Last year, it was common to read about bidding wars over properties in Ontario that would ultimately go for more than double the asking price – especially in Toronto. This year, however, things have changed.
Recent data now shows that while prices are up five per cent year-over-year, the sales price for all homes in the Toronto area dropped from an average of $919,449 in April to $746,218 in July — a decrease of 18.8 per cent. The number of sales also continues to take a tumble in the GTA, where 40 per cent less transactions were completed in July when compared to last year. And on a national scale, July saw the first decline in Canadian home prices year-over-year since 2013.
Following the announcement of the Ontario Fair Housing Plan this past April, and two key interest rate hikes by the Bank of Canada afterwards, property prices have definitely decreased, and demand has slowed, making many people wonder are these now the conditions to buy a property? Or rent?
We looked at the costs associated with buying versus renting, and we’ve done the math based on the latest stats from The Canadian Real Estate Association (CREA) and Canada Mortgage and Housing Corportion Rental Market reports. Here’s how the costs stack up against another:
Reasons why you may want to consider buying
It’s important to have assets
If you’re in your 20s or 30s, you’ll want to have some equity to build your financial portfolio, and a home is a great way to invest. When it comes time to sell, the value of your home may be worth more than what you paid for it. It could potentially help you afford your next home.
Condominiums are relatively affordable
If you don’t need a four-bedroom, three-bathroom house with a yard, why not consider a condo? Like a house, a condo is still a great investment and more affordable than a house.
Mortgage rates may increase again soon
The Bank of Canada recently increased the overnight lending rate to one per cent, which caused the five big banks to also increase their prime interest rate by a quarter point. So taking out a loan or a mortgage may be a bit more expensive than it was two weeks ago. Even still, rates are still relatively low. Now is a good time to take advantage of the current mortgage rates, as some rates can change before the end of the year.
Reasons why you may want to consider renting
It can be the cheaper option
While it is true that renting doesn’t earn you any capital, it can actually be a cost-effective way to live in a city like Toronto where buying a home can be pricey. Depending on your income and how much you can put towards the cost of a home, the cost of rent could be lower than a mortgage payment in some cases. Based on our infographic, it’s $652 less to rent a home at $1406 than it is to pay a monthly mortgage of $2058.
Save and feel out the neighbourhood
If you plan to enter the real estate market eventually but don’t feel like now is the right time, renting will give you more time to save for a down payment. Not only that, but you can get a feel for the neighbourhood you potentially want to buy in by renting in that area.
No maintenance, no worries
When you rent, you’re not on the hook for maintenance costs. If your dishwasher has washed its last dish, or the dryer isn’t drying, you won’t have to pay for repair or replacement. This also means you won’t need to pay for any necessary renovations – which can cost the owner thousands of dollars.
If you’re looking for a new place to call home, it’s important to think about what you want versus what you can afford before making a decision. Do what’s best for you and your budget and don’t forget to do lots of research when it comes time choose. If you’re considering buying a home, make sure you’re pre-approved for a mortgage and find the best mortgage rates at Rate