# What is the point of buying real estate when a GIC yields more?

Despite the fact that interest rates have risen over the past year and the housing market flatlining in Toronto and other Canadian cities, for whatever reason， people are still selling houses at ridiculous prices (from listings I see online in my area).

For example, a family acquaintance sold a condo for \$535 000 with the closing date being December 19 (10 days ago as of this post). The only problem, however, is that said condo has a monthly fee of \$680 and property tax of \$2500/year. On this market, it can be rented out for no more than \$1 900/month. If you do the math,

`(1900 x 12 - 2500 - 680 x 12) / 535 000 x 100% = 2.26%`.

There are many, many condos like this, and the math is even more brutal when it comes to semi-detached houses and single family homes, sometimes going down to below 2%. On the other hand, a 1 year GIC has a yield of 3% these days and if only you can break the \$535 000 cash into 6 deposits such that if every single bank goes bankrupt, CDIC would still reimburse you for the principal and interest.

So, going back to this point: why should anyone buy a house to live in if they are renting right now, given that you can put hundreds of thousands into a GIC and use the interest to pay your rent?

• What is the \$680 fee for? Seems like either the rent is way too low or the price was way too high. Dec 29, 2018 at 17:19
• @D Stanley \$680 “condo fee”, that includes water and gas (but a lot of places include gas, and the value of including water should not exceed \$40/month, so let's say \$640/month), it will help this equation a bit, but not much. Dec 29, 2018 at 17:24
• Because owning your own home is not, and should not be, primarily a financial decision. As a parallel, why do people buy new cars when a) they lose 25% or more of their value the minute they're driven off the lot; and b) good used cars can be had for a fraction of the price of new? Dec 30, 2018 at 4:31