The Pros and Cons of Buying vs. Renting in Toronto

What’s the difference between buying vs. renting in Toronto? Rental pricing is through the roof, and tenants might not see any relief in sight, whether rising mortgage rates or the supply-demand imbalance. According to the September 2023 Rentals.com report, the average asking rent in Canada climbed nearly two per cent on a month-over-month basis and skyrocketed close to ten per cent to a record high of $2,117.

“Over the last three-month period between May and August, asking rents in Canada have increased by 5.1 per cent, or by an average of $103 per month,” the report states.

What are the two most expensive rental markets? You guessed it: Vancouver, British Columbia, and Toronto, Ontario. Researchers found that the typical one- and two-bedroom apartments in Vancouver were $2,988 and $3,878, respectively. In North America’s fourth-largest city, the average one- and two-bedroom apartments are $2,620 and $3,413, respectively.

What makes the data even more fascinating is that the asking rent for roommates in Toronto is $1,300. In Vancouver, it is $1,455.

This will undoubtedly be fodder for the age-old debate: Is Toronto more affordable than Vancouver – or vice versa?

Meanwhile, the three cheapest rental markets in the Canadian housing sector? Saskatoon, Saskatchewan ($1,005) and Regina, Saskatchewan ($1,121).

The good news coming out of all of this is that construction activity for purpose-built rentals has accelerated. The bad news? “Despite rental apartment completions in Canada over the past 12 months reaching their highest level since the 1970s, rent growth has remained exceptionally strong,” the report stated.

“This can be attributed to the country’s record-high population growth and sharp deterioration in homeownership affordability,” the report added.

The latest conditions have many families stumped as to what to do next. Buy or rent?

Are you trying to decide whether to buy or rent in the Toronto real estate market? Let’s break down the benefits and drawbacks of both options so you can make the right choice for your financial situation and lifestyle.

The Pros and Cons of Buying vs. Renting in Toronto

Here is a breakdown of the pros and cons of buying versus renting in Toronto.

The Price

First, let’s get down to the brass tacks. Here is a breakdown of home prices in the Toronto real estate market:

Detached: $1.416 million
Semi-Detached: $1.067 million
Townhouse: $935,800
Condo Apartment: $705,572

According to statistics compiled by the Canada Mortgage and Housing Corporation (CMHC), the average mortgage payment was nearly $2,200 in the first quarter of 2023. Of course, this would vary by vast margins based on the property type, but this can offer you a glimpse of how much you can expect to spend every month to service your mortgage.

This is far below the average cost to rent a one-bedroom unit in Canada’s largest city. As many young buyers can attest, the chief challenge is having the down payment to be approved for a mortgage. That said, depending on where you live in Toronto and the type of dwelling, it could be far cheaper over time to buy a residential property than to rent.

In addition, renters do not have to bear the plethora of taxes that buyers do, such as the municipal land transfer tax or the HST, or become (directly) vulnerable to rising interest rates.

“While higher interest rates have certainly impacted affordability, the prospect of higher taxes will also hit households’ balance sheets, especially younger buyers with limited savings,” said Toronto Regional Real Estate Board (TRREB) CEO John DiMichele in a report.

Cost of Ownership

Indeed, one of the advantages of renting compared to owning is the amount of savings you can enjoy for monthly expenses. +

Renters do not need to worry about replacing appliances, taking care of the property, or even paying renters insurance (though this can vary from property to property). On the other hand, homeowners routinely have monthly expenses that can set them back by vast amounts.

So, by comparison, for owners of condominium suites, there is the condo fee, utilities, property tax, and property insurance. For renters, there is the rent and utilities.

In an environment where the cost of everything has increased significantly, renters can find considerable savings by not having to maintain their properties regularly and pay out of pocket to replace a broken refrigerator.

Flexibility Versus Responsibility

Renters enjoy something that owners do not: flexibility. Homeowners have a lot more responsibility for owning property, from regular upkeep to unexpected expenses. It is easy for renters to budget since the rent is a fixed monthly cost. Plus, if you wish to relocate to another building or another area of the city, renters can do this once their lease is up.

Who Has the Advantage? Buyers or Renters

A core component of the Canadian Dream has been homeownership. The idea of owning your own home while building equity to fund your retirement or children’s education is an appealing one.

Is this an outdated concept? Not necessarily, but accomplishing this objective will depend on where you live, household income, interest rates, public policy, and the broader Canadian real estate market. From a long-term perspective, homeownership is superior to renting because home prices generally trend higher over time, and, as a result, your equity grows over time. In the short-term, it can be advantageous to rent, wait out the market, and wait for the right opportunity.

Ultimately, the renting versus owning debate boils down to personal circumstances and overall economic conditions.