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The Great Toronto Housing Debate: Buying vs. Renting

To be, or not to be?

This was a question that haunted Hamlet.

Though not at the same life-or-death existential level, many Toronto residents struggle with another question – Buy or Rent?

The decision of whether to root yourself in a community by buying a home or just enjoy the flexibility of rental living is a pivotal choice. This fairly intense debate between renting in Toronto and stepping onto the property pitch is more than just a question of finances; it affects your lifestyle, investment, and personal freedoms.

Toronto’s psychedelic multi-culture, diverse communities, and robust job market are strong factors influencing the housing market.

Let us look at the benefits of buying a Toronto property , from building equity to the sense of security it offers. We’ll also discuss the drawbacks of being a homeowner, including the upfront costs, repairs and maintenance.

It is not as if renting in Toronto is a bed of roses, either. While flexibility and the absence of property taxes are advantages, the lack of ownership and investment potential may pinch you later in life.

If you’re considering renting in Toronto and weighing up mortgage versus rent, we will provide insights and tips to steer your housing choices.

Buying vs. Renting in Toronto

Toronto Housing Market Overview

In May 2024, the number of active home listings in the Greater Toronto Area (GTA) reached a decade-high of 21,760. Despite this influx, home sales saw a decline, resulting in 7,013 homes sold. The sales-to-new-listings ratio (SNLR) fell to 38%, indicating a shift towards a buyer’s market, where the supply of available homes is growing faster than demand.

The pricing also reflected these shifting market conditions. The benchmark home price in May 2024 decreased to $1,117,400, marking a 3.5% decline from the previous year.

The median home price, often a clearer indicator of market trends, was $992,000, up 1.1% from the previous month but down 4.2% from the previous year.

These numbers indicate a cooling market influenced by higher inventory and changing buyer sentiments. This may be a favourable time for you to consider your housing options.

Greater Toronto Area Map

Buying a Property in Toronto

Property investments, especially in a teeming metropolis like Toronto, offer good rewards and financial gains.

The real estate market in Toronto has shown steady growth, with properties appreciating annually. This increase in value makes buying a property a potential high-performing, long-term investment. Let’s look at the numbers and other advantages.

Long-Term Investment

Investing in Toronto real estate is a fairly low-risk venture due to the city’s strong fundamentals, including population growth, a robust economy, and diverse employment opportunities. These factors contribute to sustained demand for housing, ensuring that property values continue to rise.

Toronto has seen an average annual appreciation of 9% for the last 15 years, with recent figures showing an 11% annual appreciation rate. This consistent growth indicates that the longer you hold onto your property, the more you stand to gain.

Additionally, real estate investments provide a sense of stability and predictability that other types of investments, such as stocks or cryptocurrencies, often lack.

Customization Options

Owning a property in Toronto provides greater control and autonomy.

Homeowners can customize and renovate their properties according to their preferences. From choosing the location to deciding on the floor plan and interior design, this flexibility not only enhances your living experience but also increases the value of your investment over time.

Whether you’re considering a custom-built home or modifying an existing one, Toronto has many options. By choosing to buy, you’re investing in a financial future that will grow alongside the city.

Expensive House In Toronto

Drawbacks of Buying a Property in Toronto

Toronto and the GTA are some of the more expensive Canadian metros to live in.

This means that you will need to have your finances in good order to afford a house. Use a mortgage calculator to help you make a cash flow analysis and budget.

Understand the impact of mortgages and interest rates when buying a property. Keep an eye on the Bank of Canada’s announcements. As interest rates rise, so do the costs of borrowing, which can stretch your financial budget.

For instance, during periods of high interest rates, the cost of obtaining a mortgage increases, making homeownership more difficult. This scenario may force potential homebuyers to either increase their debt or postpone buying a home.

Upkeep and Repairs

Owning a home means you’re responsible for all maintenance and repair costs, which can be surprisingly high. Industry experts suggest setting aside 1-3% of your property’s value annually to cover upkeep expenses.

For a typical two-storey, three-bedroom house valued at around $1,000,000, you could be spending $10,000 to $30,000 each year on upkeep alone. These costs include everything from routine maintenance like HVAC servicing and roof repairs to unexpected issues such as plumbing emergencies or structural damages.

This financial burden is an important consideration, especially for first-time homebuyers who might not be prepared for these ongoing costs.

Low-Maintenance-Properties-in-Canadian-Real-Estate

Renting a Property in Toronto

Let’s move to renting a place. Like we mentioned earlier in the article, renting in Toronto has its merits and downfalls.

Ease of Moving

One of the biggest advantages of renting is the flexibility it offers, especially when it comes to moving. Whether it’s upgrading to a larger space or downsizing, the rental market provides various options.

However, the financial implications can add up quickly. For instance, moving from a one-bedroom to a two-bedroom apartment can cost an additional $8,000 annually, while upgrading further to a three-bedroom unit might see an increase of nearly $16,000 a year. Even moving within the Greater Toronto Area (GTA), outside Toronto city limits, does not necessarily lead to savings, with costs averaging $2,880 more annually for similar-sized units in Brampton and Mississauga.

No Property Appreciation

While renting provides flexibility, it does not allow for property appreciation, which is a downside.

In Toronto’s competitive market, where rental rates have surged by over 20-26% year-over-year, not owning a home means missing out on the potential financial gains from rising property values. Tenants find themselves paying high premiums, which cuts down their ability to save and invest in property that could appreciate in value over time.

There is no denying the fact that renting in Toronto offers the immediate benefit of mobility and lower upfront costs compared to buying. However, the lack of investment potential and the high cost of moving make it less appealing for long-term financial planning.

Buying might be a better option if you’re looking to build equity and benefit from the property’s appreciation in Toronto’s thriving real market.

Final Thoughts

Any comprehensive analysis will show that the Toronto housing market presents a unique set of challenges and opportunities, whether one chooses to buy or rent.

The prospect of owning a home in Toronto not only offers the tangible benefits of equity building and property appreciation but also provides a chance for personalizing your living space. On the flip side, renting offers flexibility and lower upfront costs, though it lacks the investment potential and stability of home ownership.

At Save Max, we feel that buying a home, despite its upfront costs and responsibilities, is ultimately a better choice for those seeking long-term financial growth and personal fulfillment.

For those looking to make a long-term investment in Toronto’s booming market and seeking expert guidance, the Save Max team is ready to offer their knowledge and support. Whether you’re looking for a studio apartment downtown or a sprawling suburban property, aligning your housing choice with your life goals can create lasting benefits far beyond the immediate financial returns.

FAQs

Should I rent or buy a home in Toronto?

Renting in Toronto might initially seem less expensive than buying. However, homeowners in Toronto generally accumulate more wealth over time compared to renters. This wealth accumulation occurs as homeowners build equity through consistent mortgage payments, effectively saving money each month.

Is purchasing a home in Toronto a wise decision?

Buying property in Toronto should be considered with a long-term perspective. Holding onto a property for at least six to seven years can yield significant equity gains. Historical data shows an average increase of 6% over ten years, with a notable 8.6% rise in the average sale price in 2023, as per TRREB data.

Is it more economical to rent or buy in the Greater Toronto Area (GTA)?

At present, renting is more affordable in the GTA. With average home prices exceeding $1,000,000, a typical $1,000,000 home would require monthly mortgage payments of about $4,626.

What are the pros and cons of renting versus owning a house?

The choice between renting and owning a home often involves balancing the desire for the freedom associated with renting against the long-term benefits of homeownership. Renting offers flexibility, fewer immediate financial burdens, and no responsibility for property maintenance. On the other hand, owning a home provides long-term financial benefits through equity.

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