Canadian Homeownership: A Smarter Long-Term Financial Move Than Renting, Study Reveals

The perennial debate over whether to buy or rent a home in Canada has been a topic of much discussion among aspiring homeowners and financial planners alike. A new, extensive study conducted by renowned economist Will Dunning, and commissioned by Royal LePage, offers a clear and compelling answer. For individuals who are in a position to secure a substantial down payment – specifically, a 20-per-cent contribution – the research indicates that owning a home in Canada is financially more beneficial than renting over the long term, in an impressive 91 per cent of the scenarios analyzed.

The Enduring Financial Logic Behind Canadian Homeownership

For generations, Canadians have viewed homeownership as a cornerstone of personal finance and a strategic investment. It’s often deeply integrated into long-term financial planning, including retirement strategies, reflecting a collective understanding that real estate can be a powerful engine for wealth creation. Karen Yolevski, COO at Royal LePage, encapsulates this widespread sentiment: “Historically, home ownership has been very profitable for Canadians, many of whom have factored their real estate investments into their retirement planning. Owning a home is widely viewed as a means to save money and build equity.” This study provides robust statistical backing to this deeply held national belief.

Behind the Numbers: A Deep Dive into the Study’s Methodology

The comprehensive analysis, detailed in the Royal LePage Rent vs. Buy Report Summary, utilizes an expansive dataset covering 278 distinct scenarios. These scenarios are carefully delineated by geographical location (city) and specific housing types (e.g., detached homes, condominiums) across the Canadian landscape. The research adopts a multifaceted approach to address the fundamental question: “Is it better to buy or rent?” It meticulously analyzes historical market data, incorporates future economic projections, and critically, positions homeownership as a tangible investment rather than solely a consumption expense. Economist Will Dunning confirms the significance of these findings, stating in a news release, “This research tests a belief that is held by a lot of Canadians, that owning is better financially than renting. And it finds that this belief is very often correct.”

The ‘Ownership Advantage’: Beyond Just Monthly Payments

One of the study’s most crucial insights lies in its redefinition of the true cost of homeownership. While it’s true that the gross monthly expenses associated with owning a home—including mortgage payments, property taxes, insurance, and maintenance—can sometimes appear higher than rental costs, Dunning’s analysis introduces the concept of the “net cost of ownership.” This perspective fundamentally alters the comparison.

A significant portion of every mortgage payment is dedicated to principal repayment. Unlike rent, which is a pure expense that offers no return, the principal component of a mortgage payment acts as a direct investment into one’s own asset. It is, in essence, a form of “forced saving” that systematically builds equity in the property. This equity represents a tangible increase in the homeowner’s wealth over time.

Principal Repayment as Forced Savings: The money allocated to paying down the principal balance of a mortgage is not a cost that disappears. Instead, it directly contributes to the homeowner’s equity, functioning as an inherent, automatic savings mechanism that appreciates in value alongside the property.
Diminishing Interest Burden Over Time: The standard amortization schedule for mortgages means that the largest portion of interest is paid in the initial years of the loan. As the mortgage matures, the interest component gradually decreases, while the principal repayment portion increases. This structural feature effectively accelerates the rate of “forced saving” and equity accumulation with each passing month, further enhancing the long-term financial benefits for the homeowner.

This sophisticated calculation reveals a striking disparity: in 253 out of the 278 cases studied (a staggering 91 per cent), the net cost of ownership—which subtracts the savings generated through principal repayment from the total ownership expenses—was found to be considerably lower than the cost of renting an equivalent dwelling. This differential is aptly termed the “ownership advantage” in the report. As of the second quarter of this year, this advantage translated into an average net home ownership cost that was an impressive $769 per month less than the cost of renting a comparable property.

Understanding the Exceptions: Where Renting Might Have a Niche Edge

While the overwhelming majority of scenarios favored homeownership, the study did identify a minority of cases—approximately nine per cent—where renting appeared marginally more advantageous. These instances were primarily concentrated within the luxury segment of the housing market, specifically for high-end properties located in exceptionally expensive urban pockets. Even in these specific circumstances, the financial benefit of renting was found to be relatively modest, averaging around $245 per month. This highlights that for the vast majority of housing types and regions across Canada, the financial scales decisively tip in favour of owning.

Beyond Financial Gains: The Intangible Value of Homeownership

While the financial aspects are undeniably significant, homeownership offers a wealth of non-monetary benefits that profoundly enhance quality of life and personal well-being. These advantages often solidify the emotional and psychological attachment Canadians have to owning their own homes.

Karen Yolevski emphasizes that while price appreciation is a welcome bonus, it is not the sole reason for homeownership’s financial appeal: “While Canadians do want their homes to appreciate, potential homebuyers will find it reassuring that significant price appreciation is not necessary for ownership to be financially worthwhile.” The intrinsic value derived from the “forced saving” aspect of principal repayment ensures a stable financial benefit, regardless of market fluctuations.

