Renting vs. Buying a Home: The Reckoning

Canada is in the midst of what is so far

the second worst price decline for

inflationadjusted home prices going back

to 1975. The worst decline was in the

1980s with a peakto trough decline of

31%. Today's decline is sitting at 28%

as of December 2025. I updated my

historical Canadian rent versus own

analysis with 2025 data across 12

Canadian cities and the results

challenge the narrative that owning a

home is always a wise financial

decision. I'm Ben Felix, chief

investment officer at PWL Capital. If

your identity is tied to owning your

home being a smarter financial decision

than renting, I suggest you stop

watching now.

In 2024, when I last ran this analysis,

hypothetical renters and owners had

built essentially equal wealth over the

prior 20 years. A statistical tie with

an average renter to owner wealth ratio

of 0.99.

But in 2025, real estate prices

continued dropping across most major

Canadian cities, while global stock

markets, where my hypothetical renters

are invested, stayed strong. The result

is that as of December 31st, 2025, the

geometric mean wealth ratio across all

12 cities is now 1.14.

That means that the average hypothetical

renter in my analysis built 14% more

wealth than the hypothetical owner since

January 2005. Before the homeowners

watching this video click away in a

rage, I own my home, too. This isn't a

personal attack on homeowners. But I

want to show you three things in this

video. One is what actually changed in

the Canadian real estate market over the

last few years. Two, the methodology I

use to compare renters to owners using

real historical data. And three, how you

can run these numbers for your specific

situation. Let's start with what has

happened to Canadian real estate.

There's no doubt that prices had gotten

out of hand. This price decline we're

seeing now wasn't a mistake, or at least

it wasn't accidental. Housing

affordability became one of the biggest

issues faced by Canadians in recent

history, and fingers were pointing in

all kinds of different directions.

Monetary policy was making the cost of

borrowing so cheap that people could

afford to pay more for properties. High

levels of immigration were making the

market for our limited housing supply

overly competitive. Foreign investors

were buying up residential properties,

pushing their prices above what

Canadians could afford to pay. and the

proceeds of moneyaundering were flowing

into Canadian real estate. All these

issues were made worse by a lack of

housing supply response to the once

insatiable demand for Canadian housing.

It's worth thinking about some asset

pricing principles for a minute. I'm

sorry guys, I can't help but get into

this nerdy stuff. If we think about

stock prices just just for a second,

I'll come back to real estate. They

represent the discounted expected future

cash flows of a business. When the

market believes a company will do really

well in the future, the higher expected

cash flows will push the stock's price

up. When the market believes the company

is less risky, the lower discount rate

will push the stock price up. It's not

that different with housing. House

prices represent discounted future

rents. When expected future rents are

higher, house prices are higher. When

interest rates are lower, house prices

are higher. Homeowners are buying a real

estate asset that pays them a dividend

equal to the rent they don't have to

pay. Renters pay their housing costs

explicitly by paying rent and can choose

to invest in assets other than real

estate. At the recent peak of Canadian

home prices, some combination of the

issues I mentioned earlier resulted in

Canadian rents, expected future rents,

and home prices becoming some of the

most expensive in the world. It seemed

like prices were never going to stop

going up. I remember while this was

happening, I'd get into online arguments

with people about my baseline assumption

for real estate price appreciation,

which I typically said at 1% above

inflation. People would tell me that is

far too low of an assumption for Canada

specifically and point to the recent

experience of rapidly rising prices as

proof. But markets are adaptive systems.

They respond to their environment

through market forces and policy

changes. Everyone was aware that high

housing prices and rents were a problem

that needed to be addressed. And while

not everyone agreed on the singular

cause, they had a pretty good idea of

the potential causes and the potential

solutions to address each of them.

Accordingly, we have seen rising

mortgage interest rates, especially

relative to the 2021 lows that

correspond with the house price peak.

Canada's immigration system has been

massively overhauled to reduce the

number of immigrants arriving in Canada.

Some areas have introduced foreign

ownership taxes and the federal

government has implemented a temporary

outright ban on foreign purchases of

certain Canadian real estate and the

federal government has launched

initiatives to increase the supply of

affordable housing across Canada. The

effects have been felt across the

country. Rents and prices have fallen a

lot in some cases from their peaks.

