There is lots of talk about the lack of affordable housing in Toronto and other cities in the GTA and we decided to do a dive into what constitutes “affordable” and whether such homes exist these days.  The somewhat surprising answer is that yes, there are some homes in Toronto that are affordable.  Well, there are about 2,000 condo apartments that fit the bill, and, let’s see, two houses that qualify.

Let’s examine what constitutes “affordable” and then look at what options exist in the city.

Some Quick Math

If we look at the average income in the city of Toronto (about $132,000) and we take the recommended maximum people should spend on housing (32% of gross income), we’re left with about $3,530 to spend on a monthly basis on your mortgage and property taxes.  If that doesn’t sound like it would give you much of a budget, you’re absolutely right.

At current rates, you could get a $500,000 mortgage for about $3,080 a month in principal and interest payments.  That’s based on a five year fixed rate of 5.6%, amortized over 25 years.  Add in property taxes of about $5,000 per year and you’re looking at monthly housing costs of about $3,500.  If we say you’ve got the 20% downpayment of $100K, that gives you a budget of $600,000.

While that’s not the highest budget, it does give you some options for homes that qualify as affordable using the above rationale.  Let’s review.

Affordable condos for everyone!

As of June 14, 2024, there are over 2,600 available condo units for sale in Toronto that are listed at below $600,000.  The median price is about $548,000 so there is definitely a huge amount of affordable housing options on the condo side of the equation.

With prices starting as low as $275,000, our condo market is truly the saving grace in the city for people who want to own real estate but have limited budgets.  If you are interested in a condo, you’ve got a huge amount of options across the city.  What about if you’re dreaming of a freehold home in Toronto?

Eight options isn’t bad, right?  Wait, are they options?

When we search for freehold houses for sale in Toronto as of June 14, 2024, we have 3,160 properties on the market.  The median price for those homes is about $1.649M, which puts them about one million dollars more than what we’re saying is “affordable” for the average Torontonian.

If we set a maximum price of $650,000, that number drops from over 3,000 options to just eight properties.  Four of them are properties listed at $1, which is a marketing tactic designed to draw attention to the listing.  None of the four properties are actually available for purchase for anywhere near $600K, so we’ll remove them from the equation.

One of the four remaining properties is a property that was previously listed for $898,000 and is now listed at $599K with an offer date.  If they wanted almost $900K before, they likely wouldn’t take anything even close to their current list price, so we’re going to remove it as well.

That leaves us with three properties.  Well, actually, two properties and one houseboat.  Yes, that’s right, one of the three affordable freehold homes in Toronto is in fact a boat.  For just $649,000 you can own a one bedroom, one washroom houseboat in the Scarborough Bluffs.

Let’s look at the two options for affordable freehold homes you could purchase in Toronto as of today.

Dundas & Annette Semi-Detached for $600,000

The most affordable listing for a freehold home in Toronto, this semi-detached house sits on a reasonable 19 ft wide by 88 ft deep lot in the Junction neighbourhood.  It’s got three bedrooms, plus one in the basement, and a full bathroom on the 2^nd floor and a powder room on the main floor.  There’s no parking but it’s located on a small side street off of Dundas, so street parking is an option.

If you’re wondering why it’s so cheap, it does come with a few caveats.  There’s no AC in the home, nor is there central heating, as the heating is provided by baseboard and electric heaters.

In addition, it is tenanted and there are no pictures of the interior, so it seems likely that the home isn’t in great shape.  That is reinforced by the fact that in the listing it says “The seller provides no warranties regarding the structure, electrical, plumbing, foundation, roof, furnace, condition, sizes, air quality, or AC/heating units.”

In short, it’s an affordable home, but it is likely in need of some significant renovation.  Installing AC and central heating will cost a fair bit and if there are structural issues, problems with the roof or the windows, then costs will rise quickly.

It’s been on the market for 23 days as of today, so there might also be a bit of flexibility on that list price.

