Several times a month I’m asked by individuals for advice on buying a house in Ottawa, Ontario or Gatineau, Quebec. While I will refrain from commenting on the personal elements (e.g. politics, etc.) as they are subjective, I’ve put together a financial analysis for those who wish to consider.
In conclusion, unless an individual earns more than $150,000 / year, from a financial perspective, it’s still significantly financially beneficial to live in Gatineau, Quebec vs. Ottawa, Ontario.
Here’s the facts. For this assessment we’ll use the salary of $75,000… (reference for calculations: http://bit.ly/RLVw04)
Ontario income tax
Total paid (assuming no additional deductions e.g. spouse, school, etc.*): $16,561
Quebec income tax
Total paid (assuming no additional deductions e.g. spouse, school, etc.*): $20,893
Quebec residents who earn $75,000 annually will pay $4,332 more in taxes ($20,893 minus $16,561) than an Ontario resident. Monthly additional expense amounts to $361.
But this is only one aspect of an individual’s expenses. If we look at other key expenditures, it’s vital to realize that Gatineau offers significantly lower real estate expenses. Let’s take a peek…(reference for research: residential freehold houses, detatched with 2+ bedrooms, 1.5+ bathrooms in Gatineau, Quebec & surrounding areas: http://bit.ly/1e8vwUy)
Similar house profiles in Ottawa, Ontario are anywhere from 50-100% more expensive than those in Gatineau and surrounding areas on the Quebec side. This quickly results in dramatic savings. Let’s assess a real life example (you can take a few moments and compare your own situation if you desire, it’ll be more interesting for you if you do). For this assessment we’ll use a homeowner who owns a single family home currently valued at $300,000 (purchased a few years ago for $225,000). Their house is not small – it’s 2,800 sq. feet with 4 bedrooms, 2 bathrooms, 2 dining rooms and 2 living rooms, a pool, hot tub, and boasts a half-acre lot in the middle of the city. Even with the additional amount spent on income taxes, this individual’s mortgage is only $900 a month including property taxes. Their drive to the office is 15 minutes each day, 30 minutes on a bad day (reference: Google Maps on a Thursday at 8AM). This same house profile (if you could find it in Ottawa) would sell for $650,000+, and their mortgage payments would be more than double with the interest expenses. Furthermore to find a house of similar profile they would need to live outside the Ottawa area and their drive would be more than 15-30 minutes each day. Each year living in Ottawa would systematically cost them more than $10,000+ additional in real estate expenses. This is an eye opener!
What about other considerations?
Quebec offers significantly lower expenses in child care (daycare), write-offs for dependants, lower property taxes, almost half-price electricity bills, no water bills and subsidized medical coverage for individuals who don’t have their own plans. Quebec also has significantly lower priced car insurance (e.g. saving thousands) as a result of their no fault tolerance insurance plans. Let’s take a look at the other important considerations:
From northern Aylmer to Ottawa west is 18 minutes (http://i57.tinypic.com/2hgzhn8.jpg)
From northern Aylmer to downtown Ottawa is 15 minutes; or 26 minutes with rush hour traffic at 8AM on a weekday (http://i60.tinypic.com/2e33a6t.jpg)
Ease of resale
Let’s look at Canadian Real Estate Association’s latest quarterly statistics for resale statistics from a percentage basis (e.g. # of homes listed vs # of homes sold, http://creastats.crea.ca/natl/index.htm). Resale percentages are nearly identical for both Gatineau and Ottawa.
Houses in Aylmer & compared to houses in Orleans
Average resell price (Q4 of 2013) is $410,600 in Orleans; average resell price is $267,800 in Gatineau. This is a 53% difference. I’ve emailed Canadian Real Estate Investment Wealth to ask permission to scan their magazine and post my source. If I get written permission I will post it. Alternately you can verify these numbers by picking up a copy of their magazine at Chapters.
