Renting vs Owning: How to Be Financially Secure Without Buying

Canadian real estate experienced a dramatic run over the last generation, shaping a widespread belief that buying a home is almost always better than renting. To illustrate, the composite benchmark home price in Canada rose from $380,700 in October 2013 to $731,700 in October 2023, peaking at $855,800 in March 2022. That represents roughly a 6.75% annualized gain over ten years, though results have varied widely by location.

Regional differences were striking. For example, prices in the Tillsonburg area of southwestern Ontario increased by more than 228% over that decade, while Regina, Saskatchewan, saw prices rise only about 4.5%, barely keeping pace with inflation. Looking further back, inflation-adjusted Canadian real estate values were essentially flat from 1974 to 1986, peaked around 1989, fell through the 1990s and did not make a sustained inflation-adjusted recovery until about 2003.

Investors and homebuyers often fall prey to recency bias — giving too much weight to the most recent decade of gains when forming expectations about the future. Although recent price declines have shifted some opinions, many people under 40 still expect prices to rise because strong housing markets have dominated their adult experience.

Buying a home versus investing in stocks

Which route delivers more growth: homeownership or stock market investing? Over the last ten years, the S&P/TSX Capped Composite Index returned about 6.69% annualized, while the S&P 500 returned approximately 13.75% annualized. At first glance, equity markets — particularly U.S. stocks — appear to have outperformed Canadian real estate over that period.

However, comparing raw returns misses several important points. Most homeowners use mortgage leverage: a down payment of 5%, 10% or 20% buys 100% of a property while the bank finances the remainder. Leverage amplifies gains (and losses) and increases return on equity, but it also incurs mortgage interest and adds risk. On the investing side, many Canadians hold balanced portfolios of stocks and bonds rather than 100% equities, and investor behaviour — such as market timing, frequent trading or paying high fees — can materially reduce realized returns. Typical advisor fees of 1%–2% annually or mutual fund fees up to 2.5% will erode investment performance compared with headline index returns.

Buying a condo: an example

To make this concrete, consider a $500,000 condo purchased with a 20% down payment ($100,000) and a $400,000 mortgage amortized over 25 years. Assume a five-year fixed mortgage rate of 6% for the initial term and a renewal rate of 4% starting in year six, with monthly payments maintained at renewal. Under these assumptions, the mortgage balance after ten years would be roughly $268,509.

If the condo appreciates at 4% per year — a rate some would view as optimistic, others conservative — its value after ten years would be about $740,122. Subtracting the mortgage balance yields roughly $471,613 in home equity.

Now consider renting the same unit for $2,000 per month. If the renter avoids mortgage payments and instead invests the would-be down payment of $100,000 plus the monthly difference between mortgage payments and rent — estimated at $559 per month in this example — in a tax-free savings account (TFSA) or similar vehicle that returns 4% annually, the invested sum would grow to about $204,396 after ten years. That result is far less than the homeowner’s equity under the assumptions above.

But comparing only mortgage payments to rent ignores additional ownership costs. Typical incremental costs for an owner might include:

• Property taxes: roughly $200 per month (varies by location)
• Condo insurance: $10 or more per month in this example, compared with tenant insurance for renters
• Condo fees and repairs: an added $500 per month, depending on building age and amenities

If the renter redirected those extra dollars — about $710 per month in the example — into their investments along with the initial $100,000, and earned 4% annually, the renter’s holdings would total about $319,117 after ten years. That narrows the gap significantly, though the owner’s home equity would still be higher at $471,613.

Transaction costs also matter. Buying might incur $10,000 in upfront costs (land transfer tax, legal fees) and selling could cost another $40,000 over time. If a renter invested amounts equivalent to those purchase and sale costs, along with their monthly savings, their portfolio would reach roughly $373,919 in this scenario. The homeowner still leads, but not by as wide a margin as the headline appreciation numbers might suggest.

Changing any assumption — the home’s annual appreciation, investment return, rent level, carrying costs, or the length of ownership — can tilt the comparison in either direction. Short-term ownership typically favors renting and investing; longer horizons tend to favor buying, provided price appreciation and leverage work in the owner’s favour.

Which is better for you?

It’s possible for a disciplined, low-cost investor to outperform a homeowner over the long run, especially if that investor builds a diversified portfolio and avoids costly behaviours. But buying a home offers non-financial benefits that many people value: the ability to customize living space, security from uncertain landlord decisions, and emotional and practical stability for families or older individuals who prefer not to move frequently.

The key takeaway is that you cannot simply compare monthly rent to monthly mortgage payments. If rents rise rapidly or home prices stall or fall, the balance of advantages shifts. In a moderate scenario where neither rents nor house prices move dramatically, the financial difference between renting and buying can be much narrower than popular narratives imply.

If you can afford to buy without sacrificing other financial priorities and you expect to stay in the property long enough to absorb transaction costs and market cycles, purchasing may make sense — but not because it guarantees outsized wealth creation. A renter who invests consistently and prudently can compete with, and in some cases beat, a homeowner on purely financial terms. Personal circumstances, time horizon and non-financial preferences should drive the decision as much as projected returns.

Read more about investing and mortgages:

• Borrowing money to invest
• How to invest down payment funds while timing the real estate market
• Should you hold your mortgage inside your RRSP?
• Contribute to RRSP or pay off mortgage?