Davenport & Caledonia Townhouse for $635,900

Our second affordable option for a freehold home is located just a few blocks north east of our first home, up in the Pelham Park neighbourhood.  It’s a townhouse that sits on a 15 ft wide by 120 ft deep lot and while there is no parking, the deep lot could allow for a garage or even laneway house off the public laneway behind the property.

It is listed as having three bedrooms, plus two more in the basement, with just one full washroom on the 2^nd floor.  It has an unfinished basement and the heat is provided by forced air but with an oil tank, and there’s no air conditioning.  Originally listed at $729,000, it’s been on the market for 35 days as of today and is now listed at $635,900.

This is an estate sale and once again the home is being sold in “as is, where is” which means buyer beware.  The home is brick, which is a good sign, but the photos definitely show some signs that the house has settled significantly in its 100 plus years of existence.

Both the front porch and the rear porch look pretty worn and the interior is very dated and basic.  There is evidence of knob and tube wiring in one of the photos and it seems likely the walls are all lathe and plaster.

In short, it would require a to the studs renovation, with all new electrical and plumbing as well as AC and heating.

Add in drywall throughout, windows and flooring and even before you get to putting in fixtures you’re looking at significant costs.

If you’re looking for affordable housing in Toronto, it seems like condos are the only option as of mid-June, 2024.  While there are technically two freehold homes that qualify as affordable, both require significant renovation that would likely push the cost up by at least $100,000.

If you like the idea of finding a home that needs significant work and making it your own, we’d love to help you find the best option.  Get in touch with us to start the ball rolling!

We’re less than a week away from a highly anticipated overnight rate announcement from the Bank of Canada.  Does this mean interest rates are about to drop?  If so, how much and are more coming? More importantly, how will this impact real estate markets?

We’ve looked at what’s likely to happen and come up with our analysis on the likely impact.  Let’s review how we got here and what’s coming next week.

Ah, the spring of 2020…let the good times roll!

On March 27, 2020, the Bank of Canada dropped the overnight rate by half a percent to 0.25% and kept it at this record low level for almost two years.  As the overnight rate directly influences lenders’ prime rates, we saw very low interest rates being offered on variable loans and lines of credit, including variable-rate mortgages.

It was a very good time to borrow money and lots of people took advantage of the low rates making the payments on mortgages affordable – well, payable.

Then came the spring of 2022.

After almost two years of these low, low rates, the Bank of Canada began to raise the overnight rate on March 2, 2022.  We saw ten increases in the overnight rate from March, 2022 to July, 2023 and since July 12, 2023, the overnight rate has been steady at 5.00%.  Canada’s prime rate went to 7.20% and remains at that level.

Anyone who had signed up for a variable rate mortgage in that two-year period of very low rates (basically spring of 2020 to spring of 2022) experienced their rates rising at a very rapid pace. The affordability of their mortgage payment went away for many homeowners and at the same time lots of potential home buyers saw their ability to afford a mortgage disappear.  The result was a tremendous slow down in the number of sales and considerable fluctuations in the average price for real estate in Toronto and the GTA.

Welcome to the summer of 2024!

After almost a year of no change to the overnight rate (and therefore prime rate), it seems likely that we are about to start seeing some change!

Just a little bit over 75% of economists (22 of 29) are predicting that the Bank of Canada will cut its key interest rate by 25 basis points to 4.75% on June 5, 2024. Financial markets have already priced in slightly more than a 60% chance of that, so most of the smart people in the finance industry think change is coming.

Is this the start of interest rates dropping back to their old levels?

The short answer to that is no.  It seems very unlikely that we will return to anywhere near the record-low interest rates we saw back in early 2020.  The COVID pandemic made central banks in many countries take unprecedented action to stimulate the economy and Canada was certainly no exception.

While we won’t hit that sub 1% level this year (or perhaps ever again), the overwhelming majority of economists expect at least three rate cuts this year.  If June sees the first of these cuts, that leaves two out of four more overnight rate announcement dates where we could see further price drops.  After June 5, 2024, the rest of the dates are as follows.

