The decision to buy or rent in Toronto’s real estate market is challenging, particularly given the current sky-high rental costs and out-of-reach home prices for many households. Whether it’s elevated mortgage rates or the supply-demand imbalance, prospective homebuyers face multiple hurdles. To determine if buying or renting makes more financial sense in Toronto, it’s crucial to evaluate the available data.

Toronto Rental Market: The Latest Numbers

According to the August 2024 Rentals.ca Rent Report, the average asking rent for a one-bedroom apartment in Toronto is $2,443, and for a two-bedroom unit, it's $3,198. These numbers remain unchanged from the previous month, placing Toronto as the third-most expensive rental market in Canada. The top two cities are Vancouver and Burnaby, with average rent prices of $2,761 and $2,566, respectively.

For shared accommodations, average asking rents across Canada have risen by 9.1% year-over-year, reaching $1,005. In Toronto, roommate rents average $1,232, up 4.9% annually, while Vancouver recorded an average of $1,476, an increase of 1.4%.

According to Jennifer Pearce, President of the Toronto Regional Real Estate Board (TRREB), record population growth and high mortgage payments are driving the increased demand for rental units. Despite some stabilization in rents, rental demand remains high.

The Great Debate: Is Toronto More Affordable than Vancouver?

The affordability debate between Toronto and Vancouver continues, with each city presenting its own financial challenges. Vancouver currently leads with higher rental prices, but Toronto remains among the most expensive rental markets in the country.

On the other end of the spectrum, the three cheapest Canadian rental markets are Saskatoon ($1,216), Fort McMurray ($1,249), and Regina ($1,334).

There has been a significant increase in the construction of purpose-built rentals, with inventory up by 174% in the last year to a multi-decade high of 22,064 units, according to Urbanation. However, recent months have seen a slowdown in rental development.

Buying vs. Renting in Toronto: Which Makes More Financial Sense?

If you’re considering whether to buy or rent in the Toronto real estate market, it’s essential to weigh the pros and cons of each option to determine the best fit for your financial situation and lifestyle.

The Pros and Cons of Buying vs. Renting in Toronto

The Cost of Buying vs. Renting in Toronto

Here’s a breakdown of average home prices in Toronto as of 2024:

·         Detached Home: $1.648 million

·         Semi-Detached: $1.254 million

·         Townhome: $970,661

·         Condo Apartment: $748,330

According to Canada Mortgage and Housing Corporation (CMHC), the average monthly mortgage payment for these properties is approximately $3,366. This amount varies based on the type of property, but it gives an idea of what to expect for monthly housing costs.

When compared to the average rent for a one-bedroom apartment in Toronto, buying could potentially be more cost-effective in the long term, depending on the property type and location. Plus, homeownership allows you to build equity, which can be used in the future for retirement, your children's education, or other significant expenses.

However, buying also comes with various taxes and fees, such as the municipal land transfer tax and the HST, that renters do not have to worry about. Rising interest rates can also impact the affordability of owning a home.

As TRREB CEO John DiMichele noted, “While higher interest rates have certainly impacted affordability, the prospect of higher taxes will also hit households’ balance sheets, especially younger buyers with limited savings.”

Cost of Ownership vs. Renting

Renters don’t need to worry about the many costs of owning a home, such as replacing appliances, maintaining the property, or even paying for renters insurance in some cases. These cost savings can make renting an appealing option for those on a tight budget.

On the other hand, homeowners must budget for additional costs, including condo fees (if applicable), utilities, property taxes, and insurance. Recent reports also indicate that many condo owners have faced special assessments—one-time charges that may be applied to cover major repair expenses, especially when reserve funds fall short.

For renters, costs typically include only the rent and utilities, making monthly budgeting more predictable.

Flexibility vs. Responsibility

One of the most significant benefits of renting is the flexibility it offers. Renters aren’t tied down to one property and can move more easily if their lease is up. For those seeking new job opportunities or a change of scenery, renting provides an advantage. In contrast, homeowners have more responsibilities, from upkeep to unexpected expenses. Selling a home also takes time and may not be feasible if the market is down or if you need to move quickly.

Renting can also be ideal for individuals who value flexibility and do not want the responsibility that comes with homeownership, such as handling repairs and maintenance.

Which Is the Better Option: Buying or Renting in Toronto?

Traditionally, a core component of the Canadian Dream has been homeownership. Owning a home and building equity to fund retirement or children's education remains an attractive goal for many.

So, is homeownership an outdated concept? Not necessarily. Whether buying is a feasible option largely depends on your location, income, interest rates, and overall economic conditions. From a long-term perspective, buying is superior to renting because real estate prices in Canada generally trend upwards over time, allowing equity to grow. However, in the short term, renting can be more practical and financially beneficial, especially if you’re waiting for the market to stabilize.

Ultimately, the debate over renting versus owning comes down to personal circumstances and overall market conditions. Buyers benefit from building equity and potentially saving money over time, but renting offers flexibility, lower monthly costs, and less responsibility.

Is Now the Right Time for You to Buy?

Given the fluctuating real estate market, elevated rental prices, and ongoing economic uncertainties, it is essential to weigh the pros and cons of both options. For some, buying is the right decision if they can afford the down payment and associated costs. For others, especially those prioritizing flexibility or facing limited savings, renting may be the more advantageous choice.

If you’re contemplating a move in Toronto, consider your financial goals, career plans, and lifestyle needs to make the best decision for you and your family. Whether it’s buying or renting, Toronto has options for everyone—it’s just about choosing the one that fits you best.