Should You Rent Or Buy In Vancouver?

Recently, I took a closer look at whether it was a better deal for someone in Toronto to rent a place or buy one. In case you missed it you can read all about real estate in Toronto right here. Let’s continue on the series and see whether someone looking to live in the Vancouver area would be better served to rent or buy.

As we all know, Vancouver’s real estate market is more expensive than getting Taylor Swift to show up at your birthday. The average detached property is going for more than $1 million, and even tear-down houses in the right location can fetch seven figures. I like Vancouver, but there’s no way I’m spending more than a million to live anywhere that doesn’t have a butler included.

Seriously. Y’all are nuts.

But just how expensive is it to rent there? To find out, I scoured the rental listings on Kijiji and then went and looked for a similar apartment in the same building for sale.

My search didn’t take long. I quickly located a 1-bedroom condo on Kijiji for $1,700 per month. As far as I can tell from the ad, the only thing not included is parking.

A very similar unit is for sale in the same building for $328,000. Based on a down payment of $16,400, and CMHC mortgage insurance fees of $9,815, the buyer of this property would have a mortgage for $321,415. If they managed to secure a 2.99% 5-year fixed mortgage, they’d be looking at a monthly mortgage payment of $1,519 over a 25-year amortization. Please people, I can't stress this enough - ALWAYS shop around and compare mortgage rates before buying a home!

But the costs don’t end there. The buyer is also responsible for a monthly maintenance fee of $348, as well as taxes of approximately $100 per month. The buyer will also be responsible for paying Vancouver’s land transfer tax, and will also have to do some work to maintain the property. But I’ll be generous and exclude both of these variables.

You’re welcome, buyers.

Add it all together, and the buyer is looking at spending $1,967 per month to own this property, while the tenant can rent it for $1,700. The tenant is up $3,000 per year compared to the buyer, which unfortunately isn’t quite enough for a butler.

What about houses?

That’s where it gets a whole lot trickier. Many people in Vancouver who own a house subsidize their housing costs by renting out the basement. And many people who are renting houses are getting a great deal on something that’s sitting on prime land, waiting for a developer to push down. Plus, it’s a lot harder to find two houses that are more than kind of comparable.

Undaunted, I went back on Kijiji and found what looked to be a pretty nice home in Burnaby for $2,600 per month. It has 4 bedrooms, 2.5 baths, a beautiful kitchen renovation, and even a single car garage.

Using that as a base, I did a search for nearby homes on realtor.ca. The closest match I could find was a 3 bedroom, 4 bathroom home located approximately 500 meters away. It’s currently listed for $839,000.

Here’s how nuts Vancouver’s real estate is, in a nutshell. If a buyer borrowed $800,000 to buy the second property, they’d be looking at a monthly payment of $3,781 per month using a 2.99% mortgage and a 25-year amortization. Add on property taxes and house insurance, and it looks like the renter is saving $1,500 per month compared to the buyer. That really is almost enough for a butler.

The bottom line? Just like in Toronto, in Vancouver the obvious choice is to rent. It’s really not even close.

You may not be able to control the price of housing in Vancouver, but one of the best tips I can give is to try and save on the variable expenses you can control such as home insurance. You will most definitely want to insure your big new purchase so just like your mortgage you should shop around and compare home insurance quotes. You can end up saving hundreds or thousands of dollars. Once again, you're welcome!

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