• Wednesday, July 24
• Wednesday, September 4
• Wednesday, October 23
• Wednesday, December 11

There is some disagreement amongst economists as to where we will end the year, but the median forecast for an end-2024 rate is 4.00%, with the dissenting economists (about half) saying 4.25%.  This means that from our current (as of today, May 31, 2024) overnight rate of 5% will drop somewhere between .75% to 1% over the course of the year.

How much of an impact does a 0.25% interest rate cut actually have?

In order to answer this question, we need to look at it from two perspectives.

The first is the actual dollar impact.  With a current typical variable rate of 5.9%, the monthly payment for every $100K of mortgage is about $633.  If the Bank of Canada drops their overnight rate to 4.75% and lenders drop prime accordingly, then we would see that variable rate drop to 5.65%.  That lower prime rate results in a monthly payment of about $619 for ever $100K of mortgage.  Yup, about $14 cheaper.

If you had an $800K mortgage, that would mean that your monthly mortgage payment of $5,064 would drop by $112 to $4,952 per month.  An improvement, but nothing that will cause you to open bottles of champagne to celebrate!

If the actual dollar impact isn’t much, the other aspect to consider is how it impacts people from a perspective stance.  With prime at 7.2% for the past year and no indication of it lowering, people began to consider this the new normal.  Any homeowners who found their mortgage payments no longer affordable came to the conclusion that things weren’t improving anytime soon and sold, sometimes at a loss.  Prospective buyers who were waiting on lowering mortgage rates to make a home affordable decided that home ownership might not be in the cards for them.

From this perspective, the impact of a lowered interest rate – with more to come over the course of the year – is much more meaningful than the actual dollar impact.  Home owners with variable rate mortgage who have held on to their properties will see some small relief in their payments and will feel better about keeping the home longer.  Buyers who could have afforded to purchase over the last year but who were nervous about where rates were going may now feel confident about moving forward with a purchase.

Will the end of the year be a whole different ball game?

Will the forecasted end of year overnight rate of between 4.25% to 4% have a huge impact on people in terms of dollars?  If we take the most optimistic scenario where the overnight rate goes from it’s current 5% to 4% by the end of the year, we see some more significant dollar impacts, but not really anything that will change the market as a whole.

Our current $633 per $100K of mortgage would drop down to $575 per month if we see prime drop by 1% by the end of 2024.  That’s $58 per month and works out to a savings of about $464 per month if you had an $800K mortgage.  While any drop in monthly payments is useful, going from a mortgage payment of $5,064 to a mortgage payment of $4,600 isn’t exactly a sea change.

While predicting markets is a difficult thing to do, we’re confident that what’s coming will have a small impact on real estate sales and prices.

We are predicting that these forecasted rate drops will encourage some home owners to keep their properties longer, which means a slight drop in the number of homes hitting the market.  At the same time, we think that buyers who were already able to afford the payment (or who were on the cusp of affording it) will move forward into making a purchase.  It should mean an increase in the number of sales in the latter half of this year, but not to a significant extent.

If you’re thinking about buying or selling this year, depending on how things go with interest rates, then we’d love to help you navigate the changing landscape.  Get in touch with us to have a discussion about the best approach!

Over the last few years it has become very clear that the run up in real estate prices in Canada – and in major urban centres like Vancouver and Toronto in particular – has caused a housing affordability crisis.  While homeowners have benefited from the tremendous increase in average house price, renters and the next generation of potential homeowners have found it very difficult to afford a home that suits their needs.

Housing affordability has become one of the biggest topics in Canada and as such, it is no surprise that the latest Federal budget, Budget 2024, Fairness for Every Generation, contains a number of measures focused on real estate affordability.

Let’s look at Budget 2024 from a real estate perspective to see what’s included, what seems like a good idea, and what may miss the mark entirely.

On one hand…

The government has described Budget 2024 as a budget that “takes bold action to build more homes…and will grow the economy in a way that’s shared by all.”  Those are welcome words and given we’ve seen a number of housing announcements in recent weeks, including Canada’s Housing Plan, which was released on Friday, April 12, 2024, it’s clear that the federal government knows housing affordability is a real issue.

