It’s the largest asset most people own, but

Canadian homeowners

with

paid-off mortgages

don’t get all that upset when their

home values

are flat or declining.

To be clear, it is easy to see why people continue to believe financial security starts with paying off your house, given that food, shelter and clothing are the most basic human needs.

But the argument that a paid-off house doesn’t cost you anything has always been folly, and month after month of mostly flat or

declining real estate prices

strengthens the argument for what you could be doing with the

equity in your home

.

Canada’s largest real estate board reported the average selling price across the Greater Toronto Area was down 4.7 per cent last year to $1,067,968. Forget the decline: even a flat home price is a costly exercise because $1 million in equity could easily go to something as basic as a guaranteed investment certificate and generate a $30,000 risk-free return. Shooting for five per cent return would not be outrageous.

Yes, the flipside is renting but factoring returns on your equity, not to mention any mortgage costs if you still have one, plus taxes and maintainances would leave the average Canadian more than enough cash to have high end place to live and some left over.

To stave off calls from angry realtors, let me be clear: I’m not arguing against home ownership; I’m arguing that people should try to understand the true cost of their financial decisions.

Alex Avery, author of the national bestseller The Wealthy Renter, has argued about the benefits of renting well before the drop in Canadian house prices and the

huge increase in rental supply

that has lowered rental costs.

Now the chief executive of Canada’s largest publicly-traded shopping mall real estate investment trust, Primaris, Avery said it’s not unreasonable to think he could just take his home equity and invest in his own REIT and get a five per cent return.

“That’s what I could be doing with my money,” he said. “It’s ridiculous to think of (a paid-off house) as free. The opportunity cost is what you could be doing with your money, plus add the maintenance, which is conservatively one per cent.” Based on those current Toronto prices, you can easily add $7,000 in property taxes too.

Since he wrote the book, rental supply has surged, demand has fallen with cuts to immigration and rents have dropped.

Rentals.ca reported average asking rental rates were down two per cent in January year over year across the country to $2,057 per month. It was the 16th straight month of year-over-year declines and the rate is now well below the peak of $2,196 reached in January 2024.

“The case for renting is that it is a lower risk, a very flexible, affordable way to house yourself and

home ownership

is very heavily hyped and promoted by a whole host of conflicted advisors, including banks, real estate agents and mortgage lenders,” said Avery. “If you look over the last 25 years, Canadian housing has gone from very affordable by price-to-household income to very expensive.”

Even with a drop in prices, he said the cost of homeownership has only moved “a small step in the right direction,” but the cost of that home is still enormous relative to renting. Try to convince people otherwise, and they will say things like, “rent is throwing away money.”

The reality is that this week, many homeowners are going to be more upset that gas prices are up a few cents since war broke out in the Middle East than they are about the decline in the value of their largest asset. And the average resale home price dropped by more than $15,000 in the third quarter of 2025, according to the most recent Statistics Canada data.

Doug Porter, chief economist with Bank Montreal, said he doesn’t get a sense that consumers’ spending habits have been affected much at all by the so-called wealth effect from lower house prices.

“The run-up in financial market wealth has, in many cases, offset the decline in real estate wealth,” he said.

The economist said flat house prices may prompt people to think differently about their

real estate assets

and noted that in the 1990s, housing prices went “sideways for a decade,” which can affect consumers for a while.

“But housing will always be a unique asset,” said Porter.

That is the crux of the issue. No matter how much rental stock we build, it will never supplant owning, because the very nature of the apartment market in Canada continues to prevent you from being a renter forever, with no guarantee of tenancy. Ultimately, your landlord can evict you.

“Consumers never think that way,” said Ron Butler, a mortgage broker, about the impact of having a lot of equity in their home, even when prices are dropping. “People are certain prices will go up. But when something you don’t see every day goes up, it’s just easier to get (angry about it) … like gas prices.”

There are also scales when it comes to your house and what you put into it. If you bought a house in the 1990s and have not put one cent into it for three decades, your costs are a lot different from those of someone constantly renovating.

“Home ownership has been mostly divorced from

the idea that it was an investment

until the 2000s,” said Butler. “The only thing you ever thought about was eventually paying it off, and you wouldn’t have a mortgage. You bought a house so your kids could go to the local school, you get to know your neighbours, and at the end, you just pay property tax.”

Given the lack of family-oriented housing, that has and always will make a lot of sense. But with your home looking more and more like dead money, will it ever change?

Butler said the one exception might be a population that is increasingly single and never plans to have children. Do they need to own? Probably not, but convincing others may be tough, even if the math doesn’t work.

“There seems to be a sense of ownership that runs through many cultures,” he said.

All true. Ownership will always have value beyond the numbers, but it comes at a price and one that should be recognized. A house paid off does cost you money, even though it’s not coming out of your account like filling up at the pump.

• Email: gmarr@postmedia.com

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