Melanie MoralesMoving to Edmonton and wondering if it’s economically wiser to rent or buy property in it?
It always depends on your circumstances, of course. That said, to help you figure out what may be best for you, we’ll compare the costs of either option and go through the pros and cons of renting and buying a property in Edmonton.
Should I rent or buy a house in Edmonton?
In general, it is better to buy than rent a house in Edmonton, especially if you’re considering a long-term investment.
This is because buying good-sized properties is only slightly more expensive (at around $2,196 / month for a single-family house) than renting a comparable apartment (at $1,825 / month) here.
Furthermore, if you look at the overall costs in the long run, the money for the mortgage is used to repay the principal cost of the property so you can own it.
Rent is virtually dead money by comparison because you can’t get it back – and no matter how much of it you pay, the property will never be yours.
Is it cheaper to rent or buy in Edmonton?
It is cheaper to buy a house in Edmonton in the long run because it has more potential for profit. That being said, it is cheaper to buy a house in Edmonton if speaking of short-term periods instead.
The actual difference between the cost of renting and buying a property in Edmonton is not that great when broken down into monthly periods. However, we can still say that buying a property makes more financial sense if you plan to stay in the city for a long time.
To show you he bigger picture, we’ll compare the average cost of rent and the average cost of mortgages for the properties in Edmonton.
The table below shows the average cost of rent in Edmonton from Zumper as of January 2023.
Here are the average prices of properties in Edmonton as of December 2022. This is based on WOWA’s Edmonton Housing Report.
We also included the computation of a 10% down payment as well as the mortgage payment based on a 5% fixed interest rate in 30 years.
Note that the monthly amortization for the properties already includes the payment for the principal loan and the bank’s interest. Note too that the monthly mortgages for the properties aren’t significantly larger than the monthly rents for comparable options.
The market for properties is particularly favourable for buyers in Edmonton these days. To show why, we’ve also included a report by Zoocasa below.
The table shows the average rental cost of 1-bedroom apartments versus the average monthly mortgage payments across some cities in Canada.
As you can see, in this set of data, the mortgage comes out even cheaper than rent for Edmonton! Furthermore, Edmonton isn’t the only city where this is true: Winnipeg, Calgary, and London all share the same trait.
Unfortunately, the rents and housing prices of other cities in the country have been skyrocketing for the past years. That’s why renting is preferred by many in those locations.
What are the pros and cons of renting in Edmonton?
Image Source: Unsplash
Here’s a quick look at the advantages and disadvantages of renting a house in Edmonton.
Pros
- Cheaper in the short run
- Offers flexibility
- Means fewer responsibilities
- No down payment required
- Fixed monthly costs (relative to interest increases)
Cons
- Possibility of rent increase
- Instability
- Bound by landlord’s rules
- Neverending as long as you occupy the space
The Pros of Renting in Edmonton
Cheaper (in the Short Run)
Renting is still preferred by some people due to their situations. For example, if you’re a young professional who’s just moved to Edmonton, renting an apartment is cheaper than buying one.
For people who are just starting a new job, the lifestyle and career opportunities that near-city locations can offer are ideal. That’s why condo apartments in the city center are the top choice for many young professionals and students in Edmonton.
Unfortunately, properties closer to the city center cost more. If you still don’t have the means to cover the down payment and other upfront fees, renting becomes a better option.
Through this, you can live in a location you prefer, even if you still can’t afford to buy a property in that area. It also gives you the ability to move if you decide your career isn’t meant to be in Edmonton – which brings us to the next advantage of renting.
Flexibility
One of the most obvious advantages of renting a property is the flexibility it offers.
Renters can generally live anywhere they prefer, whereas homeowners are restricted to locations where they can afford to buy.
If you frequently move from one place to another because of work, signing a lease instead of buying a house is a better option.
On the other hand, renting is also a good option for starting families. For example, if you’re just renting an apartment, you can easily move to a larger house if you require more space once your lease ends.
Fewer Responsibilities
As a tenant, you can avoid the hefty and unexpected costs that often come with property ownership. That’s because they’re often handled by the landlord, not the renter.
The landlord is the one responsible for covering ongoing expenses, including maintenance, home insurance, repairs, and renovations.
For example, your landlord will cover the expenses if you suddenly need a plumber or electrician. Of course, the damage must not be caused by negligence on the part of the tenant.
No Down Payment
Many Edmontonians still prefer renting because you don’t need to shell out a significant amount for a down payment.
If you decide to rent, you only have to pay a security deposit equal to one month’s rent. This is a good thing, especially for people who don’t have enough savings yet or are unable to get approved for a mortgage.
Fixed Monthly Costs
You don’t have to worry about sudden spikes in interest rates and property taxes if you’re a renter. As long as you can cover your monthly rent and living costs, you can live a comfortable life in Edmonton.
The Cons of Renting in Edmonton
Rental Increase
After a lease contract ends, an Edmonton landlord can set a rental increase if you decide to renew the lease.