Budget 2024 details an ambitious set of housing initiatives aimed at tackling the housing crisis through increasing housing supply, helping homebuyers and renters, and supporting innovative solutions for builders.  That means we’re gonna fix this, right?  Hold on a moment.

…but on the other hand.

While the new initiatives focused on increasing housing supply are absolutely welcome, they come hand in hand with a number of new tax measures that could negatively affect housing supply and affordability.

Housing is a complex issue, so it’s not particularly surprising that some aspects of the budget designed to help other parts of the economy have ripple effects on housing affordability, but it is disappointing to see that the Federal government is diminishing the impact of new initiatives with new tax measures.

Is it one step forward and one step back, or does Budget 2024 actually look like it will help with housing affordability overall?  Let’s go through the bits of the budget that impact real estate along with our take on whether it’s a good thing or a bad thing.

Capital Gains Tax Inclusion Rate

The government is increasing the inclusion rate on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and trusts from one-half to two-thirds. Individuals will continue to pay tax on 50 per cent of any capital gains up to $250,000 per year. The new rules will apply to capital gains realized on or after June 25, 2024.  Selling your principal residence will continue to be exempt from capital gains taxation.

Good or Bad?  This is potentially bad news for housing affordability, as in some cases, the increased capital gains will make it more expensive to increase supply.  For example, hiking the capital gains tax could increase the costs of converting underused commercial property into new housing.

Increase in Home Buyers’ Plan Limit

The Home Buyers’ Plan (HBP) limit will increase from $35,000 to $60,000 for an individual or $120,000 for a couple, allowing first-time homebuyers to withdraw more from their Registered Retirement Savings Plans (RRSPs) for down payments, benefiting from the tax advantages of RRSP contributions.

Canadians withdrawing from their HBP between January 1, 2022, and December 31, 2025, will benefit from an extended repayment grace period, now up to five years, allowing them to better manage mortgage payments.

Good or Bad?  This is good news for housing affordability in the sense that it will make it easier for potential home purchasers to put down a larger downpayment and allow them more time to repay the withdrawal.  At the same time, an initiative that increases demand for real estate by adding more buyers to the mix, is not particularly helpful as supply remains the biggest aspect pushing prices up.

Extended Mortgage Amortization Periods

The budget will introduce a provision for 30-year mortgage amortizations for first-time homebuyers purchasing newly built homes, starting August 1, 2024. This extension aims to make monthly mortgage payments more manageable.

Good or Bad?  Again, this is a mixed bag when it comes to housing affordability.  Yes, this is good news for buyers of newly built homes, as they can have lower monthly mortgage payments due to a longer amortization period.  At the same time, this is an initiative that increases demand for real estate by making it more affordable for buyers without actually addressing the supply side.

Permanent Amortization Relief

Enhancements to the Canadian Mortgage Charter will include permanent amortization relief for existing homeowners meeting specific criteria, thus allowing them to reduce their monthly mortgage payments as needed.

Good or Bad?  This is good news for housing affordability for specific homeowners, though it doesn’t increase supply.  In essence, it seems like it will make things easier for certain types of homeowners in specific situations, likely at the expense of their lender.  While it may be more of a shifting of costs, we’re all for anything that makes it more affordable for homeowners, so we’ll call this one a win.

Housing Accelerator Fund Enhancement

An additional $400 million will be added to the Housing Accelerator Fund, raising its total to $4.4 billion, aiming to fast-track the construction of an additional 12,000 new homes over the next three years.

Good or Bad?  This is good news for housing affordability, with the caveat that a fund has to be disbursed and used in order for the results to be achieved.  There are a lot of examples of the Housing Accelerator Fund being disbursed to municipalities and housing projects announced as a result, but having the money and people moving in are very different things.  We’ll also point out that while $400 million is a lot of money, it’s about a 9% increase to the existing fund, so not a game changer.

