With changing interest rates, many are reconsidering whether to rent or buy a home. Average detached home prices in Calgary hover around $700K, requiring significant down payments.

Recent Survey Insights

Recent surveys found 29% of renters considered buying before renewing leases, with 33% waiting for lower interest rates. Now, with the Bank of Canada’s key rate at 4.75%, the question resurfaces.

Changes in the Market

The Bank of Canada’s rate drop makes borrowing cheaper, slightly reducing mortgage payments. For instance, a 10% down payment on a $703,446 home now results in a monthly mortgage payment of $4,061, saving $96 monthly.

Renting vs. Buying Costs

Five-Per-Cent Rule

If annual rent is less than 5% of a comparable home’s value, renting is cheaper. For example, $2,000 monthly rent totals $24,000 yearly. If a similar home costs more than $480,000, renting is preferable.

Price-to-Rent Ratio

• Ratio above 21: Buying is more expensive

• Ratio below 16: Buying is cheaper

• Ratio between 16 and 21: Renting is often better

Price-to-Rent Ratios in Canada

Cities like Edmonton (9.7), Calgary (10.8), and Winnipeg (11) have low ratios, favoring buying. Conversely, Vancouver and Toronto have high ratios, making renting more cost-effective.

Hesitation to Buy

Despite lower rates, high home prices and down payments deter buyers. For instance, a $703,446 home needs a $70,344 down payment. Renting avoids these costs and exempts tenants from property taxes and maintenance.

Verdict

Buying builds equity. With national average rents surpassing $2,200 and home prices high, the choice depends on individual financial situations and long-term goals.