Cost of Rent now Outweighs Cost of Home Ownership

In some neighbourhoods, the cost of renting a home now outweighs the cost of home ownership.  With further pressure on the rental market, expect this trend to continue.

The shelter cost pendulum has swung swiftly and decisively in this direction.  I expect that we will see more would-be homeowners bite the bullet and pay higher rates in order to get into a home that would have been out of budget a few short months ago.  

Did you know at one point in the not so distance past we didn’t have the Toronto land transfer tax or the stress test or the foreign buyer’s tax?  When all of these factors were introduced there was a considerable and short-lived downturn in the market.  The sky was falling. And then something magical happened... the market recovered.  

A potential new homeowner will only evaluate their current situation and their current purchasing power.  They won’t consider that their income could have qualified them for a higher mortgage before the stress test, or they didn’t need to pay the land transfer tax once-upon-a-time.  

These higher rates will soon pass, and as soon as the shock of higher rates wears off, people will return to purchasing homes.  It’s the more practical solution.