Condo rentals an affordable option in Oshawa and Hamilton

Renting a detached home is often as far out of reach for many Canadians as buying it, with the majority of communities cited in a recent study showing rental costs prohibitive for full-size houses in most markets.

Buying detached homes is no affordable task for most Canadians either – especially first-time home buyers – with the only saving grace being the equity earned.

Condos are a different story, with rents in all but one city – Burnaby, in suburban Vancouver – more affordable than buying the property.

To guide renters, buyers, and investors in selecting where to purchase or lease their next property, real estate company Zoocasa determined the price-to-rent ratio in 21 cities across Canada for detached homes and condos. The ratio is calculated by dividing the median home price by the median annual rent.

(Median 2-bedroom rental prices were sourced from the latest rental report from Zumper’s and median detached and condo prices were sourced from individual real estate boards including the Toronto Regional Real Estate Board, Greater Vancouver Realtors, and the Victoria Real Estate Board.)

A high price-to-rent ratio of 21 or more suggests it is more expensive to buy a home than to rent, while a lower price-to-rent ratio of under 16 shows it is less expensive to buy a home rather than to rent. A moderate price-to-rent ratio between 16-21 translates to being “more favourable” to rent rather than buy, but it will depend on individual financial circumstances.

Though the price-to-rent ratio doesn’t take into account the overall affordability of an area, it can be helpful in determining if specific property types are fairly valued compared to rental prices.

Only a handful of Ontario cities were included in the survey, with Oshawa, Kitchener-Waterloo and Hamilton the only housing markets within commuting distance of Toronto in the study.

Oshawa, with a median house price of $900,000 and a median condo price $441,000, was fifth on the list for price-to-rent for detached homes with a score of 34.4. Hamilton ($835,000 and $457,500) scored 33.1 while Kitchener-Waterloo ($870,000 and $445,000) earned a 30.6 score.

Each town was well behind the usual housing leaders in Burnaby, Vancouver, Toronto and Victoria.

Things were a lot more favourable for condo buyers, with Kitchener-Waterloo scoring under the 16 threshold (15.6) and Oshawa (16.9) and Hamilton (18.2) not far off.

The median rental price for a 2-bdrm unit (all property types) in the three communities was $2,100 for Hamilton, $2,180 for Oshawa and $2,370 for Kitchener-Waterloo.

Whether you’re a renter or a homeowner, rising inflation has impacted housing costs across Canada. Borrowing costs are trending down, however and some 5-year fixed mortgage rates remain under five per cent. Inflation is also hovering just under three per cent, edging closer to the Bank of Canada’s two per cent target.

Given these positive shifts, some renters may be considering a transition to homeownership, especially as we head into summer, a time when many leases are reaching their end.

A condo may be the best property type to make homeownership dreams come true without breaking the bank, and even in cities with a high price-to-rent ratio, it still may make financial sense to buy a home rather than rent one. This is because the price-to-rent ratio doesn’t factor in the amount of equity you can build or additional expenses renters have to pay like utilities and maintenance fees.

The potential for price appreciation, especially in high-priced markets like Vancouver and the GTA.

A recent Zoocasa report analyzing the amount of equity GTA condo buyers built in five years showed the majority of GTA cities saw the average condo price increase by at least 40 per cent. In places like Oshawa, Ajax and Markham, that translated to more than $200,000 in equity gains over five years.