Home sales and the average selling price in the Greater Toronto Area (GTA) in June 2023 remained above last year’s levels.
Today, we would like to shed light on the current situation of Toronto's rental market and explain why owning a property, despite high interest rates, remains a better choice in the long run.
Toronto's rental market has been experiencing record-breaking highs in recent years, with average rents increasing over 25% year-over-year. This trend has created challenges for renters, making it increasingly difficult to find affordable housing options. Factors such as population growth, limited housing supply, and increased demand have contributed to this surge in rental prices.
However, even amidst these soaring rental costs, owning a property can be a more favorable option, especially in the long term. Here are a few key reasons why:
- Equity Building: When you own a property, you have the opportunity to build equity over time. Each mortgage payment you make contributes to your ownership stake, allowing you to accumulate wealth. In contrast, renting provides no return on investment and leaves you with no ownership stake in the property.
- Stability and Control: Owning a property provides stability and a sense of control over your living situation. As a homeowner, you have the freedom to make modifications, personalize your space, and create a long-term home. Renters, on the other hand, are subject to the decisions of landlords and may face limitations on customization.
- Hedge against Inflation: Real estate has historically been a good hedge against inflation. As prices and rents rise, so does the value of your property. By owning a home, you are protected from escalating rental costs and can benefit from potential appreciation in the property's value.
- Potential Rental Income: Homeownership also offers the possibility of generating additional income through rental opportunities. If your circumstances change, you may have the option to rent out your property and earn rental income, which can help offset your mortgage costs or provide an additional revenue stream.
- Long-Term Financial Planning: Owning a property allows you to plan for the future and build a foundation for your financial well-being. As you make mortgage payments, you gradually pay off your loan, and eventually, you can own your home outright. This can provide stability during retirement and eliminate the need for monthly rent payments.
While the current rental market in Toronto may present challenges for tenants, it's important to consider the long-term advantages of homeownership. Although interest rates may be high at the moment, they can fluctuate over time, and locking in a mortgage rate now can still be a financially sound decision.
Of course, individual circumstances and financial situations may vary, and it's essential to evaluate your personal goals and resources before making a decision. Consulting with real estate professionals and financial advisors can provide valuable insights tailored to your specific needs.
We hope this information has been useful in understanding why owning a property in Toronto, despite high rental costs and interest rates, remains a viable and advantageous choice in the long run. Feel free to reach out to us if you have any further questions or need assistance in navigating the real estate market.
Wishing you all the best in your housing endeavors.
Ross Talibov, B.Com - Law & Business
Real Estate Broker & Founder