the one hand, home prices are falling.
On the other hand, the general consensus is that mortgage rates are due to go up. If they rose 75 basis points (e.g. if we plug in an extra 0.75% into RBC’s mortgage calculator), then in 18 months, for a $600,000 home, the mortgage payment might be $2,754.98.
Based on the average home falling to $550,000, however, assuming the same mortgage terms, despite the higher interest rate, the monthly payment would remain relatively unchanged from today at $2,525.40.
The first thing to clear up is that, unlike in most Canadian towns, cities, and municipalities, there is ONE municipal tax rate for residential properties in Wood Buffalo.
Annually, city assessors estimate the value of homes and multiply their estimates by this tax rate (known as the “mill rate”).
The other significant piece of information to digest is that today and for all years in recent memory, the residential municipal tax rate has been extremely low compared to the tax rates of most other local governments throughout the nation. This is because the value of commercial and industrial assets in the region are so high that huge sums have been levied on businesses that have operations in the tax jurisdiction.
For 2017, the total tax rate which a residential property owner pays is 0.474% per annum (0.039% per month). For a $600,000 home, this would be $236.85.
Through Bill 21, The Alberta Government is attempting to make sure taxes on businesses are relatively stable compared to residential taxes throughout the province. The consequence of this is that if the bill is implemented without exception, then either commercial/industrial tax rates would need to come down, or residential ones would need to rise (more likely both). While Bill 21 is a provincial regulation, it is a hotbed issue locally because it would impact local residents and the municipal budget negatively. Local politicians vying for votes have different ideas about how to avoid or mitigate this.
In the worst case, the local municipal tax rates could at least double over 5 years.
When costs of homeownership increase significantly and quickly like this, they can negatively impact overall demand for homes and therefore prices (all other things being equal).
My take? Watch for the introduction of different tax rates for luxury properties, etc. I’d be surprised if home owners escape fairly significant increases in the tax rate. Who knows!
Clearly, these issues are something that local homeowners and potential home buyers will probably be keeping a close eye on.
You can learn about Bill 21 here.
But what about the future?
Utility costs are set to rise modestly due to the carbon tax (they could fall if it is scrapped). You can learn about the tax and rebate here:
Homes built under last fall’s new building code (that is, all new homes) have higher R-values (they are better insulated) and this tends to bring down heat loss/gain and therefore costs associated with heating or cooling your home.
Here’s how Alberta’s carbon tax worksThe government pegs the indirect costs for higher prices on goods and services at around $50 to $70 per household this year. Already some companies have alerted clients of higher prices due to the carbon tax.
Around 60 per cent of households will get a rebate. Full rebates will be provided to single Albertans who earn $47,500 or less, and couples and families who earn $95,000 or less.
Approximately six per cent of households will get a partial rebate. The income levels for a partial rebate are up to $51,250 for a single person, $100,000 for a couple, and between $100,750 and $103,000 for a couple with children.
The full rebate amount is $200 for an adult, $100 for a spouse and $30 for each child under 18, for up to four children. Single parents can claim the spouse amount for one child, and the child amount for up to four more children. read more at edmontonjournal.com
On balance, let’s say that the $350 cost might move to $400 per month.
We recommend getting quotes from several energy suppliers before committing to a plan.
Hot off the press: These costs are slated to increase effective September 1. For full details, check out this Fort McMurray Today article.
Typically, older homes with more heat loss (bungalows, bi-levels with larger roof footprints, heated garages with on-grade slabs) cost more. So do homes with specific features that add insurance risk (wood burning fireplaces).
The other noticeable trend in the above costs is that many of them are likely/set to increase over the coming years. This may, in turn, reduce demand for homes and prices.
Depending on the home you choose, and depending on your own choices (for example insurance), the above list may not be a complete one, so do watch out for additional costs. Check out this handy calculator from the Canada Housing and Mortgage Corporation if you don’t want to miss any.
Budgeting is a really helpful part of your market research because once you and your family/financial advisor have discussed monthly budgets in detail, then you can calculate the price range of homes to look at that will deliver properties that satisfy that monthly budget!
Buying a home is a thrilling journey so enjoy the ride! Please do look after yourselves and know that if you and yours need quality advice, we have specialist buyer’s agents here to help.