Want To Buy A House In Toronto? It Could Take You 24 Years.
Home buyers in Toronto better be prepared as prices continue to surge. The Toronto Real Estate Board expects home prices to rise by 10% this year, leading to the average home price to surpass $1 million by the end of 2021. As with a higher price, the down payment required to purchase a home will climb even higher, leaving many unable to enter the market. Affordability issues aren’t anything new to Toronto but it’s important to look at the gravity of the situation.
A new study released by the National Bank of Canada has revealed some depressing statistics for home buying this year. According to the report, buyers with an average annual household income of $178,499 saving at 10% per month would need 24 years to save enough for a down payment. The calculation matches the predicted average home price of $1,039,348. Those statistics are for freehold homes such as semi-detached, detached etc. If you’re looking for a condo as a cheaper alternative, you would be luckier. With an average household income of $234,335 for a condo priced at the average $615,805, you would need to save for just over 4 years. Seems much more reasonable but either way, you still need a high income and a diligent savings plan. There’s no accounting for emergencies.
While housing affordability across Canada did improve during the fourth quarter in 2020, this quarter’s affordability improvement was completely eclipsed by the sharp rise in home prices. Toronto saw both the price of condo and non-condo homes rise in the last quarter as the property market continues to flourish despite the pandemic.
Ipsos research for TREB showed that the pandemic, rather than slow the housing market, actually accelerated it for many home buyers. A survey of 1,000 home owners and 1,000 potential home buyers found that 64% of home owners bought earlier than expected due to the pandemic and 46% said they planned to buy a detached home. With an already low supply of housing stock in Toronto, competition fiercely continued as more buyers flooded the market, driving up the sale price of many homes, particularly detached and semi-detached.
It’s already difficult enough for many young home buyers to save up for such an exorbitant down payment coupled with rising debt levels, student loans, rising cost of living and stagnated wages in an ever competitive market. If something doesn’t change soon – and by something, we mean a lot of things – the market will be completely barred to many buyers in Toronto.
With higher prices, comes a higher down payment. On a national level, there has never been a worse time to accumulate the minimum down payment for a home according to NBC. Additionally, with home prices expected to continue rising throughout the year, affordability is highly unlikely to improve. As we’ve always said, Toronto needs creative solutions to combat the affordability crisis. Laneways, co-ownership, new hi-lo hybrids and updated zoning policies are all ways we can move forward. For first-time home buyers, it is a challenge but the Fridman Team has helped many clients achieve their dream of home ownership despite the market conditions.