Is it better to rent or buy in Toronto? Financial expert breaks down the pros and cons
Despite Toronto's sky-high real estate prices, one financial expert says she still believes buying a house is a smarter decision than renting.
CTV News Toronto asked Chief Financial Commentator Patricia Lovett-Reid what she believes is the best move for prospective buyers who are currently able to afford a house in Toronto's red-hot housing market.
Lovett-Reid said that while it always depends on individual circumstances she is "typically in the camp of homeownership."
"I'm a big fan of home ownership," Lovett-Reid said. "I love the capital gains tax exemption on your principal residence. That tax break alone tips the scale for me."
But Lovett-Reid said there are several factors to consider before deciding whether home ownership is right for you.
"Buying a home doesn’t guarantee wealth creation," Lovett-Reid said. "It might be hard to believe, but we could see prices fall."
She said homeowners need to be prepared for unexpected costs that most renters wouldn’t be on the hook for.
"With a home, your mortgage costs might be a known for you, but the wildcards with home ownership can be if the roof leaks, the pipes burst or the furnace breaks down," Lovett-Reid said.
For those who can buy a house, Lovett-Reid stressed that it's not always the right option.
"I think you need to look at your individual situation. Is your life stable? Is your job stable? Is your employment stable?" Lovett-Reid said.
She believes that people must ensure all parts of their life are "stable if you're making a commitment into real estate."
"I always think purchasing real estate is one of the best decisions for the long term, but I don't always see it that way for the short term," she said.
RENTERS CAN GENERATE WEALTH TOO
While Lovett-Reid said she leans towards home ownership being a smarter financial move, she still believes there are many benefits of renting.
"Renting doesn’t always mean you’re just throwing money away and just making your landlord richer," Lovett-Reid said.
She said the major benefit of renting is that it can be more financial stable for people not wanting to foot the bill for unexpected home repair costs.
Lovett-Reid also said renting offers people better flexibility if they ever need or want to relocate, as selling a home can be very expensive.
She also said renters with discretionary income can generate wealth if they are smart with their money.
"It comes down to not spending every dime coming in," Lovett-Reid said.
For people who still have discretionary income after paying their rent, Lovett-Reid recommends tucking that money away.
"It's a decent strategy to take that money and invest it in the market. You can be renting and still have wealth creation," she said. "Particularly if you’re young."
WHAT IF YOU CAN ONLY AFFORD OUTSIDE TORONTO?
Lovett-Reid said moving outside Toronto just to chase the dream of home ownership isn't always the right move.
"You could still get there and the reality is you still may not like it, no matter how hard you’ve tried to convince yourself that it’s the right financial move," Lovett-Reid said.
She suggests that anyone who is considering moving out of the city just so they can afford a house should rent in the area first to make sure they like it.
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