After hearing news about Vancouver’s housing market, I was deeply intrigued by the Gordon Feng’s blog post. However, after reading it, I disagree with his stance on renting over buying a house, because of three points:

1)      In his blog, Feng mentioned that he would rather pay rent instead of paying a high interest rate on the mortgage. However, the fact is that Canada’s prime rate is 3.00%, which is far lower than the historical average of 4.89% in the past years. Applying the law of large numbers it is certain that given time the prime rate will increase back to its historical average. Therefore, a 1.89% increase on a $630,000 mortgage will result in $11,907 of increased interest.

2)      Secondly, he mentioned high house prices as a reason to avoid buying a home. However, he failed to take into account the location factor. Vancouver is a world-class city filled with various amenities, which are highly valued, by families and investors, resulting in continuous growth in demand. Therefore, it is highly unlikely that a housing bubble exists in Vancouver.

3)      Lastly, renting is not cheaper than mortgage payments because the rent being paid by renters equals the mortgage payments paid by the homeowners when they rent their house.

Therefore, due to the above three reasons, it would be wiser to buy a house than to rent it.

 References:

“Prime Mortgage Rate History.” Ratehub.ca. Ratehub, n.d. Web. 18 Oct. 2012. <http://www.ratehub.ca/prime-mortgage-rate-history>.

“Prime Interest Rate Forecast.” Forecast-chart.com. Forecastchart.com, n.d. Web. 18 Oct. 2012. <http://www.forecast-chart.com/year-prime-interest.html>.

“Law Of Large Numbers.” Investopedia.com. Investopedia, n.d. Web. 18 Oct. 2012. <http://www.investopedia.com/terms/l/lawoflargenumbers.asp>.