Renting in Canada is starting to look like a steal

Home sweet home, sure. But how?

Driving the news: The cost of buying a home in Canada versus renting is facing one of the most extreme price discrepancies since the early 2000s. Monthly mortgage payments for the average-priced home are now well over double the nation’s average monthly rent. 

Big picture: The average monthly rent in Canada hit a record high of $2,149 last month. Meanwhile, a homeowner putting 10% down on a $753,900 (the national average) today on a five-year variable rate loan of 5.95% would be paying $4,455 a month, per Ratehub. 

  • That’s a 73% jump from January 2022, and 207% more than the current rent average. Rents have outpaced inflation, but have only risen by only 20% over the same period.
  • In theory, buying and renting costs should be roughly matched, Matt Vance, head of multifamily research at CBRE, recently told The Wall Street Journal. 

Catch-up: Over the past two decades, the average cost to buy a home has been roughly equal to renting one — buying was even briefly seen as the more favourable option immediately after the financial crisis. With rates hovering around 7%, per Nerdwallet, that’s no longer the case. 

Why it matters: Renting gets a bad rap, with many Canadians believing that investing in a house is one of the best financial decisions to accumulate wealth, long-term. But between lower maintenance and upfront costs and a shorter time commitment, renting can be a smart move. 

  • Buying a home is a great way to build equity, but high interest payments can make it so your monthly mortgage payments are barely making a dent in the principal loan amount.

Bottom line: In fact, mortgages have gotten so pricey that one in every five home loans at three of the Big Six banks are negatively amortizing, meaning that monthly payments are no longer enough to cover anything but the interest owed. That’s hardly the homeownership dream.—SB