Are you paying someone elses mortgage? Probably not if you’re renting in a building thats just a few years old. The gap between rental costs and owning cost have grown rather severely over the last few years, a fact that makes some people wonder whether buying makes financial sense. This point is debated in an article in todays business edge.
“Today there’s more pressure to make your best offer first, and you don’t get the chance to come back with a counter-offer, usually,” Mastracci says.
“The danger is always that the market gets away on you. If it gets away and prices rise dramatically, as they have in certain locales across Canada, it really hurts when you go and plunk your money down on the table for your first purchase.”
According to a recent housing affordability report by RBC Economics, home prices continued rising faster than incomes during the second quarter. B.C. remained the least affordable province, but Alberta’s energy boom sent the cost of a two-storey home jumping $28,000 in just three months.
However, even in a torrid market “you shouldn’t think this is really going to be the end-all and be-all, your best investment,” Mastracci cautions. “It may not be – especially if you buy at a high time.”
Over 20 to 30 years most homeowners might get an annualized return of four to six per cent, he estimates.
So if you buy now and hold for 20 or 30 years you might make six percent per year. What if you had bought in 1980 or 1991? What if you buy in 2011?
What if a condo rents for $1500 per month vs. a monthly mortgage payment of $3000. What if you were incredibly disciplined and you put the $1500 monthly difference into a savings account or GICs?
What if the housing fairy came to vancouver and magically turned all homes here into wonderful, solid, trouble-free buildings?
That would be awesome.