With interest rates at their lowest levels in many years, home builders,
real estate agents and some media reporters have been expounding the virtues
of home ownership at every opportunity. One of the oft advertised advantages
of home ownership is that renting is just like throwing your money away.
If you aren't careful you might just believe this.
The fact is that not only is renting affordable and extremely good value but it also offers a flexibility and lifestyle that home ownership simply cannot match.
Cost increases continue to be a fact of life in North America. While in recent years inflation has been kept somewhat under control, so too have any increases in rent. In fact for the past five years the rate of inflation has been more than double the allowable rent increase guideline. Whereas construction costs for new homes continues to rise, since 1986 rents have fallen over 12% below the rate of inflation. That means that the relative cost of rent has actually dropped at a time when most other living costs were taking an even bigger bite out of our pockets.
In these terms, rental accommodation is a real bargain.
Yes it's true that the present costs of a mortgage are at historic lows. However mortgage rates are cyclical and it's not unreasonable to believe that they may soon return to more traditional levels. And with that return will go increased servicing costs.
But the cost of home ownership isn't just the mortgage. In fact the monthly mortgage payment is just the beginning. In our harsh climate all homes require regular systematic maintenance to prevent their deterioration. This applies even more so to older homes which are often the focus of first time buyers.
And lets not forget the annual increases in both municipal and school taxes already amongst the highest in Canada.
And while avoiding the many costs associated with owning a home, renters can simultaneously relish a responsibility free lifestyle. No painting, decorating or washing windows. No snow shovelling during our long cold winters and the freedom to visit their favorite park instead of cutting the grass on a warm summer's evening.
And renters enjoy the flexibility to relocate easily. This is particularly attractive to individuals who may be concerned about job security or whose profession is subject to frequent job transfer. The costs associated with selling a house, real estate commissions, land transfer taxes and lawyers fees can easily approach 10% of a homes value. In a stable price market such as Winnipeg this can represent a significant loss on investment. Renters never have to worry about incurring these losses.
And lastly there is no G.S.T. payable on residential rent.
Residential rent is one of the few goods and services that escapes the dreaded G.S.T. As opposed to the purchaser of a newly constructed dwelling who pays an additional 7% of the sale price in tax, or the owners of older homes who are taxed each time they spend money to replace a tap, fix a screen or put a new roof on the garage, renters are spared this aggravation.
Yes, renting is still good value.