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Is It Time to Buy into Toronto’s Real Estate Market: Renting Vs. Owning

In Toronto, there has long been a debate of ‘renting’ vs ‘buying’.  For those in the city renting, if you haven’t been living in the same place for over a few years, you’re experiencing some of the highest rent prices in the country. When you’re paying $2000+ on rent a month it can be tough to save for a downpayment to purchase a property. However, throwing away tens of thousands of dollars a year to someone else’s mortgage payment probably doesn’t sit well when you crunch the numbers either.

In a recent report from Mortgage Professionals Canada: “Owning versus Renting a Home in Canada”, the study breaks down the money Canadians are spending on monthly rent vs mortgage payments. Needless to say, the costs of owning and renting continue to rise across Canada.

During the last two decades up to 2017, the average house price in Canada (as reported by the Canadian Real Estate Association, or “CREA”) rose from $154,563 to $510,090, or an average of 6.2% per year.  Rent prices in the GTA have risen 11% in the last year alone. Below is a graph that breaks down average rental prices by property type (2017 vs 2018). If you’ve been renting for a long time or considering moving into a new rental unit, you might find this helpful:

Now, let’s use this chart below created by the Mortgage Professional of Canada to compare purchase to renting. Interestingly enough this chart that averages rental and purchase prices across the country is highly reflective of Toronto’s market for those looking for a one bedroom plus den with parking. The chart below uses averages to compare additional costs on top of the purchase price these additional costs include taxes, utilities and maintenance fees.

Mortgage Payment vs Rent:  What is the real cost difference?

Okay, two important caveats here:

1. as mentioned above, you need more up front to get into a mortgage.

2. these numbers are more reflective for those in the first-time homebuyer stage.

  1. Average Mortgage Cost (including additional costs): $3052

  2. Average Rental Cost (including additional costs): $2511

  3. Average difference in monthly cost: $549

Off the hop, yes over $3000 a month is a big hit to the wallet. However, paying $549 a month to build future equality ain’t all that bad. Especially when the average annual appreciation of real estate in Toronto is 6.5%. So that 570K has the potential of producing you 185K in equity in just 5 years. Another way to look at it:  That $549 difference (roughly $32K over 5 years) is a good investment in YOU.

What’s cheaper in the long run?

With real estate prices jumping rapidly to keep up with purchase prices, over the next few years it’s likely that rental costs will surpass mortgage prices. Rents continue to rise over time whereas the largest cost of homeownership – the mortgage payment – typically maintains a fixed amount over a set period of time – usually for the first five years.

Even though purchasing isn’t a simple task for all, in the beginning, it’s the cheaper option for the long run. Not to mention, an option that provides YOU with room to grow financially.


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