Reading tip: This article was written in February 2026. The data and calculations in the article reflect the market snapshot at that time and use simplifying assumptions. Actual results will vary depending on mortgage interest rates, down payments, amortization periods, rent, taxes, insurance, repairs, transaction costs and personal circumstances; this article does not constitute a commitment to purchase or sale, investment return or loan approval.
In January 2026, the average house price in Toronto fell below 1 million Canadian dollars, which was the same as the average house price in January 2021 five years ago. The average condo price in Toronto is the same five years ago as it is five years later, both at $600,000.
Economics is not as easy to conduct experiments as physics, but it can analyze actual, very accidental phenomena and obtain results similar to those of controlled experiments in the laboratory. In the past, we often discussed whether it was better to buy a house or rent a house. When comparing, because housing prices are always changing, it is not easy to make a static comparison. By coincidence, condo prices in Toronto 5 years ago and 5 years later are the same. In this natural laboratory, we can clearly calculate the difference between buying a house and renting a house.
01 With the help of AI, confused accounts can be settled
If a family buys a condo in Toronto for self-occupation in January 2021, the house price is 600,000 Canadian dollars, and chooses a 5-year floating interest rate. The loan matures in 2026. During this period, it has experienced low interest rates, interest rate increases, high interest rates, and interest rate cuts. It is currently a medium to high interest rate. What is the average interest rate of this family in the past five years? How much interest was paid in total?
I gave the link to the Bank of Canada's policy interest rate webpage to the AI, and then entered the command: "The loan interest rate is the central bank interest rate plus 1.3%. The loan interest rate changes with the central bank interest rate. From January 2021 to January 2026, the loan principal is 100,000 dollars. What is the total interest expense?" After calculation, the AI gave the answer: 14,228 dollars.
Let me explain this order: The floating interest rate of a mortgage loan is usually the commercial bank's P (prime rate) minus a coefficient. P changes with the change of the central bank's interest rate, hence the name floating interest rate. P in January 2021 is 2.45%, the central bank interest rate is 0.25%, and the gap between P and the central bank interest rate is 2.2%. At that time, the floating interest rate of mortgage loans was approximately P-0.9% = 1.55%, that is, the floating interest rate of mortgages was the central bank interest rate plus 1.3%. Therefore, the instruction I gave to the AI was: the loan interest rate is the central bank interest rate plus 1.3%.
With the help of AI, we know how much interest borrowers paid after the ups and downs in interest rates over the past five years. From the result of paying a total of 14,228 dollars in interest for every 100,000 dollars of loan in 5 years, use the mortgage calculator to calculate back. The corresponding fixed interest rate is about 3%. That is, if you choose a floating interest rate in January 2021, after five years of ups and downs, the interest you will pay is roughly the same as if you choose a mortgage loan with a five-year fixed interest rate of 3% in January 2021.
Thanks to AI for helping us settle a confusing account: the borrower who "unfortunately" chose a floating interest rate in January 2021 was equivalent to choosing a mortgage loan with a 5-year fixed interest rate of 3% at that time. With this answer, you will have a solid foundation to continue to figure out whether it is better to rent or buy a house.
02 Are the renting families who have not bought a house in the past five years won?
Families who did not buy a house 5 years ago, if they have been renting, have escaped the rise and fall of house prices and fluctuations in interest rates. House prices have returned to what they were five years ago. It seems that renting households are the clear winners. However, by doing the math, we see that renting households are not the winners in terms of wealth accumulation.
Calculated based on a mortgage loan with a fixed interest rate of 3%, a house worth 600,000 Canadian dollars, a loan of 480,000 Canadian dollars, and a monthly payment of 2,019 Canadian dollars. The total expenditure is 121,140 Canadian dollars, of which a total of 67,739 Canadian dollars in interest has been paid in 5 years, and the principal has been reduced by 53,395 Canadian dollars. If the apartment management fee and land tax are 650 dollars per month, and the total amount is 39,000 Canadian dollars in 5 years, the house-buying family has spent a total of 160,000 Canadian dollars in the past five years, of which interest, management fees and land taxes were 106,739 Canadian dollars, and the loan principal was repaid at the same time, 53,395 Canadian dollars.
