Should You Rent or Buy in Ottawa?

By: Nelson Smith on July 3, 2015

Recently, I look a closer look at whether it was a better deal to rent or buy in Toronto, Vancouver, and Calgary. Like that friend who just will not go home no matter how many times you hint about an early morning tomorrow, I’m keeping the party going. Today’s city: Ottawa.

The nation’s capital is home to approximately 39 million bureaucrats, a pretty forgettable hockey team, some neat old buildings, and Stephen Harper’s house, which I’m assuming is all beige. He seems like a guy who likes beige.

I have no idea why any of you would want to live there. But assuming you do, let’s see whether you should be renting or buying a place. Like with the other cities, we’ll compare a condo and a detached house.

Condos

Firing up the ‘ol Kijiji machine, I found a one-bedroom condo close to something called Byward Market, which the ad seemed quite excited about. It’s currently up for rent for $1,250 per month, which is actually quite expensive for Ottawa. It’s not hard to find apartments for less than $1,000 per month there, and this one doesn’t even include parking.

Realtor.ca gave me four one-bedroom units available for sale in the same building, anywhere from $199,000 to $229,000. Let’s use $210,000 as an average. Based on a down payment of 5%, CMHC insurance fees of 3.15%, a 25-year amortization, and 2.99% interest, this property will set a buyer back $950 per month. Buying isn’t looking bad.

But after we include condo fees ($327/month) and property taxes ($100/month), the cost to own this unit balloons to $1,377 per month. The renter wins this battle, by about $125 per month.

Houses

Unlike with condos, it’s really difficult to find two almost identical houses. The best we can do is to find two places that are sort of alike, and make adjustments accordingly. It’s about as scientific as the average climate change denier during a cold spell, but it’s all we have.

Let’s start with the property for rent. I found a townhouse with three bedrooms, three baths, a double car garage, and all sorts of other goodies for $1,750 per month. Sorry smokers, but you can’t light up inside because of “allergies.” Sure…

A similar house is for sale one street over. It also has three bedrooms and three baths, as well as granite countertops and stainless steel appliances. You can smoke all you want in this place, if that’s your thing. It’s currently listed for $400,000.

Assuming the same mortgage conditions as the condo above, the buyer is looking at a mortgage of $1,853 per month. The buyer also have to budget for property taxes of approximately $300 per month, as well as close to $100 per month for house insurance. Even without including any maintenance expenses, the house will set back the buyer about $500 per month more than the renter.

Notice a theme developing? In every scenario I’ve done, it’s cheaper to rent the equivalent location than to buy it. It’s the same in markets that are more expensive like Vancouver, or cheaper like Ottawa.

There are many reasons to want to buy a place. Saving money compared to renting isn’t one of them, at least in Canada’s major cities. Considering how expensive real estate is compared to its historical average, the best move is to rent. Take advantage of your landlord’s generosity.