Whether this is perceived as good news

or not depends on who you are. I

personally think that increasing housing

affordability is a good thing, but

anyone who had their assets heavily tied

to Canadian real estate, whether as

homeowners, landlords, or investors in

real estate funds is feeling the pain of

what is probably a healthy correction in

real estate prices in many Canadian

cities. Hard lessons are being learned

that real estate is not the magical

low-risk, high return asset that it

appeared to be for many years. Living

through the earlier period of rising

prices and rents made owning a home look

really financially smart and it does

speak to one of the biggest benefits of

owning. By investing in the asset that

you live in, you're protected from being

priced out of your home. This matters if

you want to settle down somewhere

specific. The thing about that

protection though is that it cuts both

ways. When the cost of living in, say,

Toronto increases a lot. Home prices

will tend to increase as well. If you're

a renter in Toronto, rents are going up

and you might need to leave the city. If

you're an owner, while the cost of

Toronto housing is increasing, the value

of your property is also increasing.

You're hedged or protected against the

rising housing costs in your specific

city pricing you out. That has a lot of

value if you really want to stay in one

place. I get it and it's one of the

reasons that I own my home. On the other

hand, when housing costs in Toronto

start to decrease, as they have for the

last few years, property values will

tend to decrease. If you're a long-term

owner with no intention of moving, this

price decrease shouldn't bother you too

much. But if you're affected by the

value of your home, there's no question

that this matters. Renters, on the other

hand, separate their housing costs from

the value of their assets. This can hurt

when housing costs are going up, as they

were previously, and the renters's

investments are not keeping pace. But it

starts to look pretty good when housing

costs and prices are falling and other

assets are not. Because renters are able

to own a diversified portfolio of assets

rather than a single piece of real

estate. I'd say the renter is in a

pretty good situation most of the time,

even though they do have some tail risk

of being priced out of a specific area.

Last year, I made a video and wrote a

paper where I developed a method for

comparing the hypothetical

counterfactual financial outcomes of an

otherwise identical renter and owner in

Canada. I used actual historical data

for home prices, rents, property taxes,

maintenance costs, and a bunch of other

relevant data for 12 Canadian cities

going back to 2005 through to the end of

2024 to answer whether renting or owning

had resulted in more wealth. Think about

it like this. Imagine in January 2005,

you're renting a place to live, paying

the average apartment rent in one of the

12 cities in my sample. You've saved up

enough cash for a 20% down payment and

closing costs based on the average cost

of buying an apartment in whatever city

it is, and you're trying to decide

whether you really want to buy a place

or keep renting and invest that cash in

the stock market. The model then tracks

the counterfactual wealth outcomes

through the net worth of the two

scenarios over time. If you keep

renting, the cash you had saved up for a

potential down payment gets invested in

stocks. And if you buy, the cash goes

towards purchasing the home. Going

forward, the homeowner in the model

always has just enough cash flow

available to cover the costs of owning,

including property taxes, maintenance

costs, and condo fees or strata fees,

insurance, and the mortgage payment if

they have a mortgage. The initial

purchase in the model is financed with

20% down and a 25-year mortgage at the

prevailing mortgage rate at that time.

The renter has the exact same amount of

cash flow available as the owner, but

the renter typically has lower monthly

cash flow costs since they're only

paying rent and a lower amount for

insurance. Rent does increase every year

in the model. That's always a common

question based on the historical rent

increases in each city, which were often

substantial. In the model, the monthly

difference between the owners and

renters's cash flow costs are invested

in the renters's portfolio if they're

positive and withdrawn if they're

negative. Now, I I know everyone always

says the renter might not actually save

the difference. I understand that, but

they could. And some of you, especially

since you're nerding out watching my

personal finance videos, probably would

save the difference. Now, that said, it

is certainly true that if the renter is

not saving that cash flow cost

difference between renting and owning,

they have no chance financially compared

to the owner. The prerequisites for the

renter in the model to build wealth are

saving and investing in the stock

market. If you don't trust yourself to

be a good saver and don't have the

stomach for investing in stocks, owning

a home might make more sense. Though, as

we've seen, you might also need a strong

stomach to own real estate. Sometimes,

there are other good arguments for

owning, like the hedge property that I

mentioned earlier, and tax efficiency if

you've maxed out all of your registered

savings accounts like the RRSP, TFSA,

and FHSA in Canada. It's also true that

strictly from a financial perspective,

either renting or owning might look

better for your specific situation. It

always makes sense to run the numbers

based on the rent you would pay as a

renter and price you would pay as an

owner. In the model, the renters's

portfolio consists of 30% Canadian

stocks and 70% global stocks with an

annual fee of 0.25%

similar to VEQT. This is one of the

places where I think the comparison gets

really interesting. Canadian real estate

in general did not do well for the last

few years, but stock markets around the

world did really well. That can change

in a day, I know, if there's a a market

crash, but looking at what has actually

happened over this period, being

invested in the stock market has been

pretty great. Real estate dropping and

stocks going up made my historical

comparison of renting and owning to the

end of 2024 a lot closer than I would

have guessed when I started the project.

