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First-time home buyers in Toronto, Vancouver advised to rent instead

<i>[If you're thinking of becoming a first-time homebuyer, you might want to rent or look at condos instead.]</i>
[If you’re thinking of becoming a first-time homebuyer, you might want to rent or look at condos instead.]

A new report of the state of real estate is telling first-time homebuyers in the country’s key urban markets something they’ve already grappled with: renting is the new ownership.

In the latest study, Emerging Trends in Real Estate 2017, PricewaterhouseCoopers LLP and the Urban Land Institute pointed to longer-term renting as becoming a key option for first- time buyers looking to live in the urban core.

“The past year has done little to dispel worries regarding housing affordability, and many Canadians are choosing to rent rather than buy—sometimes by necessity, but often by choice,” says the report.

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But it’s not just first-time buyers who are opting to rent.

“The new renters include retirees who would rather hold onto the proceeds from the sale of their home and rent a luxury residence, new immigrants to the country, and millennials,” says the report. “Attitudes toward renting are shifting and people are choosing to rent longer – some even permanently, as they weigh the costs of home ownership against the benefits.”

Dr. Cynthia Holmes, a real estate economist and associate professor at Ryerson University’s Ted Rogers School of Business Management points out that the rising lack of affordability in Toronto and Vancouver is contributing to new attitudes around renting.

Some would-be first time homebuyers are stepping away from that cultural norm of ownership, and it could pay dividends.

“On the financial side you can be much better off renting, it’s cheaper to access a place to live through renting,” she says. “And if you can put away those savings you earn every month into a good diversified portfolio on the stock market, you can still realize the same sort of investment gains that the owners are realizing through their own home.”

The real estate economist points out that while the costs of renting are usually lower, the tradeoff for long-term renters is options are still a bit slim. The availability of spaces and dynamics of renters sticking around longer are also helping to drive rent prices up.

But that could change with the report finding a spark in interest amongst developers in purpose-built rentals “on a scale not seen in decades.”

“It is a trend that is sparking ongoing interest in purpose-built rental units – and raising questions about the size of units and the need for supporting infrastructure (e.g., schools, medical facilities, daycare, etc.) to accommodate millennials’ inevitable move toward parenthood and boomers’ downsizing,” says the report. “In fact, some older homeowners are opting to sell their homes and cash out, moving into high-end or luxury rental units and keeping the proceeds of the sale for spending.”

Holmes has picked up on the trend too.

“Cities are starting to recognize that there will be long-term renters going through life cycles in downtown locations and some of the standard family amenities that are needed, have to be in place there,” she says.

She points to the proposed 21-acre park above the rail corridor in Toronto that would give those living in the high-rise dense area a little space to stretch out.

“I think many young people are rejecting the idea of a one-hour commute in each direction in a car, partly because of sustainability issues (and) partly because their time is tight and they recognize the cost of losing all this time to commuting,” she says.

So living downtown close to work means renting or owning a condo as opposed to the traditional detached home. The end result, she says, is more free time.

“I think we’ll see the people who value this recreational time will want to live closer to the city and people who value large houses will have to keep moving further and further out to find these houses that fit within their budget,” says Holmes. “It’s a housing square footage against time trade off… which it’s always been but it exaggerated even more now.”