Looky here, the Province newspaper has discovered the price to rent ratio!
Take the house price and divide it by what it costs to rent for a year to get the price-to-rent ratio: Price divided by (Monthly rent x 12) = X.
(Estimates for additional costs of homeownership, such as taxes, maintenance and insurance are factored into the equation.)
If the number is higher than 15, it’s generally not a good time to buy.
If the ratio is less than 15, buying is a better deal than renting, if you plan on living there for at least five years to offset moving and closing costs.
By the time the number hits 20, renting is apparently the way to go, except if buyers expect to stay put for at least 15 years, according to a formula used by trulia.com to rank major urban U.S. centres every year.
B.C.’s numbers, as shown in the graphic, are through the roof, from 29 (Prince George) to 73 (West Vancouver).
Compare that to a few little housing markets like Manhattan (20) and San Francisco (17). That ratio doesn’t mean house prices are <i>low</i> it just means that they’re more reasonably priced compared to rents.
Since you can’t take on a big loan to pay rent it tends to show how much a place is actully worth in terms of desirability and local economics.