Buying beats renting only when a home costs less each year to own than to rent and you stay long enough to earn back the taxes on the purchase — and at 2026 mortgage rates that depends sharply on the city.

Renting is not throwing money away, and neither is buying. Both buy a place to live, and both carry costs you never get back. For an owner those are mortgage interest, upkeep, property tax and the return the deposit would have earned elsewhere, offset by whatever the home gains in value. The Canadian portfolio manager Ben Felix compressed this into the 5% rule: an owner’s unrecoverable costs run to roughly 5% of the home’s value a year — about 1% property tax, 1% maintenance and 3% cost of capital — so if a similar home rents for less than 5% of its price divided by 12 each month, renting is the cheaper way to be housed¹. He built that in 2019, when Canadian mortgages cost around 3%. In autumn 2026 a new mortgage costs between about 4.5% and 7.3% in five of the six markets below, and the answer has moved with them²³.

Compare rent with the cost of owning, not the mortgage payment

The commonest mistake on the forums is to set rent against the monthly mortgage payment. Part of that payment repays the loan, which is savings moving into the house, not a cost. Economists compare rent with the user cost of owning, the yearly cost of housing yourself in a home you own; Himmelberg, Mayer and Sinai set out the method in the *Journal of Economic Perspectives* in 2005, as a way of telling a house-price bubble from prices that rents and interest rates can justify⁷. Built up line by line:

• Interest and the deposit’s lost return. The bank charges interest on the loan; the deposit and every repayment stop earning whatever they would have earned invested. This is the largest item, and it is the one Felix’s 5% rule set at 3%¹.
• Maintenance. Roofs, boilers, kitchens and the slow wear of everything else. Felix uses 1% of the value a year as a planning figure¹; older homes and strata or service charges can push it higher.
• Property tax. In the US and Canada a real cost of owning, around 1% of value in Felix’s rule¹. In the UK, council tax is paid by whoever lives in the home, so it does not separate an owner from a tenant.
• Less expected price growth. The uncertain part, and the one people are most tempted to inflate.

Add those up as a percentage of the price, multiply by the price, and compare with a year’s rent on a similar home. Below the rent, owning is cheaper each year; above it, renting and investing the difference can leave you ahead, provided the difference really is invested. Ramit Sethi makes a similar point in *I Will Teach You to Be Rich*: for many people renting is the better financial decision, and a home is a purchase to be run through the numbers like any other, not an automatic investment⁸.

Mortgage rates and price-to-rent ratios in autumn 2026

The OECD tracks how expensive houses are relative to rents and to incomes in each country, each measured against that country’s own long-run average (100 = average). The latest readings show the gap between owning and renting is widest where prices raced ahead of rents for two decades: Australia, New Zealand and Canada¹⁵.

Six cities, worked through

Each case below applies one method, a 2026 version of Felix’s rule. The cost of capital is the local mortgage rate, less expected price growth taken as the central bank’s inflation target, so a home is assumed to hold its real value: 2% in the US, UK and Canada, the 2.5% middle of Australia’s 2–3% band, and 4% in India^1617181920. Singapore has no formal inflation target, so 2% is assumed there. Maintenance is 1% a year and property tax is the local rate where owners pay a material one; in Sydney, Bengaluru and Singapore the smaller owner charges (council rates, strata or conservancy fees, municipal tax) are assumed to fit inside the 1%¹. Treating the deposit’s lost return as the mortgage rate is generous to buying: if the deposit could earn more invested, owning costs more than shown. Where a household is named, its figures are illustrative.

London: close to even, decided by how long you stay

The average London home cost £550,000 in July 2026, down 3.3% on a year earlier, and the average London rent was £2,332 a month in August²¹²². These are averages of different homes — renters tend to occupy smaller ones — so the true comparison for any one flat will differ. At a 4.92% two-year fix⁴, owning costs about £21,560 a year against £27,984 in rent, so owning is cheaper by about £6,424 a year. Stamp Duty Land Tax on £550,000 is £17,500, and a first-time buyer gets no relief above £500,000²⁸. That tax alone takes about 2.7 years of the saving to earn back, before legal fees, the survey and an agent’s commission when you sell. Felix’s original 5% would put the break-even rent at about £2,292, a little under the average; at London’s prices the decision is close and the length of stay settles it.

Toronto: what a rent will justify

Maya, 31, a nurse, rents a two-bedroom condo at C$3,013 a month, the Greater Toronto average for the second quarter of 2026²⁹. Running the rule backwards gives the most she could pay for a similar condo and still not be worse off owning: C$36,156 a year divided by 5% is about C$723,000 under Felix’s original rule. The rate she would actually pay matters more than the one in the bank’s window. The posted five-year rate was 6.09% in September 2026¹⁰, but new uninsured fixed loans of five years or more averaged 4.49% in July². At 4.49%, with Toronto’s 0.767% residential tax rate³⁰ and 1% upkeep, less 2% inflation, the cost rate is about 4.26% and the ceiling rises to about C$849,000; at the posted rate it would be about C$617,000. Toronto buyers also pay land transfer tax twice, to Ontario and to the city, on the same bands: C$10,475 each on a C$700,000 home, C$20,950 in all before any first-time buyer refund³¹³². The Greater Toronto average selling price was C$1,006,409 in September 2026, down 5.1% on a year earlier³³, above even the higher ceiling, though that average covers every type of home.

