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Do Torontonians Need to Adjust Their Real Estate Expectations?

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Do Torontonians Need to Adjust Their Real Estate Expectations?


By: Penelope Graham, Zoocasa

Looking to make the leap from downtown renter to property owner? Those getting into the housing market for the first time often face the stark reality that their hard-saved dollars won’t go as far as they’d like in Toronto real estate. For those who wish to dwell within city limits, that means changing their homeownership expectations.

Sold data from Zoocasa.com finds the average price for detached houses sold within the 416 to total $1,142,080, with a 69.9% increase over the past five years. Another data set from the Toronto Real Estate Board pegs the average even higher, at $1.3 million. The challenge is that wages haven’t nearly kept up with real estate’s booming growth. Consider the median income in Toronto of $76,219: assuming ideal credit, a 20% down payment, 30-year amortization and 2% variable mortgage rates, the MAXIMUM such a borrower could hope to qualify for is $636,900 – literally hundreds of thousands short of affording a house.

The Affordability Struggle

Even high-earning individuals don’t have much chance of affording a house on their own. Here’s a look at maximum mortgage affordability, based on the average salary by sector:

Occupation Average Salary Max affordability
Mining, quarrying, and oil and gas extraction $107,065 $868,521
Utilities $89,955 $732,324
Construction $62,461 $495,646
Manufacturing $56,446 $446,218
Retail $29,398 $216,142
Transportation and warehousing $52,383 $411,297
Information and cultural industries $66,309 $528,725
Finance and insurance $65,348 $520,467
Real estate and rental and leasing $48,887 $381,257
Professional, scientific and technical services $69,032 $552,127
Educational services $53,109 $417,535
Health care and social assistance $44,949 $347,406
Arts, entertainment, and recreation $30,396 $224,718
Accommodation and food services $19,430 $140,139
Public administration $63,894 $507,971

Source: Workopolis
Affordability calculated with Ratehub.ca Affordability Calculator

Keep in mind, the above scenario are borrowers who can pay 20% on their home purchase – hardly typical among the first-time buyer crowd, many of whom scrape 5 – 10% to put down.

Townhouses an Affordable Option

With detached houses so far out of reach, townhouses are becoming the go-to for the outpriced buyer segment, according to new data from Zoocasa. With the average price of $558,930, they’re still well within the realm of affordability for many prospective buyers. And these home types have still seen healthy price growth, increasing 51.4% since 2011.

This combination of factors make them an ideal compromise for buyers priced out of the detached segment says Lauren Haw, Broker of Record at Zoocasa Realty.

“While it’s no secret that buyers who wish to live within the City of Toronto face steep affordability hurdles, our data finds there are still housing options that are in line with income and wage growth. Townhouses are still within reach financially for many Torontonians, despite enjoying steady value appreciation over the past five years,” she says.

The good news? There are a still a number of pockets in the city where townhouses are even more affordable – check out Zoocasa’s infographic to see where you could get the most bang for your buck.


Condo Market Also More Competitive

A reason for steep Toronto house prices is the chronic lack of supply; inner-city new construction projects favour high density condo developments, while restrictions on land throughout the Ontario greenbelt limit the land available for use. As a result, many first time buyers are limited to condos as their only affordable entry point into the market. According to TREB’s November housing figures, the average condo now costs $471,256, a 13.5% year over year change, and less than half of the 32% growth seen in the detached segment.

You may also be interested in: What’s Better: A Condo or Freehold Townhouse?

Writer: Penelope Graham 

Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.


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