Let's do the math
Here's a charming place @ $350,000
Built in 1981 (31 years old).
2 bedrooms, 1 bathroom.
So, say we've saved our pennies and got a chunk of change as a wedding present from the bank of M&D (mom and dad) for a down payment.
We have $50,000 to put down, so that leaves us with a mortgage of about 305,000 after various fees.
$305,000 over 25 years @ 4% (4 year fixed)
Monthly Payment: $1578.06
Property Tax: $118 /month ($1417.77 / year)
Misc fees/Utilities: $150/month (conservatively)
Total outlay: $2273.64/month
A bonus is that it has a wood-burning fireplace... so if you can't afford to pay the electric bill, you can go out and collect firewood and keep yourself warm and cook your dinner!
Here's a somewhat comparable rental apartment
It's also an older building and for a 2 bedroom and 858 sq. ft. it's $1400... including heat and hot water.
Your electric bill will add maybe $50/month.
Buying: ~$2273 ( after $50,000 deposit)
Assume prices will stay more or less flat for the next 8 years.
The renter saves ~$850/month and puts it in some kind of investment that earns 4%/year on average. he also puts the $50,000 in the same place. Of course, in 8 years, your rent will probably increase. If you're in the same place during that time and the rent is increased substantially, you'd be paying about $400 more 8 years from now. However, chances are you'll also earn more, so you can probably still afford putting away $850/month.
The owner pays off his capital. After 8 years, according to this site
the owner has:
Cum. Principal paid: 66,987.05
Cum. Interest paid: 87,563.35
Principal Balance: 238,012.95
Assuming a relatively flat market you sell the house for $375,000
. Realty fees are around $15,000
OWNER nets $121,987
After 8 years, the initial $50,000 and monthly deposits of $850 @4% interest
Renter Nets $165,505
With less risk, more freedom (to move), even at a relatively low 4%/year, you'd be $45,000 ahead if you rented.
To put it another way, the owner threw away $906/mo
($87000) to the bank in interest (aka renting from the bank). You'd need that 31 year-old property (which will be almost 40-years in 8 years) to be worth over $420,000 to break even
. When you consider the risk involved compared to renting right now, I think you'd have to believe it will sell for $460,000 in 8 years for it to be "worth the risk" of being tied a huge asset that has a chance of declining in value within the next few years.
Unless the definition of affordable
means: "I can afford to throw money away" Vancouver is NOT affordable
, even if you have a combined income of $120,000.