If you’re a prospective homebuyer in the Toronto or Vancouver area, especially if you’re one looking for a single detached home, you have the right to be concerned about prices.
In Calgary and other parts of Western Canada, the slump in the energy market had a number of effects, one of those being making homes in the region more affordable. Unfortunately, other Canadian cities have been less fortunate, as has been well-covered this year by the media.
Earlier this month, the National Post
published an article commenting on current affordability in the Toronto housing market, and highlighting that according to the Toronto Real Estate Board, the affordability index for the city is currently at 35 per cent. That means that on average Toronto homeowners are devoting a full 35 per cent of their income to pay for their mortgage, property taxes, utilities and other property-associated costs.
The big takeaway here is that the affordability index right now in Toronto is the highest it’s been in the past twenty years.
The National Post article goes on to make a comparison to the financial environment leading up to Toronto’s 1989 real estate crash, underlining that leading up to the crash, Toronto homeowners were putting as much as
50 per cent of their income toward mortgage and property costs.
Toronto buyers may not be crazy for purchasing properties in the city for seemingly outrageous prices. After all, thanks to interest rates, which were lowered earlier this year, buyers are doing what makes sense -- borrowing money while it’s still cheap to borrow.
However, that doesn’t negate the fact that the average Toronto family is dedicating a third of their income to housing, a situation that can become extremely problematic if we were ever to enter a new recession. This also doesn’t negate the fact that the average home price in Toronto rose
11 per cent to almost $650,000, according to recent data released by TREB.
Toronto developer Louie Santaguida, who is President and founder of
Stanton Renaissance, attributes
another factor to current affordability levels in the city’s residential sector -- challenges associated with lending requirements in the housing construction sector, challenges that have a rippling effect on the rest of the housing market, including buyer affordability.
Louie Santaguida, “It’s understandable that following the financial crisis in 2008, banks and other lending institutions had to address some of the regulatory circumstances that caused the crisis. I also understand that banks right now are nervous about Canadian household debt. But, the reality is that buyers in Toronto can afford the properties they are buying, especially when you are looking at the condo market in Toronto.”
Louie Santaguida adds, “For banks to add new hurdles and new lending requirements, especially in the area of residential construction, I think would be a mistake.”
As single detached homes in Toronto continue to be out of reach for many buyers, condo living remains an ever-popular choice.
Recent data confirms that condos in Toronto have not experienced the continued sharp rise in prices as other home types. In fact, the average price of a condo in Toronto is now $222,8000 lower than the average price of other housing types.
It’s no wonder that in May this year, condo construction
jumped to a two and a half year high. Canada-wide, housing construction has surged this year. And in Ontario, housing construction is up 32 per cent this year, driven by continued growth in multi-unit construction.
In Louie Santaguida’s mind, the endpoint is clear.
“In five to ten years, the condominium will be the dominant force in the housing market,” Louie Santaguida says. “This has to do with housing affordability and the simple fact that families can more easily afford to buy condominiums, as opposed to detached homes. But, this also is a reflection on a change in how Torontonians live. Living close to where you work and socialize, living in downtown areas - that’s what people in the city will continue to want. And developers will continue to meet that need.”