The average cost of a home in Canada reached $517,124. Now, this amount is quite a lot but if you look at the most expensive areas in Canada such as Toronto and Vancouver, it gets crazy. In other to afford a detached home in Toronto, you’ll need a household income of $159,000, and these numbers just keep going up, and the average house price in Toronto is $1,000.000.
Now obviously this isn’t the case across the entire country, you could go to smaller cities or less expensive cities, for example, Winnipeg or Montreal. However, the growth of prices in Vancouver and Toronto have made the market just continue to climb. But why is Toronto housing so expensive? Well, this is what we will look at in this article. Now, there are a lot of factors why real estate can go up in particular markets, however, we are going to dive into a few reasons why real estate is getting so expensive in this key market.
So, if you’re ready, then let’s get to it; Reasons Why Housing Is Expensive In Toronto:
The first factor to look at is job opportunities, and growth when it comes to Toronto. These job opportunities make Toronto a lot more desirable, and honestly comparable to cities in the United States like Los Angeles, New York or San Francisco. Toronto is exploding, not only in business and commerce but culture, food, diversity, and so many different things.
The number of companies that are coming into Toronto to start offices and hire people are just growing and growing and growing– and it looks like it is not going to slow down anytime soon. This means there are going to be more opportunities for jobs, so people are naturally going to want to move closer to where these jobs are.
Toronto seems to be turning into major world cities, and in turn, people are willing to pay extremely high prices to live in these hubs, just like in the American cities mentioned earlier.
Looking at Toronto, there has been a ton of foreign buyers coming in; foreign investors coming in to buy new real estate. With foreign investors owing about $38 billion in the housing market in Toronto, this has had an impact as the government had to place a foreign buyer’s tax of 15% on any residential real estate bought in and around Toronto. The government wanted to slow down the number of people that were flying in and buying up property.
I think foreign investors can be a good thing but also a bad thing. Now, it is great because Canada is such a diverse country, it is one of the strengths of the nation and of course, Canada is willing to open up its arms and be friendly and welcome people into buying property and moving there. However, on the other hand, you have people who are born in Canada and grew up and are either now graduating from college or starting their jobs and they want to buy a home in this market, but they are already getting priced out.
This is another reason why real estate in Toronto is going up. Toronto’s real estate has been on news outlets and has been catching headlines all across the world. And of course, Toronto and Vancouver are becoming a sort of this world-class hub cities, and in turn, it is making the demand so incredibly high, it’s gotten so high that builders are scrambling to fill this demand, and they are trying to build units and buildings as quick as possible. The Finacial Post, which is a national newspaper said Toronto was the world’s second overpriced real estate market.
It has also gotten to the point where the market is just so high, and there is so much confidence in the market that people think it will never come down. This, in general, is not a good investing mindset to have because whatever goes up must come down, especially in investing, things do not go up forever. Although nobody knows what will happen and markets will correct or go down, it is completely out of anybody’s vision or control. Although I think right now especially in key markets like Toronto, people keep filing in and keep filling in because they think they are going to miss their opportunity to buy, so, they just keep on coming in.
Canada is an immigrant nation. Many people came to this country to start a new life and explore new opportunities, and that’s what Canada is known for. So, as of right now, Canada is predicted to be welcoming 350,000 immigrants by 2021. Canada and especially Toronto have consistently ranked high on the best places to live in the world and that is certainly a factor why people are choosing to immigrate to these key markets rather than different countries.
Canada is a place where people want to move to and it also makes a lot of sense that if people move to Canada, they’ll naturally want to go to the two biggest cities which have the biggest markets where all the opportunities are.
Canadian banks are some of the best businesses in the world. The big five banks in Canada are globally known and are included in a lot of portfolios around the world. They are actually recognized as some of the strongest banks on the planet and they pay healthy dividends, and they’ve grown consistently over the past decades, so, they’re generally seen as a great investment.
In 2008, Canadian housing prices barely dropped before recovering shortly after the United States housing market plummeted. So, I think it is safe to say that the regulations that these Canadian banks had in place and also the government allowed prices to not plummet significantly back in 2008. Now, when you truly look back at it, there hasn’t been a serious correction in more than 1o years and you could look at Canadian banks as a big part of this because they are the ones financing all the properties.
So, at the end of the day, what should you do if you cannot afford to buy a home in Canada?
1. Do Not Over Consume On Housing
Well, the bottom line is, do not buy a house that is too big for you or buy too much house. This is because no matter what, even if the market goes up or down, you do not want to have something that’s just completely too expensive than what you can afford. So, generally what you should stick with is about 3 to 5 times your total income. So, just you or you and your partner, you can take your yearly income and multiply it by three, and this is generally what you want to look for at a house price.
So, what I mean is if you and your partners make $100,000 a year, you should look for a home that is about $300,000 to about $500,000 at the high end. This way you’d be comfortable with the actual mortgage payments you make, and you wouldn’t be overconsuming on housing.
If you cannot find a house in Toronto, you can move, find another market or another area that’s more affordable for you. Or you can also consider renting in Toronto and do not look at it as throwing money away, because that’s a complete myth and do not listen to that. This is because when you rent in Toronto, you’ll be saving on taxes, maintenance, and mortgage insurance. So, it is cheaper to rent in Toronto than to buy a home. If you’re smart about what you are doing with your money, you can invest that rest and grow your wealth at the same time. It will cost you money to live somewhere regardless if you buy or rent.
3. Continue Saving and Wait for a Great Deal
I recommend you continue saving and wait for the opportunity to buy. Whiles saving, look in other areas that could perhaps have better value than where you’re looking.
If you follow this advice, you should be okay and of course, nobody knows what will happen with Canadian real estate prices; they could keep climbing for ten years, or they could drop this anytime soon. So, all I am saying is that you have to look at your current situation and perhaps you might have to move a little bit further from Toronto or even rent but just know that there is always a solution to the high housing prices in Toronto.
So, I hope this article answered your question on why is Toronto housing so expensive? And if it did, leave a comment if you have any suggestions or questions.