The Soaring Cost of Renting in Canada: A Realtor's Call to Consider Buying

As the chill of autumn settles in, Canadian households may find some relief in the recent slowdown of headline inflation, primarily attributed to falling gasoline prices. However, the reality remains stark when we look beyond the numbers. Shelter costs, including skyrocketing rents, continue to surge, presenting a compelling case for prospective homeownership.

Understanding the Numbers: The Inflation Puzzle

The latest data from Statistics Canada reveals a nuanced picture of inflation. Headline inflation slowed to 3.1% in October, largely due to a base effect involving falling gas prices. However, when we exclude this volatile factor, inflation remains robust at 3.6%.

Rising Costs in Key Segments: Grocery and Shelter

While optional spending segments like groceries saw a slight moderation, with annual growth at 5.4%, it still hovers nearly triple the Bank of Canada's inflation target. However, the real shock comes from shelter costs. Even with a slight deceleration, annual growth remains high at 6%, driven by a notable rise in owned accommodations, particularly mortgage interest.

Renters' Plight: A 40-Year High

For renters, the situation is even more challenging. Rental inflation soared to 8.2% in October, marking the highest growth in the past 40 years. The government's financial support for rental inefficiencies may be contributing to these alarming numbers, leaving many renters grappling with the financial strain of housing. 

Why It Might Make Sense to Buy

Amidst this landscape of rising rental costs, the prospect of homeownership becomes increasingly appealing. As a seasoned realtor, I advocate for considering the shift from renting to buying, and here's why:

1. Stable Mortgage Payments

Owning a home provides the advantage of stable mortgage payments, shielding you from the volatility of rental increases. Let's take a look at some examples provided by mortgage broker Danielle Di Marco of MortgageLine:

• 5% Down Payment:

  • Purchase Price: $500,000
  • Down Payment: $25,000
  • Loan Amount: $475,000 + CMHC
  • Amortization: 25 years
  • Rate: 5.69% (current standard 5 year fixed pre approval rate)
  • Payment: $3,071/month

• 10% Down Payment:

  • Purchase Price: $500,000
  • Down Payment: $50,000
  • Loan Amount: $450,000 + CMHC
  • Amortization: 25 years
  • Rate: 5.69% (current standard 5 year fixed pre approval rate)
  • Payment: $2,884/month

• 15% Down Payment:

  • Purchase Price: $500,000
  • Down Payment: $75,000
  • Loan Amount: $425,000 + CMHC
  • Amortization: 25 years
  • Rate: 5.69% (current standard 5 year fixed pre approval rate)
  • Payment: $2,716/month

• 20% Down Payment:

  • Purchase Price: $500,000
  • Down Payment: $100,000
  • Loan Amount: $400,000
  • Amortization: 30 years
  • Rate: 6.44% (current standard 5 year fixed pre approval rate)
  • Payment: $2,491/month

2. Long-Term Financial Stability

Owning a home not only provides stability but also serves as a long-term investment. As rents continue to surge, your mortgage payments remain relatively consistent, contributing to your financial security and potential future gains.

3. Building Equity

Every mortgage payment contributes to building equity, allowing you to accumulate wealth over time. This is a crucial advantage over renting, where your monthly payments contribute solely to your landlord's wealth.

In conclusion, the current real estate landscape, with its soaring rental costs, emphasizes the financial prudence of transitioning from renting to owning. As a realtor, I invite you to consider the long-term benefits of homeownership in navigating the uncertain terrain of Canada's housing market. Let's make your dream of owning a home a reality, providing stability, financial security, and a valuable investment for your future.

Content for this blog was curated from this article.