2023 has been touted as ‘the year of the concert’. The total box office take for the top 100 grossing tours for first half of this year has hit $2.83 billion. Seats per show are up 49.3% across the globe according to Pollstar, a live entertainment industry analyst. With blockbuster tours like Taylor Swift’s Eras tour at over $300 million, The Boss at $142,605,835, Harry Styles at $124 million, Elton John will add $110,000,000 to his retirement on his farewell tour, and rounding off the over $100 million dollar crowd for 2023, was Ed Sheeran at over $105 million.

Once you take into consideration, Swift’s South American, European, Asian and Australian concert dates, many entertainment analysts estimate her gross sales to be over $1.4 Billion. Furthermore, her spinoff affect in the collective markets she performs in is between $7 to $9 billion dollars. The estimate is at $4.6 billion in the continental US alone.

I recently went to a live concert, something I do not do very often. My last was Prince, (a remarkable talent, and, I believe he was still known as Prince at the time.) I bumped into so many people I knew, all of which were extremely happy to be there. There was the usual banter of where are you sitting (seat envy), the trip on the GO train was miserable, “going back with uber”, how some of our friends couldn’t get seats, how lucky we all were to be there, etc.

I couldn’t help but think of how the trials and tribulations of being a live concert-goer in 2023 has some similarities to home buying vs renting, especially in these uncertain times. This begs the question is it really worth it? Most of us can watch a Taylor Swift concert on YouTube, or stream one of her songs, and listen to it on an outstanding pair of headphones. We wouldn’t have to go on the Ticketmaster website, that constantly crashes, or register as a ‘verified fan’ so Ticketmaster will then vet you, and then send you an access code (3 days later), with an email explaining that you have been randomly selected to purchase or be put on a wait list. So is the pre-concert emotional roller coaster worth going through to see Swift perform for 3 hours, sing 44 songs, with over 50,000 emotionally charged strangers, creating a special memory for life, coupled with the stress of getting home without injury? I say no! On the other hand, is the lasting dream of home ownership worth it? A resounding, unbiased, and based-in-fact, YES!!!

To Buy or To Rent, That is the Question

Buying a home offers many intrinsic advantages besides being a wealth builder. Statistics Canada released a study in 2022, and found that the net worth of homeowners of all ages went from $323,700 in 1999 to $685,400 in 2019 (more than double, or 112% in 20 years). In comparison to the same period, the net worth of renters of all ages went up by 64%, from $14,600 to $24,000. When you look at residential price appreciation in Canada from January 2019 (benchmark price $524,200) to today (benchmark price $757,300), that’s a 45% increase. Just wait until Statistics Canada updates their current study - the numbers will be even more compelling.

Let’s Compare Apples to Apple

We REALTORS® are constantly bragging about how our clients have built tremendous wealth in the real estate market. Similarly, financial advisors talk about the last 20 years of tremendous returns in the stock market. Landlords complain about maintenance, taxes, rent controls, and the cost of borrowing. It’s because we all have something to sell. REALTORS® sell properties; investment advisors sell financial products; landlords sell rent increases to their tenants. So whose opinion about this can be trusted?

If you were to have invested $1000 in the S&P 500 back approximately 20 years ago, with an annualized total return of 10.1%, your thousand dollar investment would be $6,936.The simple concept which the “buying naysayers” argue, is that if you invested a portion of your income, which would have gone into home ownership, your money would work just as hard, if not harder. If you were to have invested in $1,000.00 in Apple stock during the same period, your investment would be worth more than $600,000.00 (37.6% annualized total return, price change plus dividends).Drop the mic????? No, read on….

Rent and Retire Rich

The Globe and Mail recently published an article on August 7th, 2023, titled Retiring without home ownership is possible.The reporter, Salmaan Farooqui, spotlighted a 76 year old man, who has rented most of his life. The article states that Mr. Brideau, had a standard income, and was a disciplined investor who invested 20% of his income since he was 21. I wish I just had the money I spent in bars when I was single and 21, forget about 20% of my income!!! The article goes on to say that Mr. Brideau, has hundreds of thousands in savings, amassed over 55 years (not millions). No magic bullet here - just disciplined savings. Let’s face it, we Canadians aren’t the best savers.

Actuaries Weigh into the Debate

Recently the Canadian Institute of Actuaries published a paper, Managing Risk in Uncertain Times, and there was a section on Renting vs. Buying - A Personal Risk Management Framework, authored by Joe Nunes. As a student of real estate my whole life, when I came across this unbiased piece of work by such a renowned organization, I was all eyes!!! Nunes starts his paper with the following statement, “Since it is hard to predict the return on market investments or the appreciation of home prices over longer time horizons...” What???? I think there is data on that!!!! Joe goes on to say that a more accurate approach is to compare the monthly cost of home ownership (interest only plus maintenance), versus monthly cost of rental a home. His conclusion was that based on a 4% interest rate, if you rent a home for $2,500 and it’s worth $750,000, then renting is the viable option. If the home is worth $250,000 at same rent, then buying is your best option. I kid you not, this study actually exists.

Rental Risk vs Home Ownership Risk

Our friends at Rentals.ca just released average rental rates for July of 2023, up a hair below 9% over July of 2022. June to July rent was up the most month-over-month at 1.8%. If that trend continues, we may be well into a double digit increase come the end of the year. When you compare current rental numbers to 2021, we are up a whopping 21%. How has housing faired during roughly the same period? In July 2023, the benchmark price of a home in Canada was $757,300, according to the Canadian Real Estate Association, down from July 2022 by 1.6% (Composite benchmark price July 2022 - $769,100) and up 8.3% from July 2021 ($694,200). Rental rate uncertainty far outweighs mortgage rate uncertainty which has been driving our real estate market for the last 30 days.

Michelangelo Gets The Last Word

There is something intrinsic about home ownership which goes beyond just facts and figures. Michelangelo said it well. “The sculpture is already complete within the marble block, before I start my work.It is already there; I just have to chisel away the superfluous material.” So let’s peel away the superfluous banter that economists, lenders, financial advisors, landlords, the Bank of Canada, and REALTORS® have put out into the universe. Let’s remember that the meaning of home ownership is what you make it. It’s the freedom to do whatever you want, when you want. It’s about building passive equity to retire on, or to lend to your children to buy their first home. It’s about backyard barbecues, without your landlord telling you to keep it down. It’s about moving out when you want to, not by way of an N12. It’s about building a treehouse in that oak tree outback, or hanging up Big Mouth Billy Bass in your garage, without asking for anyone’s authorization, but your own. 

Happy Home Buying!!!