RelativeRealty | Toronto, Ontario

Knowing whether to rent vs buy can always be a difficult decision. As my wife likes to remind me, sometimes both options are good options. While I advise you to consider the financial implications of renting vs buying, there are also non-financial considerations. The stability and forced savings of homeownership for some might be given more weight than the freedom and improved cash flow that renting offers to others. Other factors to consider as you look at the line comparison for buying vs renting include how current trends might have future impacts.

-If you think mortgage rates will go down, home prices are more likely to increase and lower financing costs will drive more Buyers to the market. 

-Rents have been increasing and fast. Average rents have been increasing 10% or more year/year for the last few quarters and this seems unlikely to change given Canada’s population drive.  Anybody renting something built after 2018 should anticipate large rental increases per year. I would recommend budgeting +10% annual rental increase for the next 2 years when making your decision.

-Sales and listing activity have remained below 5 and 10 year averages. This should mean pent up activity is building on both the sell and buy side.  

-Those with job security and looking for stability in living arrangement should lean towards to owning.  

-Those looking for more freedom and shorter turnover would be better suited to renting.

Leslieville Condo:

An entry level 1 Bedroom Leslieville condo (with balcony but no parking) can be found in the low $500,000 purchase range, a similar unit is renting for about $2,200. An end user is likely to benefit by renting in the short term 1-2 year range vs buying. However, a purchase could prove to be beneficial if we continue to see double digit rent increases and flat or slightly reduced interest rates from what we are seeing now. With a cap rate of just 2.7%, investors should continue to show restraint on this type of purchase until they feel confident in higher rental rates and limited supply of this type for this type of unit.

Etobicoke Townhome (3 Bed 3 Bath 1,800 Sq Ft): 

Looking for a good amount of space and less maintenance than a Detached home? Etobicoke townhomes can offer good square footage at a significant discount to homes with more property. Much like the Leslieville Condo an Etobicoke townhome is currently much more appealing to rent. However, for many Buyers a townhome can often prove to be a purchase their family can grow into. Purchasing for the long term can minimize future transaction and moving costs. I also expect rent for similar properties to continue to escalate. Therefore while this purchase is not appealing in the short term it could prove to be a good long term hold. Particularly if you think rates are peaking. From an investor standpoint this purchase remains highly speculative as even with a 20% increase to rent, your cap rate is expected to remain around 3.5%.

Scarborough Bungalow: Homes With Additional Income Continue To Be Appealing

Homes with separate rental income have always proven to be a more appealing cash flow purchase for budget conscious Home Buyers. A Scarborough Bungalow with basement apartment is not only appealing to an end user willing to rent out the basement, with cap rates in the high 4% range, investors are likely to also take note. In an affordability driven market this type of home is likely to have some the strongest upside potential in price appreciation. However, I anticipate rental appreciation to be more limited on this property going forward.