Renting vs. Buying a Home in Toronto’s Housing Market

Make Money Count

The best mortgage brokers in Toronto return! This week Marcus & Justin debate renting vs buying a home in this current market. With how much housing prices have declined and how much rental rates have risen, we have a question. Is it now cheaper to buy a property and build equity rather than paying all-time high rent prices? No matter the market, it is essential to examine these opportunities on a case by case basis. Have a listen to the episode to learn the math to help make the decision easier.

The Math

The team looks at an example in downtown Toronto where the monthly rent is $3000 and the purchase price is listed at $489,000. After putting 5% down as a first time buyer; a 5 year fixed rate of 4.8%; $1,292 in property taxes; and maintenance fees of $329 a month: you arrive at a monthly average cost of $3,192 a month. This is not much more than the $3,000 rent and you build equity at the same time.

We also discuss the over-reactions of the central banks when it came to stimulating the economy during COVID. They are now over correcting it with rapid rate hikes. This is what has put real estate prices in a difficult position. They rose to unattainable levels and now are falling back to earth. This will have tough consequences for those who purchased at all time highs and now are servicing the debt at unaffordable levels. Only once inflation slows down will the central banks pause these rate hikes and then pivot in the other direction.

Whether you're new to the city or you've been here for years, this video is a must-watch! We'll be discussing the latest trends in the Toronto housing market, and giving you advice on how to make the most of your investment.

Make sure to watch to the end to find out which option is best for you!

0:00 - Intro
1:59 - Buy vs Rent example #1: 20 Joe Shuster Way
7:41 - How will the economics impacting the Buy vs Rent debate change in the foreseeable future?
14:32 - You have more to look forward to when buying if values are low and rates are high vs values being high and rates being low.
17:58 - You need to look at the Buy vs Rent decision on a case by case basis, but there are many attractive buying opportunities.
20:41 - Does Marcus own rental properties? The last 20 years has been an incredible bull run.
24:32 - Central Banks overshot way too far with stimulus and now they are overshooting way too far with rate hikes.
29:05 - Private Equity deals have dropped as well due to the increased cost of capital required to finance the purchases. Will that turn around soon?

Document: Buying Vs Renting In Toronto - Nov 2022

Transcript: Make Money Count 052 Transcript

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