Renting VS. Owning, a Matter of Philosophy or Affordability?

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When it comes to renting versus owning a home in a city like Ottawa, are Millennials really opting out of home ownership, or is this a classic case of affordability?

Home ownership among Millennials seems to be down compared to previous generations. Some have attributed this trend to this cohort’s resistance to owning big-ticket items versus experience-driven purchases. Others determine that the cause is affordability.

So what are we to make of a recent article claiming that many young Canadians choose renting versus owning, despite having the cash to enter the property ladder?

We asked brokers from Ottawa for their observations based on market activity. Not surprisingly, affordability (or the lack thereof) seems to be the main driver for Millennials opting to rent instead of buy.

Jason Pilon, Broker of Record, Pilon Real Estate Group in Ottawa says Millennials value the idea of home ownership. “Most appear to want to buy a home but due to lack of funds, some may have no choice but to wait…Their long-term goal is to own some type of home in the future.”

Sixty-eight percent of Ontarians are homeowners, therefore the intent to own a home in Ontario is definitely there. Furthermore, while only 45 per cent of Canadian Millennials currently own homes, 72 per cent of Millennials are planning to buy in the next five years.

Renting Versus Owning

  • From a cash-flow perspective, renting may appear cheaper in the short term. However, the reality is that approximately 50 per cent of a mortgage payment goes to repay principal – a forced savings. Renters may not be able to save the amount that buyers do.
  • The gains in value from a principal residence are tax-free, so buying is the better choice once you are able to afford it.
  • Yet, a down payment and mortgage can crimp a lifestyle, so renting, at first glance, can seem like the best of both worlds.

Millennial Motivations

  • Often, the biggest purchasing obstacle for Millennials is the down payment. Many Millennials make a good income but haven’t saved enough for the initial down payment. The Bank of Mom and Dad can be a lifeline.
  • Condos are a popular choice for a first home because they are often more affordable and they suit many Millennials’ lifestyles.
  • Parents have a big influence in terms of instilling the value of real estate, and this often drives Millennials’ desire to own.

Millennials in every city share common challenges and aspirations when it comes to real estate. They want that elusive home someday soon –  even if that means relying on the Bank of Mom and Dad, or renting for a couple of years before they have the chance to purchase a home.

Thinking about buying? Check out these Tips for a Mortgage Application. 


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