When looking back on 2022, it's abundantly clear -- the economic climate has changed significantly over the past year. In short, interest rates and inflation have increased substantially.

Beyond pondering big grocery bills and gnarly gas prices, those with their finger on the pulse of the real estate market have spent months asking (and stressing over) one question in particular: how have these changes impacted homebuyers?

The answer might surprise you.

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Let's take a look at a typical homebuyer — a couple seeking to purchase a property in the GTA. How do things stack up when we look at the real estate market one year ago vs. today?


  • Purchase Price - $950,000
  • Down Payment - $190,000 (20%)
  • Mortgage - $760,000
  • Interest Rate - 2.49%
  • Monthly Payment - $3,400

2022: property values down 20%, interest rates up 100%

  • Purchase Price - $760,000
  • Down Payment - $190,000 (to be consistent with 2021)
  • Mortgage - $570,000
  • Interest Rate - 4.99%
  • Monthly Payment - $3,311

As these scenarios show, when we use the exact same down payment -- and even with the interest rate costing twice as much -- the monthly payment is slightly less in 2022 than it was last year.

Bank of Mom and DadSubdivision homes in Vaughan, Ontario/Shutterstock

Now let's look at the five-year perspective.

  • Using a conservative estimate, real estate will appreciate by the rate of inflation over the long term. The GTA's long-term average is much higher, at more than 6% over the last 40 years. To be ultra conservative, we will assume inflation is 2% annually. The five-year impact of owning the $760,000 property would be roughly $15,200 of appreciation annually, or about $76,000 after year five.
  • Another important element to consider is debt repayment, or mortgage principal reduction. Every monthly mortgage payment pays off a portion of the debt. The first-year net effect, for instance, is a $4,392 reduction of interest. Over five years, the impact is a reduction of approximately $22,000.
  • The value of appreciation and principal repayment combined is approximately $100,000 after five years.

Compare these results to a prolonged period of renting. If the typical Toronto rent is approximately $3,500 per month, how much equity has someone accumulated after five years?

The facts are quite conclusive for those who want to build wealth through equity: if you can muster up the down payment, buying is the way to go.

This article was produced in partnership with STOREYS Custom Studio.