Is renting better than buying a house in today’s times?
Renting Vs Buying a home
To rent or to buy is a quintessential question which most of us face yet try to avoid finding the right answer to. For some of us, the math is too complicated, for others the overhead costs of owning a property are too intimidating. And if you happen to stay in an area like Greater Toronto Area (GTA), this question becomes even more imposing.
The best way to determine how to proceed is by understanding the GTA real estate market and the factors that influence the renting vs buying decision.
GTA real estate market at a glance
The real estate market has stagnated to a some extent in GTA over the past few years. Still the average prices for detached and semi-detached houses as well as condos in the GTA have risen tremendously over the past few years. At an average asked down payment of 20%, buying a house in the GTA, requires a minimum initial investment of $80,000. Mortgage lending rates can vary between 3 – 5% on an average, taking monthly mortgage payments around $2000 for a loan term of 25 years. Furthermore, overheads like property tax and home insurance can surmount to about $1400 per month (depending upon the worth of the property).
While this seems like a steep amount to pay for home ownership, renting isn’t a very cost-effective option either. In the past decade, rent prices in the GTA have grown at an average of 11%, forcing most renters to spend around 30% of their monthly income on rent. While renting doesn’t require any investment, it also doesn’t allow for an asset to be created (in the form of property).
Factors affecting Renting vs Buying decision
With the backdrop of GTA’s real estate market, let us consider the factors that affect the renting and buying decision –
- Financial readiness: The very first thing that can affect your decision is whether you have enough money saved up to buy a property or not. Even though there may be lucrative mortgage options available in the market, you will still need to make the down payment on your own. Thus, if you don’t have a nest egg for making an investment in property yet, then renting is the way to go.
- Emotional readiness: For some of us, buying a home means being ready to take-on the responsibility of living with a mortgage and increased tax liability. If this seems like a very scary scenario to you, then renting vs buying should not even be a question. You should continue to rent and save the money for home ownership later. But if you are prepared to create a lasting asset, then investment in real estate is the best way to go, especially in a stagnant GTA real estate market.
- Type of Property: Lastly, the type of property you want to buy can also affect the renting or buying decision. If you wish to invest in a 3 bed 2 bath starter home, the initial investment and the continual cost of maintaining property can be equivalent to paying rent for the next 20 years, thus not giving any financial advantage to the buyer. But if you wish to buy a condo in GTA, buying can prove to be a profitable investment in the long term.
In conclusion, deciding whether to rent or buy in the Greater Toronto Area can’t be a unilateral decision. Consider the market, your readiness and the type of property and then make a conscious choice.
At Toronto Condo Only, we are passionate about new land developments and since 2007, we have helped clients get the best deals and the properties. Monty Malhi has and continues to build formidable relationships with reputable developers and major industry players to give clients first access to the most desirable and sought after projects in and around the GTA. First access to securing units at most projects can amount to considerable price savings of over $20,000 – $50,000. Clients trust our industry knowledge of the real estate investment market throughout Greater Toronto, which is the foundation of our success to buy low and sell high. With our broad vision and innate ability to understand real estate properties, including pre-construction low-rise and high-rise condos, resale homes and commercial properties, we have achieved continued success for our clients and ourselves.
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