Should You Rent or Buy in Mississauga?
To rent or buy a condo in Mississauga, that is the question.
Conventional wisdom says to buy if you're capable, as you'll acquire equity and not "throw money away" every month. Other experts might advise you to rent because condos don't tend to appreciate in value the same way houses do and current low interest rates could increase, stretching the average millennial's budget to the max.
According to a recent report in The Star, young professionals in their 20s and 30s might want to exercise caution when deciding to purchase a condo in the GTA. Toronto firm Wealthsimple -- which the article says has a vested interest in selling stocks -- told The Star that an internal analysis suggested that people are better off investing in stocks than condos.
While the firm itself might have an agenda, they raise some compelling points.
Much like Wealthsimple says, there's no evidence that condo prices -- a very different beast from house prices -- will climb significantly in the near future. Interest rates, which are historically low thanks to a tender and volatile worldwide economy, could also rise over the next few years, making mortgage payments more and more of a hardship.
While all of these points are valid and wise to consider, there are still benefits to buying a condo in Mississauga.
"It's better to buy if you can," says Kim Kubath, a Mississauga-based realtor with Royal LePage. "You would be making equity and not paying someone else's mortgage. You have something to claim on your taxes and it's good to own a home that you can decorate."
While it might seem like a realtor has a vested interest in encouraging home ownership, lots of agents -- Kubath included -- help clients find rentals and are open about the benefits of leasing a space.
"Renting offers more flexibility," she says. "[There are also] less unexpected expenses, such as your furnace breaking. You can save additional income for trips or a future investment in a home. [You're] also not tied down with mortgage payments. You can move around more easily and explore different neighbourhoods without having to worry about real estate and lawyer fees."
While it's good to know the benefits of renting vs. buying, the choice -- especially for younger people in the city who are just starting out -- often comes down to pricing and flexibility. Mostly pricing, if we're being honest.
In terms of costs, renting can be cheaper.
But only sometimes.
"Basement apartments are cheaper," says Kubath. "But for the most part, mortgage rates are so low that owning is equal to renting monthly. There are cheap rental exceptions and the cheapest way to live is to have a roommate."
In terms of Mississauga, a starter condo for one person (so, say, a one-bedroom condo that's under or around 700 sq. ft.), can run you anywhere from the high $100,000s to the high $200,000s. If you want to pay less, you can look at Cooksville, Sheridan or Meadowvale. A lot of units are in older buildings, meaning you might get more square footage for less.
If you want a newer or City Centre unit, you're looking at the mid to high $200,000s, which is significantly lower than the average house and quite doable in terms of mortgage on a middle-class income.
Let's pretend, for a moment, that you want to buy a $240,000 unit. Let's say you have 20 per cent to put down, so $48,000 (the minimum amount to avoid mortgage insurance). With a five-year fixed rate 30 year amortization at 3.14 per cent interest, you're looking at $821.93 a month. This is a doable amount, although it's important to remember that you'll have to pay condo fees, some utilities and taxes on top of the mortgage. If your fees are around $400 a month, your property taxes around $160 and your utilities around $30 (hydro and heating fees in condos, should you have to pay them separately, should be relatively low), you're looking at roughly $1,412 a month in housing costs. That's not much different from the rental rates for the same City Centre units, most of which hover around the $1,300 mark.
The only major difference is the down payment. If you don't have one (or don't have a large enough one), renting might win out.
Another thing to consider is flexibility. If you plan on staying in Mississauga for some time, the stability of ownership is appealing. You don't have to worry about your landlord deciding to sell his or her unit, giving you a few months to find a new place. If you're not sure if you'll be in one neighbourhood for too long, renting is ideal. While a condo can always be sold, it's not likely to sell as quickly as a house. Condo inventory in the city is relatively healthy, so there isn't a mad rush to purchase units and it's rare that any unit will sell for much over asking price.
It's also worth considering what condo ownership means to you. If you have a down payment and want to enter the market, you're building equity and a more personalized, customizable home. You can paint, hang pictures, replace appliances and change the overall aesthetic to your liking. It's yours -- and yours alone -- and no one can tell you what colour to paint the bedroom or what granite to order (although some landlords might allow you to renovate, you have to check first).
Both renting and buying are viable options for young people in Sauga. It mostly comes to down to what you can spend upfront, whether you want to enter the market and how much risk you're willing to assume in terms of fluctuating interest rates. In terms of prices, a rental might not save you too much month-to-month unless you're leasing a basement unit or splitting costs with a roommate.
So what do you think, Sauga millennials? Do you want to rent or buy?