Is anyone else annoyed by the advice that young people should give up hope of paying their own mortgage for their own home in favor of paying their landlord’s mortgage via rent? “People need to shift the idea that to be successful you have to own a home. It’s just not going to be in the cards for some people, and they’re in a worse position for trying to own a house,” she said.”
I say that instead of telling young people to give up on goals we should, as a nation, protect owning a home as if it was a basic necessity and do something about large %'s of homes/condos being owned by investors. It was possible to buy a home on a single income just a few generations ago. I’m sure it can be again if we make housing security a priority.
I’m in the process of buying my first house, and I’m pretty sure I’m putting more down than my parents paid for their whole first home.
Not too long ago, the tradeoff of renting was that it was cheaper, you didn’t have to care about repairs (in theory) and could take the money you saved to invest.
The rental market is so outrageously out of whack that it is no longer the case. If you don’t own your home, you’re paying for someone else’s mortgage, while not having the benefit of paying less to invest more. And that’s not even broaching the subject of slumlords and overall bad landlords.
I don’t think that’s the advice. Rather that renting can be significantly cheaper and less risky to your savings in the current market. Here’s an anecdote from where I live. If you were to buy the unit I live in today, you’d have to pay $3700/mo in mortgage, $1000 in maintenance, and $250 in taxes. That’s $4950/mo to “own” this place. Instead you could rent it for $3200. That’s $1750 difference. That’s a lot more than what’s going to be going towards your principal, your equity in the purchase case. Out of the $4950/mo, only $860/mo would be going towards equity. Everything else goes in someone else’s pocket. The renter would be able to stash more money than you till your 13th year in the mortgage. If this is the reality you’re looking at renting is significantly cheaper. I think that’s what the advice is about.
You’re ignoring the fact that the house is appreciating in price more than $1750x12 per year. In fact, my house has appreciated around $500,000 in the 3.5 years since I bought it, which is about $12,000 per month. Plus I get the principal amount I’ve paid in back on top of that.
So while it’s cheaper every month to rent and they do have more cash in their pocket today, it’s FAR better financially to own. I will be able to retire easily with a paid off mortgage and very low living expenses, a renter may never have enough cash saved to be able to retire at market rental rates even if they put every single dollar they save each month away.
This is true if it-only-goes-up. Prices in the GTA for example have been flat since they came down from the peak in 2022:
So I’m only ignoring price appreciation because not all markets in Canada are upwards moving and I’m not betting it’s gonna go up or down.
If you bought at the peak then lost your job and had to sell you’d have lost your down payment. The 5x leverage works both ways. Such people weren’t as lucky as you and they do exist.
If prices stagnate and a renter saves more on housing than you pay in equity, at the end of your mortgage, they’d be able to buy your house with their savings and live just as comfortably without paying rental market prices.
So yeah, buying is a far better investment today, only if you bet it’s going to go up. And only if you make enough money (200K to comfortably support the below-median 740K scenario above) so that you’re able to absorb shocks without being forced to sell at an unfavorable time/price. It has been true for a while and if (when) interest rates fall, prices are likely to go up, but that would only happen because it would become cheaper to carry the higher mortgages required to inflate the prices further, because incomes are not rising nearly as fast.
In my opinion (and I think the article’s) buying today with lower income where you have little buffer left after paying those 5K is a recipe for disaster. I would rent when significantly cheaper than buying, buy when similar or cheaper than renting.
What the hell are you doing at this house that you need $1000 in maintenance every month.
You can’t buy a house in the GTA for 700K. You’re buying a 2 or 3-bedroom condo for that much today. Check the maintenance fees for such units in the GTA. I don’t think you’d see much under $600 for a 2-bed and often without hydro/water/heat in it.
it is not that you pay that per month( unless you have strata building fees) but you have a roof replacement, or furnace change then you have a huge expense spread over you maintenamce saveing account. I once had Vaccum ,cleaner washer and dryer die in one week. But when I rented that is somebody elses problem. It was good renting 10 years ago maybe, but those days are done
Not in my experience in the GTA. The cheapest all-inclusive maintenance I’m aware of is in the $600 area and that’s for 2-bedroom units in much, much worse building. Larger 3-bedrooms (1200-1500 sq.ft.) in decent buildings cost $800-$1200. Whenever I see cheaper maintenance for such units it typically doesn’t include hydro/water. Let alone Internet and cable.
My house has potentially increased in value almost $40k since I bought it almost two years ago. While most of my mortgage payments right now go towards interest. The equity I’ve gained by its value increasing is more than what the payments have done for me. I can’t realize that without selling, which I don’t intend to.
It’s like the story of a Vancouver woman who lived in an apartment in English Bay. She was a server when she moved there 10 years ago, and had no issue affording it. Over the years she got settled, went to school while working and became a lawyer.
She eventually had to move out of the same apartment as it was no longer affordable, despite becoming a lawyer and earning significantly more money.
If she can’t keep pace with inflation going from a server to a lawyer, not sure what hope the rest of us would have.
As a young person, I love living astronomically.
Nice job with the headline quote, BNN Bloomberg writer.
Most of Europe rents, even people who make 6 figures and live in big cities…there’s absolutely no stigma attached to renting, in contrary people who decided to get a 35 year mortgage for an overpriced house (which often isn’t even a single house but a semi or a house with 3 ft of land around it) to live on the outskirts among conservative simpletons are thought of as suckers… It helps though that in the EU renters have rights and landlords are extremely limited in terms of raises or contract changes.
I’ve seen European Redditors say that European rental apartments tend to have better layouts and separation between units.
Probably better sound proofed too as they were built as multi units from the start instead of being a regular house renovated into apartments.
This is a bit of a fallacy. In a normal market, the rent for a home is less than the costs of home ownership (mortgage + maintenance + taxes) and that saved money can be used to purchase other assets.
Until the real estate mania of the last few years, if you followed this strategy, you would not be any worse off than the person who bought their home.
I personally would much rather have equity in more fungible assets than a home. Owning a home ties you to a specific location, and can’t easily be sold in an emergency. Plus it’s not a very diverse portfolio if most of you wealth is in a single property
If you can find such an asset for a fair price, then it might be a good investment, but that’s like hitting the lottery at the end of a bubble. There’s no guarantee your asset will rise in value or even just stay the same. It also depends on one’s financial situation. I pay about 15% of my net income on rent for nice flat in a modern building from 2021. If I could have the same living standard with a mortgaged asset for the same 15% of my net monthly income, I would consider buying, but it’s impossible even if I’d put down 25% cash upfront. House prices are crazy in Europe, I heard it’s due to all kinds of shady organisations like the Russian Mafia parking and washing their money here.
Only individuals should be able to buy and own residential property. Not corporations, not numbered companies, just people. They can rent them out, etc but don’t get the same protections of corporations. It becomes personal at that point. Banks generally will finance about 20 properties this way before they decide the liability becomes too much. This protects small landlords still, but gets all the big money out.
Then the rental market will price itself fairly based off of that and keep the rental market in check, but when the corporations own both sides of the coin they set the price.
Many of our MPs are landlords themselves, which may influence how… reactive they are to the issue https://www.landlordmps.ca/data-analysis
Our economy is over-reliant on housing as an investment in general, so getting people to do anything about it is hard to begin with https://www.oecd.org/housing/policy-toolkit/country-snapshots/housing-policy-canada.pdf
It’s not looking good. We’re in so deep already. A lot of people will lose their homes either way.
