It has become all the rage in the papers these days to discuss renting versus buying. While this isn’t exactly a new phenomenon, it has taken on a particular relevance with the boom in housing prices and extremely low rental vacancy rates across Canada. It seems that everyone has an opinion. My dad’s generation will shake their heads and with their decades of wisdom (and complete ignorance of current home prices) repeat over and over again that, “Renting is like throwing your money away.” Others will show you graphs that explain the disparity between what you will pay for a house and what you will pay in rent has never had a larger gap than right now; therefore, renting is the logical choice for a lot of folks. Finally, you get the really official-sounding self-proclaimed experts who will reference metrics like record low interest rates, future investment rates of return, possible housing appreciation/depreciation, and my personal favourite – parsing of Bank of Canada statements to speculate on what the future holds. Naturally very few of these people will admit to the fact that if they actually knew what interest rates were going to do (a hugely complicated scenario that would require you to know what is going to happen across Europe, in the BRIC countries, and how the USA’s political gridlock will shake out) they surely wouldn’t be giving those findings to a newspaper, they would be making billions from them in a hedge fund somewhere.
Ah I See, You Must Have Stayed At a Holiday Inn Express Last Night
I don’t know what the housing market will look like in ten years. I can’t say for certain what the best option is for you personally. What I can say is that there is a HUGE aspect of owning a home that many “experts” are totally missing on, or only giving minor priority to when discussing the concept of young people entering the world of home ownership for the first time. That massive oversight is the little thing known as mobility.
Given my last paragraph and the title of this article it might surprise you to learn that I am a homeowner. After achieving my B. Ed degree I moved to a rural area with a permanent job contract in my hand and purchased a house that would probably cost $250,000 or so in any of the nearest urban centres for $95,000. Because of the low cost of the house, and the certainty of my job, my situation was much different than that experienced by most of my generation. The realities I get to experience as someone who likes to live a rural lifestyle are not the same as those for the majority of young Canadians. The incredible stability of my job as a teacher is also far from the norm. I love the idea that I am building equity with every mortgage payment, but I also recognize that the advantages I just mentioned don’t apply to everyone.
Go West Young… Or East… Or Anywhere!
Regardless of what interests rates do, or how many condos are going up in your neighbourhood the fact is that the overriding concern for young people in today’s economy should not be whether to buy a house or not, but whether or not their income is stable and dependable. It is well-documented that the youth around the world were the demographic most drastically affected by the economic crash of 2008. Canada is no exception to the rule, and while many parts of our economy have bounced back, youth unemployment and underemployment numbers remain stubbornly high. This has led to an “employer’s market” in that every “decent” (is there any job out there that isn’t decent these days?) position that is offered up can be guaranteed dozens of resumes from hungry, young, energetic potential employees.
The natural laws of supply and demand mean that employers can then keep compensation packages low, and keep many young people on term or even casual contracts (as well as unpaid internships). All of this has contribute to a youth employment situation that is highly unpredictable, and one in which a premium must be placed on labour mobility.
Perhaps your greatest asset as a young person entering the workforce should be the lack of things tying you to a certain area. I know there are often strong sentimental reasons for staying close to your childhood home, but that might not be possible for many of today’s graduates. Renting allows you to be able to pick up and move with minimal hassle, and to be able to do this multiple times as you seek to further to career and earning potential. Being able to expand your job search to all of Canada, or even internationally, obviously gives you a massive advantage over people who will only look in their backyard. Even if you are able to get a job in your home province, or even your home city, you may decide you want to move closer to it for commuting reasons (you want to talk about a real black hole for time and money), or even just for personal taste. If you own a home the amount of work to pick up and move stakes is considerable, as are the expenses associated with buying and selling a home.
Income and Career vs Equity
While building equity is fine and good, there is a strong case to be made for building your income potential and aggressively pursuing promotions while you are young (in addition to saving up for a down payment and starting an RRSP/TFSA and all of that good stuff). Regardless of the immediate dollars and cents argument about what your choice should be between renting and buying in your specific market, the reality of labour mobility in this ultra-competitive youth jobs market means that renting should get a huge check mark on the “pros” side of your comparison table. To ignore this fundamental aspect of the modern economy is to give in to tunnel vision, and it will ultimately severely limit your employment prospects at a time when you can ill afford to do so.