Canada Housing Infrastructure Fund

A new $6 billion fund will support the construction and upgrading of essential housing infrastructure to facilitate more homebuilding activities. The government is looking to partner with provinces to deliver this funding, in addition to working directly with municipalities.

Good or Bad?  This is definitely good news for housing affordability, as one of the under recognized challenges with building new housing supply is essential housing infrastructure is also required.  Aspects such as water and wastewater systems, roads and bridges, electrical infrastructure all need to be in place at the appropriate level in order for these new homes to actually be livable.

Support for Renters

New measures for renters include launching a new $15 million Tenant Protection Fund, creating a new Canadian Renters’ Bill of Rights, and making sure renters get credit for on-time rent payments.

Good or Bad?  This is bad news for housing affordability from our perspective.  We say that because it’s focusing on things that are not core challenges with renting in Canada.  Within Ontario, our Landlord and Tenant Board is fundamentally broken and it causes tremendous hardship for both tenants and landlords when the other side is acting in bad faith.  We see zero likelihood in the feasibility of renters getting credit for on-time rental payment, as the rental market is comprised of many, individual landlords and tenants and the reporting requirements would be near impossible.

Making Your Home Cheaper to Heat and Easier on the Environment

To help Canadians lower monthly home heating costs, the government is reinvesting $903.5 million into a new Canada Greener Homes Affordability Program to support energy efficient retrofits for homeowners and renters with low- to median-incomes.

Good or Bad?  We’d say this is good news, albeit on a very limited level.  It doesn’t meaningfully impact housing affordability to lower utilities cost, but it can’t hurt.

Combatting Mortgage Fraud

Government will be consulting with the mortgage industry on making a tool available through the Canada Revenue Agency to verify borrower income for mortgages.

Good or Bad?  It’s just a commitment to consult, so it’s hard to say how this will look or if anything will come of it.  Despite that, we’d say that a tool that reduces mortgage fraud – and therefore reduces purchases and demand – is a good thing.

Investing in New Approaches to Homebuilding

Government is earmarking $50 million through Canada’s regional development agencies to support innovative housing projects, including those in modular housing, automation, and robotics.

Good or Bad?  This is a good thing, but the amount seems very low and we’re not holding our breath it will result in meaningful innovation.

Providing Low-Cost Loans to Prefabricated Housing Projects

Earmarking at least $500 million in low-cost financing is to be made available through the program for new apartments that use prefabricated or innovative homebuilding techniques.

Good or Bad?  It’s a step in the right direction in that it makes it more affordable for builders or developers to use new approaches to building, but will these savings be passed on to buyers or make more projects complete than would otherwise happen?  Time will tell!

Offering Low-Cost Financing for Homeowners to Add Additional Suites

Proposing a new Canada Secondary Suite Loan Program, delivered by the Canada Mortgage and Housing Corporation, will enable homeowners to access up to $40,000 in low-interest loans to add a secondary suite to their homes.

Good or Bad?  Our perspective on this is that it is a welcome addition that encourages adding secondary suites, but we predict a limited uptake from home owners and no meaningful increase in housing supply.

Accelerated Capital Cost Allowance Increase

The federal government is increasing the post-tax Accelerated Capital Cost Allowance from 4% to 10% for purpose-built rentals. This will act as a major incentive for the construction of a new supply of purpose-build rentals.

Good or Bad?  This one’s easy – it’s a good thing!  We continue to suffer from a lack of purpose-built rentals in Toronto and the GTA and we need the full gamut of affordable housing – both for owning and renting – in order for our cities to thrive.

That’s it?

There are few additional measures that the Federal government has included in Budget 2024 that are worth mentioning.

