Mortgage 101 – Student Mortgages Unlocked

Dan Ahlstrand and Clinton Wilkins discuss the challenges of student housing in Halifax, noting the high cost and limited availability.

Dan Ahlstrand
Hey, welcome back to Mortgage 101. I’m Dan Ahlstrand, filling in for Todd this month, and he, of course, is Clinton Wilkins. We’ve been having a conversation about the market and what’s happening out there. It’s a busy time of year. Coming into the studio today, I got to walk through downtown. I’ll get down here a lot because of the studios we have.

Clinton Wilkins
I know, up in the north end. I mean, back to school is a wild time; it’s busy.

Dan Ahlstrand
There are a lot of young people around, and young people are obviously getting back into school once we get through any kind of labour situation that there may be. I can tell you that not all, not all the kids are here. They’re just may not be going to all of their classes as of yet. That all being said, Clinton, we know that that school comes with a bunch of different expenses, tuition, books, meal plans, recreational stuff, correct? What are you experiencing on your end of things when it comes to students and student housing?

Clinton Wilkins
There was a time, Dan, when a lot of parents were really getting into that marketplace to be able to buy a property so their kids could live in it, maybe get some roommates. I don’t know if that trend’s continuing, just because the cost of real estate is so high. I think more of this, we’ll call it student housing, is being sold. I’m seeing it on MLS. I’m seeing these properties. You can tell what student housing was like. I think that version of housing is shifting away, partially because that was very expensive. And even at a two-bedroom apartment at $2,500, I think there’s been so many new units coming on board. It’s kind of a vacuum. It’s sucking up some of this lower-quality stuff into nicer stuff. So I mean, there is more housing opening up. The one thing I can tell you, fewer foreign students are coming to Halifax. That is mandated by the government, and I think that has hurt some of these small landlords, and it will eventually drive the cost of housing for students down. The more availability you have, eventually, it’s a race to the bottom. Everyone wants to get their rooms and their units rented. So, in a couple of years, I think it’s going to be a different story in Halifax, but the mandate from the government may change again, right? As we know. The nice thing is, we’ve had a lot of new units coming on board here, a lot of new apartments coming on, but we’re still getting calls every day from parents wanting to buy properties for their kids.

Dan Ahlstrand
And use that for four years, the average length of school, I was there a little longer, I too, but we’re here now. But we’re here now. We got through it. But if you’re going to use it for four years, and you do the math, and then you hopefully sell that condo at the end of that. Does that make financial sense? Is it cheaper, or is it just is it worth it for four years?

Clinton Wilkins
I don’t know some of the people that I’m talking to now, their kids are entering an undergrad for example. They think this kid may go on to medicine or dentistry. They may need this unit for 10 years, 12 years, and they can’t even fathom paying $2,500 a month in rent to nothing, which is going to go up 5% every year. They cannot even fathom that. Plus, they want a secure place for their kid to live. And when you rent, you’re really at the mercy of the landlord. You don’t have control. But when you own it? Yes, maybe the Mortgage payment, plus the property tax, plus the condo fee, might equal more than 2500, but you’re paying down the Mortgage, and hopefully that property is going to appreciate. And that’s what these parents are banking on. They’re really banking on it as an investment. And some of them have talked to me and are like, If my kid does good. I’m gonna add this kid to the title and give them all the equity in the property, basically, like, they’re gonna get a gift. I had a call just today, and we looked at three different condos and, like, kind of ran a few of the numbers. Like, well, this one, the condo fees are 1800, that’s probably not gonna work. This one, the condo fee is 500, which might be more palatable. But then we’re looking at the kitchens and the bathrooms, and like, my kid likes and is used to a nicer place, but this may be better, especially for them, to be in a condo compared to being in student housing or being in a brand new building, to be like, they don’t know what real life is.

Dan Ahlstrand
Student Housing was part of the experience, wasn’t it?

Clinton Wilkins
I mean. I’ve done it and I went. It’s all in my book. I lived the first year in student housing, and then I bought a house, but that was back in the early 2000s, we’re talking like 25 years ago. And if you had a heartbeat, you could get a Mortgage back then. Obviously, it’s a different, whole different story. But you could buy a new construction property in 2001 or 2002 for like $170,000.

