According to a recent article in CBC.ca, the Toronto real estate market is fast becoming as unaffordable as Vancouver. The article assessed a study by the Royal Bank of Canada, as its third-quarter affordability index showed 63.7% of household income in the Greater Toronto area is being spent on costs associated with owning a home.
These costs include mortgage payments, property taxes and utilities and the principal and interest. This is an increase of 3% compared to the last quarter and homeowners in Toronto haven’t needed to spend this much of their income on maintaining a home since spring 1990. Toronto still has some way to go to catch up Vancouver where 92% of the average household income is needed to pay for home ownership costs.
Since Vancouver introduced a tax on foreign buyers, the market there appears to be softening but there is no such slowdown being predicted for the Greater Toronto Area. Instead, it’s predicted that the percentage of household income required for maintaining a home is likely to continue to rise. This is because real estate prices are anticipated to continue to rise in Toronto and at an accelerated pace. One of the biggest reasons why real estate prices will continue to become more costly is because there is a lack of property for sale. At the end of November, there were 15,184 new homes being built, although this is 84 more than August which was the lowest month on record.
In spite of the lack of supply, homeowners are still looking for property for sale, even during the typically slower months such as December. This may be because these buyers have heard that historically the winter months of December, January and February may be the best time to buy when prices are supposed to be lower.
Would-be homebuyers are not surprisingly frustrated by the lack of supply in the city which has led to a year-on-year price growth of 20.3% for November, while the price for detached homes increased by 32.3% during that period. This means the average price is now CAD$1,345,962. If real estate prices continue to rise so rapidly, experts feel this will place pressure on policymakers to introduce measures to cool the market or to help increase affordability.