• The government intends to restrict the purchase and acquisition of existing single-family homes by large corporate investors. The government will consult in the coming months and provide further details in the 2024 Fall Economic Statement. We’ve seen issues in the US with large corporate investors buying up housing stock and thereby driving up real estate prices, so this is a good area to consult on before Canada sees a similar situation.
• The government is also considering introducing a new tax on residentially zoned vacant land and will launch consultations later this year. We’re very much against this idea, as hiking taxes on vacant lands zoned for residential is a risky measure that may result in costs passed on to new home buyers.
• The government intends to establish a subsidiary of the Canada Mortgage and Housing Corporation (CMHC) to deliver flood reinsurance. While not directly impacting overall housing affordability, this is a good initiative as climate change is definitely making insurance and specifically flooding a growing concern.

All in all, a lot of measures in Budget 2024 designed to help with housing affordability in Canada.

While we are in favour of a number of the initiatives in the budget, we do feel like the Federal government has missed the market on their focus in a number of ways.  While some may have limited impact, others may in fact reduce the overall effectiveness of the more impactful measures.

The new taxation measures are likely to make certain types of investment in housing less appealing and that is something we need to avoid if we’re to make housing more affordable for the next generation.

If you like talking politics, budgets and the economy – and you’re looking to buy or sell real estate – then we should really hang out.  Get in touch with us and we’ll make it happen!

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.

In December 2021, the Ontario government appointed nine members to a new Housing Affordability Task Force and gave them a mandate to explore measures to address housing affordability by:

• Increasing the supply of market rate rental and ownership housing;
• Building housing supply in complete communities;
• Reducing red tape and accelerating timelines;
• Encouraging innovation and digital modernization, such as in planning processes;
• Supporting economic recovery and job creation; and
• Balancing housing needs with protecting the environment.

The Task Force, chaired by Jake Lawrence, CEO and Group Head, Global Banking and Markets at Scotiabank, included a diverse range of experts in not-for-profit housing, Indigenous housing, real estate, home builders, financial markets and economics.

On February 8, 2022, the task force released their report, with 55 recommendations.  You can find the full report here.

It’s a lengthy document with some very important and challenging recommendations.  In our work with buyers and sellers, we know what’s important to them and we’ve highlighted three big take-aways that matter to you.

A note that we do believe that more affordable options for real estate is fundamentally a good thing.  Whether it is new builds, resale properties or rental options, encouraging and allowing a range of income levels to live within a community and continue to contribute to the local economy is desirable.  At the same time, change impacts people differently and we think it’s important to identify what is likely coming and how it might impact you.

Your Neighbourhood May Start Changing

There is a hidden layer to every home and neighbourhood that is called zoning.  Zoning defines what we can build and where we can build.  If you’ve ever said you like a neighbourhood because of the type of homes, space between properties and number of residents, you are reacting to the zoning that permits that type of building activity.

Within Toronto, it is estimated that 70% of land zoned for housing is restricted to single-detached or semi-detached homes, with accompanying restrictions for setbacks, building heights and so forth.  This prevalence of low-density zoning is what is responsible for the continued spread of municipalities.  When you cannot build more density due to zoning, you find new land to build more homes.  Anyone who grew up in southern Ontario in the past number of decades is very familiar with seeing farmland and rural land turn into subdivisions and housing developments.

The report recommends a number of changes to zoning that would result in the removal of many zoning restrictions.  The practical result of this is that over-time, your neighbourhood could change.

• The addition of residential housing up to four units and up to four storeys on a single residential lot.
• Modernized building code that removes barriers to affordable construction, meaning that the changing homes will continue to look like homes (single staircase, single egress) rather than mini-commercial properties.
• Conversion of under-utilized commercial properties to residential or mixed commercial and residential.
• Depending on individual properties meeting requirements, more secondary suites, garden suites and laneway housing will be built.

The overall goal is achieving what is known as gentle intensification of density.  It isn’t about building high-rises in the middle of a low-rise community, but it is about more multi-unit properties, slightly taller buildings and a wider range of housing options available within the neighbourhood.

The impact of these changes will be similar to what happens in a new housing development over time.  Such sub-divisions start out looking very similar, with a few different models built by the developer.  Over time, home owners renovate, change and add to individual properties and the look and feel of the street changes with each subsequent update.

