If you’re debating the age-old argument of whether it’s better to buy or rent, then a new data report may help put the economics of owning versus leasing into perspective.
Today, Toronto-based brokerage Zoocasa released their findings on which City of Toronto neighbourhoods are better to buy or rent a condo apartment in, based on the number of years of paid rent a condo purchase price would be equal to.
With a flood of new condo rental supply hitting the market while housing priorities shift as a result of the pandemic, Zoocasa explains that renters and prospective homeowners may be exploring their options on whether to rent or own.
Using quarterly market data from the Toronto Regional Real Estate Board (TRREB), Zoocasa compared the price-to-rent ratio (PTRR) of 35 city neighbourhoods to highlight which parts of Toronto are more cost-effective to make a home purchase in or stick with tenancy.
The PTRR is calculated by dividing the average purchase price by the annual rental price. This determines how many years of renting would be equal to the property’s sale price. Zoocasa notes that this measurement does not factor in the income required to qualify for a mortgage or any carrying costs, such as maintenance fees.
Across the City of Toronto, the average condo apartment purchase price from Q2 2020 was $661,458, which is equal to 22 years worth of rent at an average monthly price of $2,501.
Regions with lower ratios between 1 and 15 years were considered to offer better value for owning over renting, while Toronto communities that scored a ratio of 21 and higher were deemed to have better value in leasing.
“Of the 35 neighbourhoods included in our analysis, 22 had a PTRR of at least 21 years, indicating that overall, renting a condo apartment may currently offer more value than purchasing one in the majority of Toronto neighbourhoods,” explains the Zoocasa report.
Out of the communities examined, the eastern and western stretches of the city presented the best case for buying over renting. E03, which includes East York and Danforth Village, and E10, comprised of West Hill and Centennial Scarborough, produced a PTRR of 15 years. In E11, W05 and W10, where average condo prices hovered around the low- to mid-$400,000 range, the PTRR was 17 years.
Central Toronto neighbourhoods proved to have some of the highest PTRRs, with ratios surpassing 21 years across Midtown, North York and downtown Toronto. The steepest price ratios were found in C02, E01 and C12, where the PTRR exceeded 30 years. Ultimately, it was C09, home to Rosedale and Moore Park, that nabbed the top spot with an average condo purchase price of $1,307,658, equal to 35 years of rent at $3,143 per month.
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