The Renting vs Buying Debate Goes On

Some things change; some things stay the same.

One of the things that doesn’t change is the mindset of Toronto residents, who still apparently have a desire to live in the downtown core. Regardless of whether they are starting out on a career or winding down one, more and more people are finding attractiveness in living in the heart of the city.

What seems to be changing, though, is the way they pay for their accommodations. Since the turn of the year, several new residential developments have suddenly and quietly switched their plans from high-rise condominium properties to rental units.

And according to analysts, that isn’t going to be the end of it, as more people act on their desire to move to downtown Toronto (aided by migration from places such as Alberta), property values rise and more people find it difficult to gather up the necessary funds for a down payment.

Sam Crignano, president of Cityzen Development Group, says affordability plays a big part in the decision of people to go rental, and developers are willing to oblige them in order to get the most from their investments. Cityzen had plans to build a new development called The Selby (on the subway line at Sherbourne and Bloor), before an investor bought up all the units with plan to turn them all into rental units.

Weeks later, another development on King Street West — Urbancorp’s Kingsclub — also switched its plans from a condo high-rise complex to three towers of rental units.

Analysts expect home values in Toronto to rise by about 4.5 percent in 2015, which is below the rate of increase last year and certainly not pushed out of the realm of affordability, but it has also pushed up rent rates and left many would-be first-time owners rethinking their long-term real-estate investment plans.

The Selby - via blog.mycondolife.com

Factor in the desire of current, many long-time, owners to give up on the responsibilities of ownership (property taxes, condo fees, maintenance costs, pride-of-ownership displays, etc.), those who want to realize their entrepreneurial dreams or help their children with continuing education, and those nearing retirement who want to travel or spend more on their grandchildren, and you have a burgeoning rental market in the making.

The rate of return for investors is greater on rented units than it is on owned units, so they are keen to wade into this potentially burgeoning market partly due to the low vacancy rate in Toronto rentals — less than two percent — and they see the investment potential in lapping up hundreds of units in a condo complex before individual owners have a chance to put down their money.

It’s also faster for developers to sign up rental users as opposed to buyers of condos, meaning construction can begin more quickly. The first buyers for the Kingsclub development signed up in 2011, and the company converted to a rental property two years later when it couldn’t come up with the necessary numbers to warrant the start of construction. Cityzen’s Crignano told the Financial Post that he sees more of these types of transactions in the future.

As for users, the debate over whether it’s better to rent or own has been ongoing for decades, and there are several free calculators available online that allow visitors to put some numbers into an equation and see in which way they would be farther ahead after a length of time. Some post-secondary professors even use the debate as a teaching tool in finance courses.

The right answer, of course, depends on what feels right to the person making the decision. Both ownership and rentals have their downsides as well as their benefits, and the only person who has the right answer is the person making the decision.

Whether people are buying units or renting them, it adds up to more opportunity for people to move back to the downtown core, and that in turn adds to the economy and vibrancy of the city.