Neighbourhoods that have remained largely consistent over a number of decades will likely look somewhat different over the next few years as the impact of some of these proposed zoning changes are felt.  A small home will be torn down and rather than replaced with a large single-family home, it may be replaced with a four unit multiplex that is slightly but not significantly different in scale from the rest of the street.

Neighbourhoods or streets that are close to transit can expect even more density to arrive, with zoning changes allowing higher density buildings to go up.  Buildings of six to 11 storeys on streets with public transit will began to be built and even higher construction will take place in immediate proximity to major transit stations.

Moving forward, an important consideration for homeowners will be whether the street is on a bus route or near a transit hub, as such locations will likely see higher levels of density built over time.

Speed it up!

Canada has, over time, fallen far behind in the rankings for how long it takes to approve building projects.  The UK and the US approve projects three times faster than we do on average, without sacrificing quality or safety.

Within the GTA, it is not unusual for us to see a renovation or new build project take years to complete.  The average approval time in Hamilton, Toronto and Ottawa is between 20 to 24 months, with up to two years longer for building permits for bigger projects.

The task force report has a number of recommendations to increase the speed at which projects take place while reducing the red tape and costs.

• Legislated timelines for provincial and municipal review processes, including site plan and minor variances, with automatic approval if the response time is exceeded.
• Funding for approvals facilitators to resolve conflicts between authorities
• Allow wood construction up to 12 storeys, thereby reducing the cost (but not impacting safety) and timeframe for smaller builds.
• Reduce the ability of other parties to abuse the appeals process to add significant delays and costs to builds.

While a number of these recommendations are focused on larger builds that have larger impacts on the density and housing options for an area, there are also significant benefits to smaller residential projects in our neighbourhoods.

On many streets across the GTA, there is a near constant progression of construction taking place over a lengthy period.  It is quite common to see a home that is sold and lies vacant for months or even years as various approvals wind their way through municipal processes.  Such derelict properties serve no purpose on the street, reduce the appeal of the area and a quicker approval and build process would mean a new home is finished quicker and the neighbourhood returned to its residential character.

Rent May No Longer Be a Four Letter Word

Within Canada, renting is often stigmatized, and renting rather than owning is deemed to be inferior in almost all respects.  As we’ve faced housing supply shortages within the GTA, many people have not been able to afford to buy and are stuck in rental housing that doesn’t make sense for them as their needs change.

The combination of the red tape and government charges on real estate development has resulted in many developers choosing to focus on end-user builds rather than purpose-built rental units.  Two-thirds of the purpose-built rental units in Toronto were built between 1960 and 1979, despite our significant population increase since then.

The task force report recommends a number of changes to make it easier to build rental properties, including property taxes aligned with condo or other ownership properties, provincial and federal loan guarantees for purpose-built rental and waiving development charges for smaller rental projects.

One of the reasons that renting is stigmatized is the housing rental stock that we see in most of the GTA.  With so little modern purpose-built rental units, renting can be synonymous with dated, low-quality housing in high density areas.  Individual landlords have picked up the slack, buying real estate and renting out units or properties to tenants, but as real estate prices have risen, such market rentals have become less common and more expensive.

With more options for modern rentals arriving due to changes that make building purpose-built rental properties, we may see a shift where renting is no longer considered to be a last resort for those who cannot afford to buy.  With rental options beyond small condo units, families will be able to remain in neighbourhoods of their choice rather than being forced to move or remain in apartments that don’t meet their needs.

The Housing Affordability Task Force report has set forth a number of ambitious recommendations to help address the issue of housing affordability in Ontario.  While a change can be intimidating, a number of the recommendations will have an overall positive impact on real estate markets within the GTA.  A gentle increase in the densification in neighbourhoods, speedier completion of projects and more options for rentals are all good ways to ensure that real estate remains valued – and accessible in some fashion – in the years to come.

If you’re looking to buy or sell and want to make sure you’re doing so with an understanding of what changes are coming, we’d love to work with you.  Don’t hesitate to get in touch!