Is It Better to Rent or Buy Your Home?

Spoiler alert: this isn’t one of those pro-renting articles that seem to be so in-vogue these days. You’ve probably seen the type. They purport that contrary to popular belief, if you look deeply into the long term economics of homeownership, you’ll find that it actually makes much more sense to rent. Some even tout the psychological benefits of foregoing homeownership (based on… not all that much).

Let’s call these articles what they are: hit pieces. Nothing more than toxic click bait that at its best incites fear in its readers, and at worst threatens the Canadian housing market. To make matters worse, many of the voices shouting these theories are highly credentialed. A senior Globe and Mail journalist; a renowned economist; a former Minister of National Revenue.

No doubt these three have earned their stripes. But when it comes to the rent vs. buy debate, it’s crucial to look at the bigger picture. As storied as these critics are, they are a small but loud minority. Sure, you can trust these three. Or you can trust the thousands of experts who uphold the duly popular belief that homeownership is the more prudent direction.

What These “Experts” Get Wrong

Rent has exploded in the last few decades. Not just in big cities; small towns as well (relatively speaking, of course). With property values skyrocketing, investors are cashing in by selling to new owners who have no problem jacking up the rent. Renters are left paying exorbitant prices for their housing without amassing any wealth in the process. 

If you chose to listen to one of these ownership critics 10 years ago, for example, you would have missed out on a gigantic opportunity. Property values have tripled in the last decade. In that same time frame, renters would have either been subject to regular rent increases, or forced to seek new housing for much higher rent altogether. The end result is an ever growing amount of discarded cash. 

So why go down this road? Many renters might be swayed by the argument that homeownership is risky. There’s no way of knowing where the market will go and no guarantees that you’ll make your money back. It’s true that property values ebb and flow. But that’s why I’ve always recommended holding onto properties for at least seven years. Seven years is just long enough to amortize the acquisition costs and see you through any upward or downward economic cycle.

The Bottom Line

Relax. Think critically. Don’t be triggered by inflammatory tweets and blog posts. Just because someone has a PhD beside their name doesn’t mean you have to strategize your financial future around their opinions. So many of these views are backed by ego more than fact. Everyone wants to be able to say they told you so.

The reality is that our economy is healthy. Unemployment is at a record low, and immigration is bound to kick back up. All signs point to a prosperous housing market for the foreseeable future, so you don’t have to worry. Take pride in the home you own and be grateful for it this holiday season. 

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca