Canadian homeowners are effectively paying significantly less per month than renters, a new study from Royal Le Page says.
The study, which sought out to answer the age old question of “is it better to rent or buy?” analyzed price data from across the country. It found that although homeowners are often paying much more upfront, part of that cost is the principal interest, which is the original amount borrowed to buy your home. This, the report says, can be seen as a form of savings as you’ll likely get that back when you sell.
In 91% of the 278 cases studied for the report, the net cost of ownership (the total cost minus the savings) is lower than the cost of renting. And as of the second quarter of 2021, the average net homeownership cost came out to $769 less than the cost of renting an equivalent property.
In those few instances where renting was more beneficial, they were typically in luxury homes in expensive neighbourhoods. There, renters were at a $245 per month advantage.
“Although supply has reached historic lows and home price appreciation continues to trend upward, the findings of the report show that owning a home remains financially advantageous for most people,” said Karen Yolevski, chief operating officer at Royal LePage Real Estate Services Ltd. “However, all Canadians would benefit from swift and material government action to solve the country’s housing supply crisis.”
The study even looked at what would happen in the unlikely scenario that home prices go down 10%. Even under those conditions, roughly half of all homeowners would still see a positive rate of return on their real estate investment, while the other half would break even or see a minimal loss.
Being able to choose whether to rent or buy, however, comes with the caveat of being able to afford a downpayment on a home, which is becoming increasingly more difficult as home prices across the country continue to rise.