It’s an increasingly common calculation for British Columbians, especially in the Lower Mainland: is it more cost-effective to rent or take on a mortgage?
The conclusion that most people are coming to these days is: it doesn’t make much difference.
For years, the popular wisdom has been that to rent is to pay someone else’s mortgage. Why be the sucker when you can be the landlord?
But with home prices skyrocketing and investments in the housing market becoming both more inaccessible and dubious, the wisdom is shifting. Maybe it’s better to rent and invest your honeypot somewhere else – like the stock market.
In the short term, as in the next fifteen years, the numbers come out virtually even. But after fifteen years, in the case of townhomes and detached homes, buying does usually win out.
But the risk, and the minimum investment, is still so huge.
Our co-founder, Daniel Greenhalgh, endorses a kind of hybrid approach – own where you can afford to, and rent where you work. “My personal opinion is that you should own a house outside of the city, in the suburbs or even farther. And then rent near where you work and where you want to spend your time. It gives you more freedom to move around, to live a little more streamlined, and you can still have that nice investment. Basically, don’t live in the house you own.”
Dan broke down the numbers involving renting or owning units in ENM’s soon-to-open purpose-built rental project Willoughby Walk. “If you were to own them, the average unit prices are about $380,000. They’re between $330,000 and $450,000 at the top. A mortgage on those would come out to about $1828 per month. Then you look at our average rental price, which is $1845. That’s with no strata fees, no property taxes, no maintenance fees. So of course, in the short term, renting looks pretty good. Obviously, buying is an investment, but you’re not seeing anything back until you own about 50% of the unit or the property. Before that, it’s kind of like renting – that money is just going away.”
There’s a lot of panic rhetoric involving
the housing market in Vancouver and the possibility of a looming crash. It’s
tough to imagine a scenario where the market stays where it is or keeps rising
over the next 15-25 years. It’s already at such an unsustainable level.
But Dan points out that while sales numbers may be dropping off, land prices haven’t and most likely never will. “It’s still a great investment, if you can afford it, to own a home here. And that means owning the land the home is on. As long as the land values are steady, the investment in owning a home is not too big of a risk.”
