HARBOUR SIDE PARK. Located in prestigious Coal Harbour just steps from Stanley Park, Marina and best downtown living. Updated kitchen/bathroom w/granite countertop. Hdwd flr. 1 parking/2 storage. Rent $1300/mth.
Ok now for the chat:
As you can see, once we account for the amount which is used to pay down the debt, the cost of renting and buying are remarkably close. This has not been the usual case in Vancouver. There has been a premium to buying due to several reasons:
1) Due to limited land, population growth and inflation, property has trended up, leading to capital appreciation.
2) This capital appreciation is a tax-free gain and as such was regarded by financial planners as one of the best ways of accumulating wealth tax free.
3) When you rent -there are many tangible costs such as moving expenses and intangible ones such as being at the whim of your landlord for lease renewals and the anxiety of frequent moves, stability for schooling, neighbours etc.
Because of these, renting has been cheaper than buying for as long as I can remember. However as the lunatic boom of the last few years got going and everyone wanted to get on the capital appreciation band-wagon this difference expanded to 100% or more is some cases.
So how did we end up near even now?
1) Prices have dropped
2) Mortgage rates are at remarkably low rates.
3) The 'lost opportunity' on the down-payment is very low (unless you can time the stock-market)
So is this the time to buy?
There is no magic formula for when to buy. The most important factors are the mortgage interest rates and the state of the economy.
The fact that rent/buy costs are so close, is a sign of how unusual (and potentially bad) our current situation is. If things weren't bad- interest rates would not be so low, and yet house prices are dropping even though it costs as much or less to buy than rent.
If you expect rents to drop, prices to drop, no bonus or worse no job-do you buy- whatever the comparisons?? No!
It is the current uncertainty that is causing the rent/buy parameters to get so close. While it has stimulated some demand, I would expect the uncertainty to trump it very soon...perhaps this summer.
I expect that by the time this is all over we will see rents and prices fall further and just as a pendulum swung too far to one side, it will then swing too far to the other side and there will be a period when it will be CHEAPER to buy than rent! A complete repudiation of the bubble we just had.
However this is just may opinion, and worth as much or as little as anyone's. Opinions welcome..