I’m sure many of us grew up with the mentality that buying is always the best option when moving out on your own. The argument has remained consistent: renting means throwing away money, while purchasing is investing.
In Toronto’s real estate market, people often assume the value of their houses and condos will inevitably go up in value. Although many factors contribute to the flux and flow of condo prices, including a building’s location, age and condition, the reality is that the value of many condos either remains the same or drops by a small percentage over time. This can make the real estate market a roulette game for aspiring young buyers and first-time home owners.
“I recently sold my condo in the downtown core after about three years of ownership. My overall profit was negligible given the condo market saturation,” says Toronto native Josie Sorelli. “In retrospect, I wish I had crunched the numbers more accurately before buying. If I’d had a more conservative estimate of my return on investment, and given all the additional costs I incurred, I would definitely have opted to rent. Closing costs, real estate fees, property taxes and condo fees put me in the red. Hindsight is 20/20!”
Brand new condos are coming onto the market every day, so some condo owners hoping to buy bigger homes may face difficulties when attempting to sell their condos for a price comparable to a house. Those who do successfully sell their condos and choose to purchase again often have to look outside of the city for houses they can afford.
So why has renting been stigmatized as not a smart option?
Think of some of the advantages of renting. Those who can’t afford a down payment or plan on living in the city only temporarily can be more particular about the area in which they’d like to live. Perks of good neighbourhoods include accessibility to transportation and hidden gems and hot spots, and monthly payments exclude additional fees.
Although you’ll never see the monthly rent instalments returned to you in the future, the money you could have spent on condo fees and property tax is yours to keep. Many people, particularly students or those moving out on their own for the first time, see renting as investing in an experience.
“After doing my due diligence researching property ownership, I found it just didn’t make sense for me,” says Nick Davis. “Once I added up all the expenses and the high prices of real estate, I decided to rent and cross my fingers for a market correction. I didn’t want to be house-poor and feel strapped month-to-month. I also like my area and the complete accessibility I have within the city.”
“I chose to live at home until I’ve saved up enough for a down payment. I’m happy with that, but sometimes I wish I’d chosen to rent temporarily first,” says west-ender Sarah Rodriguez. “People get wrapped up in the fantasy of buying a condo, but ownership of a condo goes beyond the idea of simply being able to say that it’s yours.
“If it’s your first time moving out, you have to make sure you have a steady income, because condo living includes paying maintenance fees. You also need to consider possible conditions like leaks that could affect your neighbours. Condo ownership comes with responsibilities.”
With property tax and condo fees that could suddenly increase – and may or may not include utilities – the total due each month is usually more than you would pay when renting.
So if you’re at a crossroads, make sure you do some research. If you do choose to invest in a condo when moving out on your own for the first time, make sure you monitor the market, speak to a financial adviser and create a plan that budgets for every expense. Then determine if and when buying is right for you.