I measured outcomes as the ratio of

renter wealth to owner wealth at the end

of the period and found a geometric mean

average ending wealth ratio of 0.99

across all 12 cities. This means that on

average renters and owners would have

accumulated comparable wealth with a

slight edge for owners in that initial

sample. There was lots of dispersion

with some cities favoring owners and

some favoring renters, but the overall

picture across Canada was surprisingly

even. Since then, real estate has

continued to drop while the stock market

has remained strong and shown off the

benefits of diversification. The US

stock market, for example, slowed down a

bit. It still had a great return, but it

slowed down a bit in 2025, but Canadian

and international stocks did incredibly

well. As of December 31st, 2025, the

geometric mean wealth ratio is 1.14.

This means that on average, hypothetical

renters have now come out ahead of

owners in Canada since January 2005. No

cities flipped, meaning that owners

still come out ahead in the same cities

as before. But the wealth gaps narrowed

pretty dramatically in some places.

Kitchener, Waterlue, and Victoria are

prime examples where as of 2024, owners

had come out way ahead. But as of 2025

year end, the renter to owner wealth

ratio is 0.99 in both of those cities,

suggesting that my hypothetical renters

in those cities only trail owners by a

small margin. These numbers are all

based on historical Canadian data. If

you want to run current numbers for your

specific situation, PWL Capital has a

free online rent versus own calculator

for Canadians. Anyone can use it whether

you're Canadian or not, but it lets you

toggle Canadian taxes on or off for your

investments and the renting scenario.

and it customizes the tax calculations

for your specific province and tax rate.

It's definitely worth checking out if

you're making the rent versus own

decision in Canada today. Sometimes

renting will look better and sometimes

owning will look better on a projection

basis. And importantly, the calculator

only looks at the financial side of the

decision. If you feel good, if you feel

good, numbers aside, about yourself or

about your decision uh to own your home,

this video is not suggesting that you're

wrong. The calculator is not suggesting

that you're wrong. As I mentioned

before, I own my home, too. But I also

don't have a dogmatic view that home

ownership is superior in every possible

way to renting, which is a very common

perception in Canada. The reality is

that owning a home in and of itself is

probably not going to make you happier

or more fulfilled. And renting combined

with discipline, saving, and investing

can be expected to offer comparable

long-term financial outcomes to owning.

Again, I own my home because I live in a

place with very little rental stock. It

would be hard for us to rent if we could

find a rental at all. And I don't want

to have to move. Candidly, that's a nice

thing about owning. There's nothing

wrong with wanting to own your home for

those reasons or whatever reasons you

have. I my my main argument is that

renting is a perfectly reasonable

option. That's all I'm trying to say.

Prior to owning, I rented happily and

successfully for for many years. It was

incredibly useful being a renter, being

able to move at the end of a lease as my

family was growing and my employment was

changing. When we went from in office

work to work from home, I was able to

move very easily. Now, at this point in

my life, I have owned a home for the

same amount of time that I had rented

with a wife and kids. I've been in six

years roughly in each situation. Again,

being with a wife and with an increasing

number of kids, which is now done at at

four. Both were fine. The main

difference being a homeowner makes in my

life is the amount of time and money

that I spend on maintaining and

improving my house, which is a painful

amount. I don't want to talk about it.

My kids still talk about missing some of

our previous rental homes, which were

all nice places. There are nice rentals

out there, but my kids do also like

being settled in in one place. All that

to say, if you're happy renting, don't

let people tell you it's a mistake.

That's a point that should be easier to

make now. That Canadian real estate has

proven that it is in fact a risky asset.

And that on average across 12 major

Canadian cities, a hypothetical renter

could have reasonably built more wealth

than an owner in the stock market from

January 2005 through December 2025.

If you're making the rent versus own

decision right now, run your numbers

with the PWL Capital Calculator. Link is

in the description. It's built

specifically for Canadians and free to

use.