Calgary’s housing market has been experiencing a surge in demand, leading to record-breaking sales and limited inventory levels. As prospective homebuyers, it’s essential to carefully consider the advantages and disadvantages of renting and owning a home in this competitive landscape. While both options have merits, we’ll explore why buying a property may be a favourable choice for those looking to secure their future in Calgary’s real estate market.
Renting: The Pros and Cons
As Calgary’s real estate market continues to thrive, the choice between renting and owning becomes more than a matter of preference — it becomes a strategic financial decision. For those who anticipate staying in the city long-term and desire a stable investment, homeownership provides an opportunity to capitalize on rising property values and build equity. However, renting remains a practical and affordable choice for those seeking flexibility and cost-effectiveness.
With rents in Calgary expected to continue rising in 2023, the already competitive rental market will likely become even more challenging for prospective renters. Economic growth, increased migration, and higher mortgage borrowing costs are key factors driving the demand for rental properties. As the vacancy rates for newer units remain extremely low, the limited supply further contributes to the upward pressure on rental prices.
The growing demand for rental properties is primarily influenced by the rising mortgage costs, making homeownership less attainable for many first-time buyers. With mortgage rates expected to remain high, renting becomes an attractive and affordable option for those who might otherwise find homeownership out of reach.
Advantages of Renting:
1. Flexibility: Renting provides the flexibility to adapt to changing circumstances, such as job relocations or lifestyle shifts, without worrying about selling a property.
2. Lower Upfront Costs: Renting typically involves lower upfront costs, making it more accessible for those with limited savings for a down payment.
3. No Maintenance Responsibility: Renters are not responsible for property maintenance and repairs, saving them time and money on unexpected expenses.
Disadvantages of Renting:
1. Limited Control: Renters have limited control over their living space, with restrictions on making modifications or owning pets, per the landlord’s policies.
2. No Equity Building: Renting does not provide the opportunity to build equity, potentially missing out on long-term financial benefits.
Owning: The Pros and Cons
Appreciation in the real estate market is an influential factor that can yield significant long-term benefits for homeowners. While it’s true that real estate prices follow cyclical patterns, patient homeowners who stay in their properties for an extended period can benefit from the effects of appreciation. Although the short-term gains may be insignificant, the value of a home has the potential to rise steadily over time, especially in a thriving housing market like Calgary.
As the demand for housing continues to grow and supply remains limited, the prospects for appreciation become even more promising. Homeowners who hold onto their properties and make wise investment decisions can position themselves to reap the rewards of increased home values when they eventually decide to sell. This potential for future profit is a compelling reason for individuals to consider homeownership a strategic financial move, particularly in a dynamic real estate market like Calgary’s. If you are considering buying a property in Calgary, download our comprehensive step-by-step Buyer Guide.
Advantages of Owning:
1. Building Equity: Homeownership allows you to build equity over time as you pay off your mortgage, creating a valuable asset that can appreciate in Calgary’s growing real estate market.
2. Stability and Control: Owning a home offers stability and the freedom to personalize your living space according to your preferences and needs.
3. Potential Investment: In a market with rising property values, owning a home can serve as a solid investment with the potential for substantial returns in the future.
Disadvantages of Owning:
1. High Upfront Costs: Purchasing a home requires a significant upfront investment, including the down payment, closing costs, and ongoing expenses like property taxes and maintenance.
2. Illiquidity: Selling a property can take time, especially in a hot market, which could be a consideration if you need to move suddenly.
Why Buying Makes Sense in Calgary’s Market
Given the current market conditions in Calgary, where the supply of homes is limited, buying a property may be a wise choice for several reasons:
1. Capitalizing on Price Appreciation: With limited inventory and high demand, property prices are on the rise. Buying now could allow you to capitalize on potential future price appreciation, growing your investment over time.
2. Locking in a Fixed Mortgage Rate: With interest rates gradually rising, buying a home now allows you to lock in a fixed mortgage rate, providing financial stability in the face of potential rate hikes.
3. Securing Your Future: Owning a home provides a sense of stability and control over your living space and offers a hedge against rising rental costs in the future.
Given the soaring property prices and the overall increase in the real estate market’s attractiveness, many individuals now view housing as a wise investment opportunity. Instead of “wasting money” on rent, owning a home allows individuals to build equity and potentially benefit from positive market trends. The recent surge in property prices, as seen in Calgary’s housing market, further strengthens the case for homeownership. By investing in a home, individuals have the potential to see their property’s value grow over time, presenting an opportunity to accumulate wealth through their primary residence.
Moreover, one significant advantage of owning a home is the absence of capital gains tax on the property’s accumulated value. Unlike taxable investments, where 50 percent of the income is subject to taxation, homeowners can enjoy the appreciation of their principal residence without paying capital gains tax. This tax advantage offers a considerable incentive for those looking to build wealth through real estate ownership, making it an appealing option for long-term financial planning.
Additionally, owning a home provides a sense of security and stability in the face of fluctuating housing markets. For those planning to stay in a property long-term, the impact of market fluctuations becomes less worrisome compared to the uncertainty faced by renters. While renting, individuals might encounter sudden rent increases or even the possibility of renovictions, where they are evicted to facilitate apartment renovations. Homeownership safeguards against such market volatility, granting homeowners greater control and peace of mind in their living arrangements.
However, it’s essential to recognize that while owning a home can be a reliable hedge against future housing consumption, only some stay in a property for decades. Life circumstances, job opportunities, and personal preferences may lead individuals to relocate, even though they own a home. Despite this, the potential for equity building and the tax advantages of homeownership can still make owning a home a favourable choice for many, even if they don’t live in the property for an extended period.
In conclusion, the data from Calgary’s housing market paints a picture of high demand and limited inventory, making homeownership an appealing option for those seeking to secure their financial future. With rising property prices and a positive outlook for the real estate market, owning a home provides an opportunity to build equity, enjoy tax advantages, and gain stability in an increasingly competitive housing landscape. Whether planning for the long term or embracing life’s changes, owning a home offers numerous benefits that can contribute to a more financially secure and rewarding future.
Disclaimer: This article provides informational content and should not be considered as financial, tax or legal advice. It is crucial to consult with professionals for personalized guidance based on your specific situation.