The increase can be as low as 5% of the original rent but there is no definite limit on how much a landlord can increase your rent. Most of the time, landlords increase rent 12 months after the start of tenancy or 12 months after the last increase was made.
Instability
Renting might not be for you if you easily get attached to your home and neighborhood. You see, you can’t be certain if you’ll be able to renew your lease after the contract ends.
Your landlord will decide whether you can stay or move once your lease expires. Besides that, the landlord can decide to terminate your lease early due to various reasons.
Bound by Rules
As a tenant, you are bound by the rules set by your landlord.
For example, some properties do not allow pets or children. There are also limitations on how much you can change or renovate the property.
That’s why even if you want to improve your living space, you still need the project or changes to be approved by the landlord.
If you don’t comply with the rules stated in your contract, your landlord can deem it as grounds to terminate your lease contract early.
Rent Never Ends
Rental fees continue for as long as you occupy a property, whereas you can actually finish paying off a house you’ve bought.
And regardless of how long you’ve been renting a property, you won’t have anything to show for it afterwards. The property will never be entirely and legally yours.
Moreover, as you pay rent, you’re actually paying off your landlord’s mortgage, so you can’t consider it an investment.
What are the pros and cons of buying a house in Edmonton?
Image Source: Pexels
Here’s a quick look at the advantages and disadvantages of buying a house in Edmonton.
Pros
- Freedom
- Privacy
- Stability
- Investment
Cons
- Large deposits required
- Less flexibility
- More expenses and responsibilities
The Pros of Buying a House in Edmonton
Freedom
One of the biggest advantages of buying and owning a house is that you can freely decide what to do with it afterwards.
This means that you can do home improvement projects and modify your home’s interior and landscape to suit your living requirements and preferences.
You can even perform big installations like a fence, deck, or garage. Moreover, you can also decorate and renovate rooms without asking permission from a landlord.
Privacy
Since you’re paying to own the house, you have the liberty to decide who can access your home. Unlike if you’re renting, where your landlord can drop by for regular checks anytime for as long as the tenant is informed beforehand.
Stability
Setting roots in a neighborhood you prefer by owning a house provides a good sense of stability and security. This is why buying a house is recommended for people with families.
Through this, you can establish a home with your family and kids in a place that suits your lifestyle. Even if you’re still repaying the house, you can stay in that location for a long time (for as long as you pay your mortgage on time).
Investment
Venturing into real estate, like buying a house, is a great way to invest in your future. Each time you pay your mortgage, you are one step closer to owning a house and building equity.
If you pay your home loan before or within the planned time frame, you can enjoy your retirement without worrying about the cost of paying rent.
Apart from that, if you make profitable renovations and repairs, you can significantly increase the value of your house and property.
To top it off, it’s a long-term investment that can gradually improve your credit score.
The Cons of Buying a Property in Edmonton
Large Deposit
The upfront cost needed to cover the initial deposit or down payment when buying a house is costly, and not everyone can afford it. Aside from the deposit, you also have to pay taxes, fees, and in some instances, renovation costs.
Canada Mortgage and Housing Corporation (CMHC) currently requires at least a 10% down payment for properties between $500,000 and $1,000,000. On the other hand, properties that cost more than $1,000,000 require at least a 20% down payment.
Overall, you need a significant amount of money to secure and buy your dream home.
Less Flexibility
The cost involved when buying or selling a house is high, so buying a house is not recommended if you’re not ready to settle in one location for a long time.
Moreover, if you decide to sell your property, you also have to take care of the fees for the real estate agent, lawyer, advertising, and more, so moving out will not be easy.
More Expenses and Responsibilities
As a homeowner, part of your responsibility is to maintain and improve your property. The disadvantage of this is that you can’t guarantee that the improvements you’ve made will increase your home’s market value in the long run.
Apart from that, you have to cover property taxes and other fees every year. Once you start paying your monthly mortgage, you are at the mercy of interest rate hikes.
Finding the lowest mortgage and interest rate when buying a house can be hard, so you might need to hire a mortgage broker.
Although a 5-year fixed mortgage is commonly offered in Edmonton, it can still be stressful when this grace period ends. If the interest rates rise, you’ll have to adjust your budget and pay more.
Besides that, if you can’t cover the mortgage due to high-interest rates, there’s a big risk that the bank will repossess your property.
Final Verdict: Renting vs. Buying in Edmonton
In conclusion, both renting and buying come with their own advantages and downsides. It’s up to the would-be renter or buyer to determine the best for their personal and financial situation.
This is a big decision that requires careful financial and personal consideration.
If you have enough funds to purchase a house and pay the upfront fees and taxes, buying a property is the best choice.
On the contrary, renting is a more practical option if you’re planning to move out or live in another city after a few years.
Simply put, if you’re after stability and setting roots, you can go purchase a house. However, if you want flexibility and affordability, you can rent in the meantime.
If you’re still undecided, we suggest you take the time and consider your short-term and long-term goals to see which option aligns with them.
To help you get a head start, you can check out our articles about the best and safest neighborhoods in Edmonton.