Houses in Aylmer & compared to houses in Kanata
Average resell price (Q4 of 2013) is $387,500 in Kanata; average resell price is $267,800 in Gatineau. This is a 44.6% difference. I’ve emailed Canadian Real Estate Investment Wealth to ask permission to scan their magazine and post my source. If I get written permission I will post it in the coming days. If you wish you can pick up a copy of their magazine at Chapters.
Moving costs are similar. In Quebec there are welcome taxes, these are the same as land transfer taxes in Ontario (just named differently). CMHC is taxable in both provinces as well (see here: http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_003.cfm).
Car insurance costs
I pay $230 for my license plate and $400 for car insurance annually in Quebec. When I was considering moving to Ontario my plate costs were negligable but my insurance costs would have been $1,300 annually. This would more than double my car insurance costs in my case, even after factoring in the cost of plates in Quebec.
In Quebec electricity prices are 8.55 cents per KWH including both non-peak and peak. In Ontario, prices are an average of 12.3 cents (43.8% higher). Calculations are available here to determine the averages (https://www.hydroottawa.com/residential/rates-and-conditions/) and Ontario rates are about to rise even higher (http://www.cbc.ca/news/canada/toronto/electricity-rates-going-up-in-ontario-may-1-1.2612844). In addition to this, many Ottawa residents have reported that the are also charged an additional “electricity delivery fee” which increases the cost even further.
Quebec residents are welcome in all Ontario hospitals and vice-versa. As a father who has a son with Autism I leverage the expertise of both provinces. While there are amazing specialists in Quebec, I also have some specialists in Ontario that I leverage as well. When I had a medical issue last year with my back (awaiting surgery), I received medical services both in Ottawa and Orleans.
Education quality & pricing
Post-secondary educational pricing is significantly less expensive in Quebec. It’s well known that Quebec subsidizes their education and the cost is < 25% of Ontario’s. As for quality, this is subjective and depends on the school, program, etc. Grade school math for instance is more advanced in Quebec and my friend’s children struggle with Quebec mathematics after having moved from Ontario; whereas there are other educational benefits in Ontario as well. Since this is subjective, I’ll leave this to the reader’s opinions, as I have no interest in being pulled into a subjective debate that has no clear concrete answer.
Tax deductions for higher-income earners
Let’s assume a $150,000 income. Reference for calculations http://bit.ly/RLVw04
Ontario: $48,556 Quebec: $55,627
In this instance a Quebec resident with a salary of $150,000 will pay $7,071 more in taxes (no other assumptions or calculations included). This is approximately the salary required to start saving money by living in Ontario vs. Quebec with all other standard elements considered (real estate, etc.) if you are single and have no children.
Even without subsidization daily cost per child averages $25 / day on the Quebec side. This is still significantly cheaper than the average $45 / day in Ontario for child care. With subsidization the cost drops to $7 / day. Our family earns a household income of $125,000 per year and we qualify for subsidization.
In almost all scenarios, living in Gatineau is significantly more financially beneficial than living in Ottawa. Regardless, financial reasoning isn’t the only reason, but, it is a significant one. Everyone’s situations are unique and individuals must make decisions based upon what’s best for them.
All I ask is that you take the time to compare apples to apples. Never believe one-liners that you read in the media or one-off statements that you hear someone say. Take the time to do your own assessment and if you make the decision to spend more to live in Ottawa, do it for reasons that best suit your needs. Don’t do it because you’ve tricked yourself into believing that you’re doing it to save money, because chances are you are not.
I took the time to prepare this blog because there are too many individuals who hear something and assume it to be fact. Not looking at the entire picture and making an informed decision can be a mistake and could cost years of consequence. If I assumed that everything I heard was fact then I wouldn’t have started my own businesses, build my own real estate investment portfolio and transformed myself from someone who would have never been able to afford retirement into someone who will be able to retire in less than a decade if I wish to do so.
Take the time to do your own assessments and for your own benefit, make sure you are comparing apples to apples, most of all – good luck with your home purchase and congratulations!
Founding Partner, Amplified Investments