Should you rent or buy in the Greater Toronto Area?

The Bank of Canada’s most recent interest rate hike may have some homeowners in Toronto recalculating their finances while renters wonder what this means for their future monthly payments.

On Wednesday, the Bank of Canada (BoC) raised its policy interest rate by 25 basis points to five per cent, pushing it to its highest level since 2001.

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This means higher payments for variable-rate mortgage holders until the rate of inflation returns to the BoC’s two per cent target, which could take at least another two years.

So, if you had to buy or rent a property in the Greater Toronto Area (GTA) right now, which would be the better deal?

Canadian real estate website Zoocasa analyzed data from the Toronto Regional Real Estate Board (TRREB) to compare monthly rent and mortgage payments (based on a 25-year amortization with 20 per cent down on a five-year fixed rate of 4.94 per cent) in 27 Toronto regions.

Here’s what they found:

WHICH CITY HAS THE MOST EXPENSIVE RENT?

According to Zoocasa, the city with the most expensive average rent in the GTA is Brampton at $3,263 per month, based on rates from the first quarter of 2023.

While that’s steep compared to the rest of the GTA, it’s still cheaper than buying a home in that city where the average home price in April was $1,113,948 and average monthly mortgage payments would run you $5,153.

THIS GTA CITY HAS THE CHEAPEST RENT

Based on available TRREB data, Zoocasa says Georgina, Ont., near Lake Simcoe, is the place to be for cheap rent at $1,650 per month.

However, because the average home price in the south-central Ontario town is $903,359 -- the third lowest in the GTA cities surveyed – there are two other cities that offer more affordable mortgage prices, Zoocasa says.

WHICH CITY HAS THE CHEAPEST MORTGAGE PAYMENTS?

The cheapest place to own a home in the GTA is Orangeville, Ont., according to the data.

There, the price of the average house will set you back $847,527 and monthly mortgage payments will cost $3,920.

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Rental prices in Orangeville are slightly higher than those in Georgina, Ont. at $1,663 per month, however.

The second most affordable place to own a home is Oshawa, east of Toronto, where a mortgage would cost you $3,954 a month on the average selling price of a home at $854,822, Zoocasa said.

MORTGAGE PAYMENTS MOST EXPENSIVE IN THE GTA

Though it may come as a surprise to those in downtown Toronto who saw the average price of a home climb to $1,182,120 in June, the crown for most expensive real estate in the GTA lies north of the city. 

Zoocasa says the average price of a home in King City is $2,312,339, where monthly mortgage payments would cost you an eye-watering $10,696 on average.

On the flipside, rental prices in the city are surprisingly modest at $2,225 – more than $1,000 less than the most expensive rental market in Brampton.

SHOULD I RENT OR BUY?

Based on their calculations, Zoocasa’s determination on the real estate situation across the GTA is clear: “It’s vastly more affordable to rent than it is to buy a home, currently.”

“Aside from the ability to build up equity in a home you own, it’s important to take into account that mortgage payments are being driven up because of heightened interest rates,” Zoocasa writes.

Experts have said the recent hikes by the BoC are likely to continue to have a runoff effect, causing prospective homebuyers to wait on the sidelines and increasing competition in the rental market while landlords look to push higher costs on tenants.

“However, if the Bank hits its target, these [mortgage] payments will decrease in the future for variable rate holders and those renewing their mortgages,” according to Zoocasa, which could bring more affordable housing options in the future for those renting or buying.

To see the full list of GTA cities surveyed, click here.