Canada

6 Canadian Cities Where Renting Makes More Sense Than Buying

6 Canadian Cities Where Renting Makes Sense

Read last week’s article on how the “average” homeowner does in six cities across Canada? You’re either packing your bags and moving to Calgary to buy a home, or you’ve decided renting is for you. To help you, we’ve broken down how the cost of renting compares in those 6 Canadian cities.

Buying a house isn’t a solution for everyone, and anyone who says it is, is just giving bad investment advice. In fact, median income households may actually have more to money to invest by renting. Crunching the numbers yourself is important, so don’t depend on this, or anyone else’s sole advice to make a decision that’s right for you. That in mind, we did an overview of renting in six cities to help give an idea of what the average rent should look like.

What We Did

We took the median income and compared it to the average rental data for a one-bedroom. We also removed income tax by province, because after all, that money belongs to the government, not you. The taxes are an estimate, that can be higher or lower, but are meant as an estimate to help gauge the leftover money.

Renting Is Looking Better

We know, every Boomer you’ve ever met is telling you renting is a waste of money. Not so much the case anymore, especially in cities like Toronto and Vancouver. In Vancouver for example, if you purchased the average composite home, you would need to borrow $690 a month (before eating/transportation). Conversely, renting in Vancouver would leave you with $3,800 to bank/invest/travel/buy food. For the average couple, with these numbers in mind, it’s hard to make an argument that purchasing makes any sense.

Do The Math Yourself

Buying isn’t always a bad idea, but taking a substantial amount of debt that you have no means to pay off always is. This is especially important if purchasing compromises diversification and quality of life. So do yourself a favor, and run your own numbers before taking advice from someone who made a ton of money years ago, in a much different economic environment.

Halifax

Monthly Breakdown

Median Income:

$84,560

Income Taxes (Est):

$23,633

1 Bedroom Rental:

$878/monthly

Left For Living:

$4,199/monthly

Toronto

Monthly Breakdown

Median Income:

$75,270

Income Taxes (Est):

$15,937

1 Bedroom Rental:

$1,110/monthly

Left For Living:

$3,834/monthly

Vancouver

Monthly Breakdown

Median Income:

$76,040

Income Taxes (Est):

$15,715

1 Bedroom Rental:

$1,175/monthly

Left For Living:

$3,852/monthly

Montreal

Monthly Breakdown

Median Income:

$75,010

Income Taxes (Est):

$20,319

1 Bedroom Rental:

$675/monthly

Left For Living:

$3,882/monthly

Calgary

Monthly Breakdown

Median Income:

$104,530

Income Taxes (Est):

$26,593

1 Bedroom Rental:

$1,122/monthly

Left For Living:

$5,372/monthly

Ottawa

Monthly Breakdown

Median Income:

$102,020

Income Taxes (Est):

$26,080

1 Bedroom Rental:

$980/monthly

Left For Living:

$5,348/monthly


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4 Comments

  • Reply
    Scott Ingram 1 year ago

    Disclosure: I’m a real estate agent. Rent vs. own definitely makes sense for some people depending on city, income, career path, mobility, and a few other factors. It’s an important decision so it should be looked at from all angles.

    While I agree that the renters would obviously have more current cashflow at their disposal, what this doesn’t really acknowledge is that the major portion of that mortgage payment is principal (72.4% over 25 years using your assumed 2.75% and assuming rates don’t change for 25 years, which of course is a big stretch).

    So basically of the $2,980 monthly mortgage figure you used in your article about homes, $2,156 is really going back into your pocket as forced savings (and $824 is interest out of your pockets forever). I did the calculations just last month and the 10-year return on Toronto housing was 7.3% (basically doubling the principal) — and that’s tax free because of the principal residence exemption.

    The other benefit of buying is you’re fixing that $2,980 amount for 25 years (other than the interest varying) because it’s based on the price you paid for the house now. Your rent figure of $1,110 would be at $2,980 a month in 25 years if it grew at 4%, and 0% of that is going back into your pocket. And after year 25 that $2,980 disappears, leaving you with just property tax and utilities (and maintenance).

    Here is that 10-year “return on investment” analysis I mentioned: http://www.slideshare.net/ScottIngramCPACAMBA/toronto-real-estate-returns-report-june-2016

    • Reply
      Tiffany Greene 1 year ago

      Thanks for the insightful comments.

      Why would you assume that rent would go up with inflation, but interest won’t? We’re at the lowest rates in history, and even if you don’t think I’m right about interest rates – we recently published an interview with the Ontario finance minister. He’s also under the impression rates will go up in the near future.

      The investment return chart is interesting, I’ll send it to the data team and see what they think. I know we have an article on renting/portfolio returns in the pipeline, I’ll try to give it a bump up the queue so you can see how our numbers contrast.

      • Reply
        Scott Ingram 1 year ago

        Hi Tiffany, I had already acknowledged your point about the interest rate assumption in my original post when I said “assuming rates don’t change for 25 years, which of course is a big stretch.” Obviously, being at historical lows, interest rates only have one place to go, and that’s up.

  • Reply
    Alice 1 year ago

    Who knew the high rollers were in Ottawa and Calgary?

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