Sydney: the duty threshold matters as much as the rate

Chloe and Sam, 33 and 34, are looking at a two-bedroom unit in Marrickville for A$1,050,000 and pay A$850 a week to rent one in the same street. At the average 6.24% rate on new owner-occupier loans in June 2026⁵ — set before the Reserve Bank lifted its cash rate to 4.60% at the end of September¹¹ — owning costs about A$49,770 a year against A$44,200 in rent. NSW transfer duty on A$1,050,000 is A$41,437, and because the price is over A$1 million they get no first-home concession; at A$800,000 or less they would pay none³⁴. Across New South Wales the mean dwelling price was A$1,304,900 in the June quarter of 2026³⁵.

Bengaluru: the answer turns on price growth

Karthik and Divya, 35 and 33, both in technology, like a 3BHK in Whitefield listed at ₹1.6 crore; the identical flat upstairs rents for ₹48,000 a month, a gross yield of 3.6%. With home loans from 7.25%¹² and prices assumed to rise with the Reserve Bank’s 4% inflation target²⁰, owning costs about ₹6.8 lakh a year against ₹5.76 lakh in rent. The result flips if prices keep rising faster than inflation: India’s real house prices rose about 3.85% a year from 2009 to 2025 on the OECD’s series³⁶, and at that pace the owning cost falls to under 1% of the price. That is the Indian argument in one line: the rent alone does not justify buying, so the case rests on prices beating inflation, as they have since 2009, which nobody can promise. Karnataka’s stamp duty and registration fees add several per cent of the price on top, paid once, and belong in the break-even sum before deciding.

Austin: the clearest case for renting

The Garcias, both 36, rent in Austin and keep being told they are wasting money. The typical Austin-area home was worth $417,977 in August 2026 and the typical rent was $1,622²³²⁴. At 7.28%³ and Texas’s 1.40% average effective property tax on owner-occupied homes²⁵, owning costs about $32,101 a year against $19,464 in rent. The typical rent is for a smaller home than the typical house, so the true gap is narrower, though not by anything like $12,600. Bills vary by school district and county, so their own appraisal notice is the figure to use. Austin also shows why price growth is not a given: the typical home value is 26.8% below its June 2022 peak²³. The Garcias’ honest plan is to rent, invest the difference every month, and look again if rates fall.

Singapore: an HDB flat is cheap to own and dear to rent

Jun Hao and Pei Shan, both 30, are choosing between renting a 4-room HDB flat and buying one. In July to September 2026 the median 4-room resale price was S$628,000 across 3,269 sales, and the median approved rent for a 4-room flat S$3,400 a month across 3,226 approvals²⁶²⁷. An HDB loan can cover up to 75% of the price and is pegged 0.1 point above the prevailing CPF interest rate⁶; the Ordinary Account rate is 2.5% for October to December 2026¹⁴. On those figures owning costs about S$10,048 a year against S$40,800 in rent, and Buyer’s Stamp Duty of S$13,440 is earned back in about five months³⁷. Two cautions: an HDB lease runs 99 years and an older flat’s value falls as the lease runs down, so add a depreciation allowance for any flat past its middle age; and CPF used for the purchase must be refunded to your account, with the interest it would have earned, when you sell³⁸.

How long you need to stay

Transfer taxes and fees are paid once, so their yearly cost depends on how long you spread them. Divide what buying and later selling cost by the yearly saving from owning, if there is one. London’s stamp duty alone is about 2.7 years of saving; Singapore’s about five months; in Austin and Sydney there is no yearly saving to earn anything back at today’s rates. If owning costs more each year than renting, no length of stay fixes it — only price growth beyond inflation, or a fall in rates, can.

What history says about house prices

The case for buying usually rests on prices rising. Over 1970 to 2025, real house prices — after inflation — rose about 2.9% a year in the UK and Australia, 3.01% in New Zealand, 2.77% in Canada and 1.86% in the United States, but only 0.55% in Japan and 0.20% in Germany³⁶. Those national averages hide long losses: Japan’s real prices fell 43.4% from 1991 to 2009 and in 2025 were still 28.8% below the 1991 peak, and US real prices fell 27.2% between 2006 and 2011³⁶. Robert Shiller’s *Irrational Exuberance* shows that over a century real home prices in the US rose far less than most owners assume, and argues that housing booms feed on psychology and expectations as much as on fundamentals³⁹. A house is also leverage: with a 20% deposit, a 10% fall takes half your equity.

The part that is not arithmetic

The numbers rarely settle it on their own, and pretending otherwise is how people end up in the wrong house. Owning buys control: no landlord deciding to sell, the freedom to knock down a wall, a school catchment you will not be moved out of. It also works as forced saving for people who would not invest the difference, and a paid-off home cuts what you need to live on later. Renting buys flexibility: you can move for a better job in a downturn, you are not concentrated in one building in the same city as your income, and a repair is somebody else’s weekend. Neither is the responsible choice by default.

1. Find the rent on a home you would actually buy, not the average for the city.
2. Add up property tax, 1% maintenance (more for an old building or one with service charges), and your mortgage rate less a cautious price-growth assumption¹.
3. Compare that yearly cost of owning with a year’s rent.
4. Add every one-off cost: transfer tax, legal and lender fees, moving, and selling costs later.
5. Divide the one-offs by the yearly saving, if there is one, to get the years you would need to stay.
6. Check the deposit leaves your emergency fund intact, and that you could pay the loan at a rate two points higher.

Putting the choice into your own plan