Should you Buy or Rent?
While there are pluses to either position; buying a home has resulted in wealth generating returns over the years. Yes there are cycles in the market and sometimes the advance of prices slows. But over time, home prices have had huge gains.
Here is a comparison of actual August sales in the Parksville - Qualicum Beach area and what the same house sold for previously.
Many homes show gains of over 10% per year on the original purchase price.
Area |
Sold 2018 |
previous sale |
year |
% increase |
%/Annum |
(000) |
(000) |
||||
Parksville |
$444 |
$290 |
2015 |
53% |
18% |
Deep Bay |
599 |
247 |
2007 |
143% |
13% |
French Creek |
439 |
356 |
2016 |
23% |
12% |
Parksville |
530 |
130 |
1991 |
308% |
11% |
Eaglecrest |
594 |
358 |
2012 |
66% |
11% |
Qualicum Beach |
510 |
327 |
2012 |
56% |
9% |
Qualicum Beach |
550 |
370 |
2011 |
49% |
7% |
Sandpiper |
500 |
325 |
2008 |
54% |
5% |
Corfield Glades |
615 |
401 |
2008 |
53% |
5% |
Parksville |
400 |
245 |
2005 |
63% |
5% |
That is nice to know that home prices have gone up.
Everyone knows that.
But what does that work out to as a return on the amount invested?
Let’s assume a buyer put 20% down and took a mortgage for the balance.
Using an example from the middle of the chart:
Purchase price $358,000 in 2012
20% down $71,600
Mortgage $286,400
Selling Price $594,000 in 2018
Net increase $236,000
The return on the $71,600 invested is 330%!!!
Which is 55% per year over the 6 year period.
That is an AMAZING return.
Ralph Kirby’s comment is “I am not aware of any investment that can beat the return of home ownership. There is no question that Buying is better than renting, financially.”