Stability, Freedom, and Community: The Lifestyle Dividends

Unmatched Stability and Security: Homeowners enjoy a profound sense of security and control over their living environment. The constant anxieties associated with renting—such as unexpected rent increases, non-renewal of leases, or forced relocation due to landlord decisions—are eliminated. This stability provides peace of mind and allows for more predictable long-term planning.
Personalization and Creative Autonomy: Owning a property grants an unparalleled freedom to truly customize a living space. Whether it’s choosing paint colours, undertaking minor decorative changes, or embarking on major renovations, homeowners have the autonomy to tailor their environment to perfectly suit their personal tastes, needs, and lifestyle. This ability to invest in and personalize a space fosters a deeper sense of belonging and comfort that rental properties rarely offer.
Building Roots and Community Engagement: For many, homeownership is synonymous with establishing deep roots within a community. It transcends the physical structure of a house; it’s about fostering connections with neighbours, actively participating in local events, and creating enduring memories within a stable family environment. As Yolevski eloquently states, “I believe most Canadians would agree that owning a home is as much about laying down roots in a community and making memories with family, as it is about financial security.” This invaluable social capital and sense of belonging are significant, often understated, benefits of owning a home.

Navigating Future Market Uncertainties: A Resilient Investment

The study’s robust nature is further underscored by its meticulous consideration of various hypothetical future market conditions. One critical scenario involved simulating a mortgage renewal occurring five years into the future, at an elevated interest rate of 3.62 per cent. This rate was chosen because it represents the highest interest rate observed during the entire study period, spanning from the fourth quarter of 2014 to the present. Even under this more challenging and conservative assumption, the report confidently projects that homeownership is expected to remain more affordable than renting in the vast majority of situations. This finding offers crucial reassurance to prospective buyers who are understandably concerned about the potential for future interest rate volatility.

Homeownership: A Strategic Component of an Investment Portfolio

Beyond its fundamental role as shelter, a home is consistently regarded by Canadians as a vital asset within their broader investment portfolio. The Dunning study meticulously analyzed the potential investment performance of homeownership under various assumptions regarding property value changes over the coming decade. The results highlight the inherent resilience and long-term potential of real estate as an investment:

Resilience in Market Declines: Even in a pessimistic scenario where home prices experience a 10-per-cent decline, approximately half of the homeowners included in the study would still achieve a positive rate of return on their investment. The remaining half would either break even or incur only a modest loss, underscoring the protective effect of equity building through principal repayment over time.
Positive Returns Without Price Growth: Remarkably, the analysis revealed that even in a scenario where property values experienced no growth whatsoever, homeownership would still result in a positive rate of return on investment in a majority of cases. This finding strongly reinforces the concept that the “forced saving” aspect of principal repayment generates a foundational financial benefit irrespective of market appreciation.
Accelerated Returns with Appreciation: Unsurprisingly, in scenarios where property values experience moderate to significant growth, the study demonstrated increasingly attractive rates of return, further solidifying homeownership’s status as a powerful, long-term wealth-building tool.

A Comprehensive Look at All Associated Costs

To ensure the most accurate and transparent comparison, the study’s analysis meticulously accounted for a wide range of costs associated with both the acquisition/disposition and ongoing maintenance of a home. This all-encompassing approach ensures that the “net cost of ownership” is not understated and reflects a true apples-to-apples comparison:

Upfront Buying and Selling Expenses: The analysis included significant one-time costs such as closing costs, legal fees for lawyers, commissions for real estate agents involved in transactions, and land transfer taxes, which can vary considerably based on the province and municipality.
Major Ongoing Homeowner Expenses: Beyond the regular mortgage payment, the study factored in all essential recurring expenses that homeowners typically incur. These include utility costs (electricity, natural gas, water, internet), routine maintenance and unexpected repair expenditures, comprehensive homeowners’ insurance, and, where applicable, condominium fees for properties governed by strata corporations.

By integrating these extensive and realistic cost considerations, the study delivers a highly credible and transparent assessment, unequivocally demonstrating that even with these various outlays, the profound and multifaceted long-term advantages of homeownership generally prevail across the Canadian landscape.

Key Takeaways for Prospective Canadian Homebuyers

The groundbreaking Royal LePage study, spearheaded by economist Will Dunning, provides invaluable guidance for anyone navigating the complex rent-vs-buy decision in Canada. It firmly establishes that, under most financial circumstances and predicated on a manageable 20% down payment, purchasing a home is not merely a wise financial investment but also a pathway to enhanced stability, personal freedom, and deeper community integration. The emphasis on principal repayment as a powerful form of “forced saving” fundamentally reorients how monthly housing costs should be perceived, highlighting equity building as a core benefit that renting, by its very nature, cannot offer. While practical challenges like accumulating a down payment and managing initial higher gross costs do exist, the long-term financial resilience and the myriad non-financial benefits of homeownership present an overwhelmingly compelling case for buying in the dynamic Canadian housing market.

This comprehensive research serves as an essential resource, encouraging Canadians to transcend a narrow focus on immediate expenses and instead embrace a holistic view of the long-term returns—both monetary and deeply personal—that accompany the decision to plant roots in a home they can proudly call their own.