Dan Ahlstrand
Clinton, let’s focus on students who are maybe in their third year, maybe in their fourth year, maybe have gone through the master’s program, or they’re gonna graduate. Maybe we’ll leave the doctors out of the discussion, but those in other programs, what is your advice to students who are graduating have an exorbitant amount of student debt, who want to get into the real estate market? Is it best to try and offload as much student debt as you can before you add more, like a house? Or can you do both at the same time?

Clinton Wilkins
I think you can do both. You need to have the asset, and you need to pay down the debt you but you also need to have the income. So it’s really kind of that trifecta of a solution. We see lots of people coming in for pre-approval who are a couple of years out from wanting to buy a home, but we put together a roadmap, like we’re looking at their income, we’re looking at their assets, we’re looking at their credit because all of these things we’re looking at to be able to make a plan. And usually when we’re doing these types of roadmaps, it’s not like they’re fixing just one thing. Sometimes they’re working on two or three things at the same time, because you can be great at, like, hammering down your debt, but if you have no debt and you don’t have a down payment, you’re no further ahead, right? Some debt is okay, but you also need the money for the down payment and the closing costs. So always tell people to pay down your highest cost debt, first credit card debt, 100% credit cards, then loans, then lines of credit, and at the very, very end, start paying down the student loans, because these student loans are somewhere between no and low interest, right? So student loans, and oftentimes these student loans, you can pay them over like 10 years, like ride that baby out.

Dan Ahlstrand
So a good idea to be thinking about that as you’re getting ready to put on the cap and gown and graduate, to have that plan already in the bank, so to speak, so that you have a plan moving forward. It’s not just looking at these large amounts of negative numbers and saying, I’ve got to get rid of all of that before I even think about more.

Clinton Wilkins
Would I start saving while I had credit card debt? No, pay on the credit cards first, then start saving. And start saving at the same time you’re paying down some of the lower-interest debt. And I would let those student loans ride for as long as you can. Let them ride for because either it’s tax-deductible, or it’s very low or no interest. So I’d let the student loan ride for as long as I could personally.

Dan Ahlstrand
Budgeting for that kind of life, obviously, house prices are continuing to rise. We talked about that earlier. Would you budget for what the prices are today? Would you budget for what the prices are going to be when you graduate, or maybe two or three years down the road?

Clinton Wilkins
I think, definitely for the future, and I would build in a 3% price growth in a lot of other areas of Canada, the prices of real estate were increasing 8, 10 percent, right? I think the prices are going to increase here, like one, two, 3% and we’re seeing about a 3% growth right now in Nova Scotia, so I would bank on a 3% increase. And I think that goes to say for anyone wanting to buy real estate, is it the real estate is cheaper today, most likely it will be in one year. Yes, we may be going into more of a recession situation here in Canada from the job numbers. What’s going on with GDP? Who knows what’s going on with tariffs? But the right time for someone is the right time for them. Really, there’s no magic number. But I think whatever you’re making for your goal, stick to it and do it. The challenge is that the endpoint might be a moving target. So some of these people that we talked to five years ago, Dan, right, could have qualified, and did qualify, and could have bought a home. They would have doubled their net worth, probably if they had pulled the trigger five years ago, but they didn’t, for X, Y or Z reason.

Dan Ahlstrand
We know that students graduating from post-secondary institutions, not necessarily planning could stay in Nova Scotia. They could travel anywhere else in the country, of course, some around the rest of the world. Why would it be a good idea to look at investing in Nova Scotia? Is it because those prices are going to be relatively stable, and we’re not going to see those bangs and booms and busts that we’re seeing in places like Toronto or Vancouver?

Clinton Wilkins
We’re very stable here, but we also have a pretty good job market. So I think in terms of balance, Halifax has it. Does it have everything? No, but it is the biggest small city in Canada, I think, or the smallest big city, whichever. You want to look at it, and we have a lot going on for us, and I think it’s a great place to do business.

Dan Ahlstrand
We’re going to stop and take another break. Mortgage 101 is going to continue on the other side of it. I’m Dan Ahlstrand, in for Todd. He’s Clinton Wilkins. We’ll be back.