In real estate, we often talk about the housing or property ladder and how one can “move up the ladder”.  The idea is that you start at the bottom and progress upward.  Typically, when people talk about this concept, they think of detached homes at the top and either condo apartments or renting at the bottom.

There is an assumption built into this framework, that the next rung up is the same for everyone and that the steps are somewhat equidistant.  In reality, what constitutes a move up is different for different people and the price between housing types (or rungs on the ladder) does not follow a set scale.

Let’s look at the current state of the housing or property ladder in the GTA (including Toronto) so far in 2022.

First things first, let’s talk about this property ladder concept.

There is a pretty common belief in how the hierarchy of housing types goes.  It is often described as a property ladder, with the idea being that you start at the bottom and work your way up over time, to a presumably better type of housing.  While that is not necessarily accurate for all people, let’s take a look at the various housing types that make up the property ladder.

At the top is the holy grail of housing, the detached home.  No shared walls, a bit of space between you and your neighbours, the promise of tranquil, private living.  In the GTA (including Toronto), detached homes make up about 45% of the sales in 2022, so while it may be considered the best type of property, it’s not exactly rare.

Just below that on the property ladder is the semi-detached house.  Yes, you share a common wall with your neighbour, but with the right neighbour, it doesn’t feel like it.  With no windows on one side, a fence between your side and your attached neighbour and some decent sound proofing, the semi-detached can feel like a slightly narrower detached home.  In 2022 so far, it has made up just over 9% of the sales within the GTA (including Toronto), so while some neighbourhoods have lots of semis, it is not a huge component of the housing market.

The next rung down is the attached (or row) townhouse style home.  You’ve now got neighbours on both sides, with two shared walls (unless you’re an end-unit townhouse, which is still considered a townhouse) and likely a narrower lot size.  While townhouses can be a good size, they do tend to have light issues, with windows only at the front and rear of the home.  Just like semi-detached houses, they make up a relatively minor segment of the housing market, with just over 9% of sales in 2022 being this type of housing.

Moving on from freehold (where you own the house as well as the property is located upon), we have two condo type properties making up the rest of the majority of the market.  Just like it’s freehold cousin, the condo townhouse shares walls with neighbours on both sides and also has a monthly maintenance fee that covers off some aspects of the development.  This can be as basic as a shared, common driveway that is maintained by the condo corporation, or as involved as a whole list of amenities for the townhouse development such as pools, tennis courts, lawn maintenance, snow removal, plus a reserve fund for exterior elements of the properties such as roof, windows and so forth.  In the GTA (including Toronto) in 2022, condo townhouses made up just under 8% of the sales this year, so they are just slightly less common than their freehold equivalents.

Finally, in what is often considered the bottom of the property ladder (due to the average price being the most affordable), we have the condo apartment.  As opposed to the top of the ladder, the detached house, where you share no walls or common areas, the condo apartment shares walls, ceilings, floors, common areas, parking and so forth.  You own the unit, but not the building or the land it sits upon and you pay a monthly maintenance fee to the condo corporation for ongoing costs as well as a mandatory reserve fund for anticipated major repairs in the future.  Making up about 29% of the sales in the GTA (including Toronto) in 2022 so far, condo apartments are the second largest housing segment in our area.

There are a few other specialized types of housing that collectively make up less than 1% of the sales we’ve seen so far in 2022.  Whether it is link houses (homes that appear detached, but share a common wall underground in the foundation), co-op apartments (where owners actually don’t own either the unit or the land), detached condominiums (like freehold detached homes, but in a condo structure) or co-ownership apartments (where owners own a percentage interest in a building rather than a unit outright), these types of real estate are quite rare in the GTA.

Here’s the housing types we’ve discussed in a bar chart that shows what percentage of the property ladder they actually make up.

If you visualize the above bar chart as a ladder, you can see that most people (about 75%) who bought in 2022 were either moving to the condo apartment step or the detached house step.  Not much of a ladder.

How much does it cost now to buy in the different property types?

Our housing ladder framework takes another hit when we look at what the actual price difference is between the various rungs.  After all, if we’re considering each rung to be a move up or down from the lower or higher rung, there should be significant differences.

When we look at the average price for each housing type based on the latest sales (August 2022 stats) in the GTA (including Toronto), here’s what we see.

Much like the spread of where on the ladder people actually transact, we see a decidedly non-linear progression.

  • With average price of approximately $1.38M, detached homes are definitely the highest price point home in the GTA. There were around 2,600 sales of detached homes in August 2022 and the most common price range (with 609 of the sales) is in the $1M to $1.25M range.
  • The next theoretical rung on our housing ladder is semi-detached homes, which had an average price of $998K. That’s a whopping $381K difference between detached and semi-detached homes.  If we look at it another way, you have to have 28% more money to be able to afford a detached over a semi-detached house.  Despite that difference, in the 526 semi-detached sales that took place in the GTA in August 2022, the most common price point was $1M to $1.25M, which accounted for 157 of semi-detached sales that month.  That’s the exact same price point that was most common for detached homes
  • The next housing type on the ladder is attached (or row) townhouses, with average price of $987K. Despite being a “lower” level of housing type than semi-detached houses, the average price difference is only about $11,000, or about 1% less.  When we look at the 524 townhouse sales in August 2022 in the GTA, the most common price range is $900K to $1M, which had 131 of the sales within that range.
  • Turning to condo townhouse properties, the average price drops down to about $790K, which is almost $200K less than freehold townhouses. Keep in mind that condo townhouses have maintenance fees whereas freehold do not, so the carrying cost on a monthly basis probably didn’t look much different.  The most common price band for condo townhouses was $700K to $800K, where 109 of the 411 sales in August took place.
  • At the low position on the ladder is condo apartments, which had just over 1,500 sales take place in August 2022. The average price for a condo apartment unit was $711K, which is about 10% cheaper than the price you would have paid for a condo townhouse.  The most common price band for our August condo unit sales was $600K to $700K, which had 421 of the 1,500 sales within that range.

When we look at the average price point as well as where the most common sale price was with the most recent sales, we see that the housing ladder is definitely not evenly spaced.

Let’s sum it up.

The key take-away would be that the housing ladder in the GTA as of August 2022 is hard to climb, with significant price differences between a few steps.  Arguably it is hardest to get on the ladder at all, as for many people buying real estate has become extremely difficult as prices went up quickly over the past few years.

The bad news is that just getting on the ladder isn’t the end of the challenges you’ll face.  Moving from a condo property (whether it is a condo apartment or a condo townhouse) to a freehold property requires a significant jump in both average price (up $200K to $275K approximately) and also in the band most people buy, which is $200K to $300K higher.

If you get into the freehold market, then moving from a townhouse to a semi-detached is not nearly as big a stretch financially.  Despite that good news, owning a detached home still hard on average, with almost a $400K difference between the average price point, but if you bought a townhouse or semi-detached in the most common price band, you’re not far away from a detached in the same price band.

While climbing the housing ladder in the GTA (including Toronto) isn’t a steady progression, there is hope for buyers.  We’ve seen prices across the entire ladder drop in the past few months and the most unattainable property types (freehold properties) have seen prices drop more so than the condo properties on the market.  If you’re thinking about getting on the housing ladder or making a move, then we’d love to help you navigate it.  Don’t hesitate to get in touch.