If you rented a house in the past five years, the average monthly rent was 2,300 Canadian dollars, and the total expenditure in 5 years was 138,000 Canadian dollars. The total expenditure of renting households is 22,000 dollars less than the total expenditure of buying households. At the same time, house buying households have accumulated 53,000 dollars more wealth than renting households. Under the same living conditions, households that buy a house gain about 31,000 dollars in wealth accumulation.
Data from Statistics Canada in 2023 show that the gap in median wealth between owners and renters reaches 104 times among young people, and 117 times among people approaching retirement. This gap is mainly driven by home ownership. Through the above calculation, we can easily understand how this gap is caused: even in extreme circumstances, such as housing prices stagnating in the past five years, households that buy houses still outperform households that rent houses in terms of wealth accumulation.
03 Have real estate investors lost?
Five years ago, if a real estate investor bought a CONDO unit for rent of CAD 600,000, the total rental income in the past 5 years would be CAD 138,000 and the total expenditure would be CAD 160,000. In terms of expenditure, it would be a "loss" of CAD 22,000. The negative cash flow of an investment property is an additional down payment, not a financial loss; on the contrary, the net rental income may still be positive.
The 5-year net rental profit is: gross rental income of 138,000 Canadian dollars, minus interest expenses, management fees and property taxes, totaling 106,739 Canadian dollars. The taxable net profit is 31,200 dollars. The average annual rental profit is 6,252 dollars, and income tax is required. If the marginal tax rate is 30%, the annual tax payable is about 1,875 dollars, which totals about 9,375 Canadian dollars in 5 years.
During the five years of holding this CONDO unit, the investor added cash of 22,000 dollars and paid income tax of approximately CAD 9,375, for a total cash of approximately CAD 31,375. At the same time, the investor obtained house equity of CAD 53,000, which is a net increase in house equity of approximately CAD 21,000. Real estate investors' income is shown as assets on a person's balance sheet, not on the income statement.
In the past five years, real estate investors have only gained about 21,000 Canadian dollars in net equity income, but they have experienced fluctuations in interest rates and tight cash flow. The landlord provided a peaceful living space for the tenants, but he himself experienced the baptism of wind and rain. Judging from the experience of the past five years alone, the opportunity cost of real estate investment is relatively high. Let us jointly hope that the landlord's income will get the returns it deserves in the next five years.
In the past five years, owner-occupiers have benefited the most, followed by real estate investors, who all increased their down payments but gained the property rights of their homes. As always, renting households have the least expenses, the lightest burden, and the easiest life, but they have gained nothing in terms of assets.
Conclusion: Who is the real winner?
Renting families enjoy the present far better than buying families and real estate investors. They can easily take vacations and dine out while homeowners struggle to pay off their mortgage, not just in the past five years but in the future. When it comes to enjoying the moment, renting families are the eternal winners.
"The heavier the burden, the closer life is to the earth and the more real; when the burden is missing, people become lighter than the air, floating away from the earth and becoming a semi-real existence." - Milan Kundera, "The Unbearable Lightness of Life". At any time, in any country, and in any era, the lighter the current responsibility, the heavier the burden will be in the future.
By acquiring real estate, real estate investors capture the income of renting families, increase their own sources of income, and accumulate net assets by actively taking risks and continuing to make additional down payments for home purchases. Homebuyers use their accumulated savings as a down payment, mortgage future cash flow to acquire the property, and force savings and accumulate property rights through repayment of mortgages to reserve food for retirement.
Robert Kiyosaki repeatedly emphasizes a point in the "Rich Dad" series: The income of the rich enters the asset side of the balance sheet and accumulates over time; the income of the poor enters the expenditure side of the cash flow statement and accumulates over time. The fate of poor dad and rich dad has been priced in these two tables.
Zweig wrote in "The Beheaded Queen": "All the gifts given by fate have already been secretly marked with a price." Some people only find the price tag after retirement. They have always thought that the gifts given by fate are cheap or even free. On the occasion of the Spring Festival, I wish all readers and friends can laugh last; the one who laughs last is the one who laughs best.
Original article published: "Investment Weekly" Issue 273
Henry Wang, in Toronto on February 24, 2026