Buy or rent? Simple question, difficult answer.

Renters boast about the flexibility that comes from being unanchored by a mortgage, nor is it their problem when something breaks around the house.

Owners argue that renting is akin to throwing away “dead money.” Why do that, when mortgage payments will eventually make you the owner of a living asset?

The answer is difficult because it really depends on who’s asking. First-time homebuyers have to consider what makes the most sense to them in their current stage of life.

Real estate is often seen as a solid long-term investment that builds equity without any capital gains tax implications; for many Canadians, their houses have been a reliable retirement savings vehicle.

Buying also offers the prospect of a stable place to live, the freedom to renovate as you wish and protection from “renovictions,” the practice of evicting tenants to do renovations, and then selling the property, or re-renting it, at a higher price.

A 2021 study sponsored by real estate company Royal LePage found homeowners came out on top financially over renters over the long-term in 91 per cent of the 278 scenarios analyzed by the report’s author, economist Will Dunning. While the total monthly costs of owning are typically higher than renting, Dunning found that the net cost was often less when repayment of the principal is taken into account.

“If you look backwards, there’s been this huge growth in equity (and) price appreciation,” Dunning said in an interview. “But at the time I did the analysis, you don’t need to make assumptions about that in order to justify purchase, you can justify purchase just based on comparing the monthly costs,” he added. “If you’ve got an expectation that prices are not going to go anywhere at that time, you can still make a decision to buy a home on a financial basis.”

To be sure, the housing market has changed a lot since 2021. Dunning said that if he redid his analysis with today’s prices, a greater number of scenarios would show renters as the winners.

“Owners’ very substantial investments in down payments (and in the repayment of mortgage principal) have an opportunity cost,” Dunning said in the report, using a term from economics that, in this case, refers to the return that money might earn if it was invested in something other than an expensive house. “On that basis, it might still be the case that renting and investing could be financially advantageous compared to owning.”

There comes a certain point where a renter does not want to be a renter anymore, and it’s not necessarily because they see a house as an investment

Nasma Ali

There are also costs to homeownership of which people should be wary, said Nasma Ali, founder and chief executive officer at One Group Toronto Real Estate. Some of her clients even took a loss on their properties when they were forced to sell their condos during the pandemic.

“If you want to really think about what you’re getting in return, remove the interest, remove the property taxes, remove all the repairs that you have, the closing costs, the realtor fees, the land transfer tax — that’s all extra stuff that you have to pay that a tenant doesn’t have to pay,” Ali said.

Ultimately, prospective homebuyers should take into account their life circumstances and what their long-term goals are. For example, for the nomadic career people whose jobs have them moving around the country, being tethered to a mortgage may not make as much sense as renting.

On the other hand, if buyers are at a point in their lives where they have a stable job, and they’re looking to establish roots in a community, owning probably is the better strategy.

“There comes a certain point where a renter does not want to be a renter anymore, and it’s not necessarily because they see a house as an investment,” Ali said.

For people with enough money for a down payment, Ali advises that house hunters lower their expectations and consider buying the home that may not check all of their boxes. They should also consider fixer-upper, “outside the box” properties, she said.

“Everybody is chasing the shiny, beautifully staged property,” Ali said. “A lot of our clients, they see bad photos, they don’t even want to go see it. They don’t even give it a chance!”

For many Canadians, the desire to own a home goes beyond being a financial decision and is very much a personal one.

“You don’t want to be at the mercy of someone else about moving and you want to just get to decide where you want to be for as long as you want to be and you want to make it your home,” Ali said.

• Email: shughes@postmedia.com | Twitter: StephHughes95