It’s Officially Cheaper To Rent In Canada Than It Is To Buy
Is it better to rent or buy? This is by far the most popular question when it comes to real estate.
For many years, those on the buying side of the argument had a strong case, but thanks to extreme house price growth and rising interest rates, it seems the rent argument is finally having its moment.
According to a recent report from the National Bank of Canada, it is cheaper to rent in Canada than it is to buy for the first time in years.
In cities like Toronto, Montreal and Vancouver, this makes sense, but outside of these urban hubs the case for buying still holds strong.
Even with house prices decreasing in cities like Vancouver, affordability still remains a major concern as high interest rates and low median annual income keep many out of the market.
On a national scale, the report suggests that the monthly mortgage payment for the average mid-price condo is close to $2,000. The average monthly cost of rent across Canada is listed as $1,850.
Of course, those living in cities like Toronto and Vancouver know the real cost of rent is much higher.
In Toronto, the average monthly mortgage is closer to $2,800 while the median cost of rent is $400 less.
Housing affordability is down across all property types in Toronto. Within the past year, the price of condos in Toronto increased 9.4 per cent.
Though the drastic rise in house prices might be off-putting for potential buyers, the real concern is the impact of rising interest rates. Kyle Dahms, co-author of the report told HuffPost renting currently looks safer than buying since high interest rates are taking up a large portion of payments leading to larger pools of debt.
In the end, every homebuyer’s situation is different. If you already have a downpayment or if you can save up for a larger downpayment buying can still be a profitable investment. If you don’t have savings and you stand to save quite a bit by renting, you might want to hold off on buying.
Just don’t forget that as house prices increase, so too does the amount of time it takes to save for a down payment.
In 2000, the average condo buyer could expect to save for 26 months for a downpayment. At a saving rate of 10 per cent, it now takes prospective condo buyers 49 months to save for a downpayment. Non-condo buyers can expect to save for 112 months their downpayment.