Once upon a time, real estate was considered a stable but not particularly lucrative investment.  In these quaint times, people bought homes to live in, with the hope that they would appreciate somewhat over time.

Starting in the late 1990’s, real estate in Toronto and the GTA began an upward climb that continued, more or less uninterrupted, until 2022.  It was in that year that we saw the cumulative effect of many years of price appreciation and rising interest rates finally put a stop to the rapid price growth to which we’d grown accustomed.

Take a look at the chart below to see our average price in the GTA since 1994.

Back in July, 2016, we did a review of how long it takes to recover the transaction costs of buying and selling a property in the GTA.

We did this analysis because we were curious if a piece of commonly held wisdom – that it takes about five years to recover the costs of buying and selling real estate – was still accurate.  Our analysis found that depending on the housing type, it was taking just between about five months to 13 months to pay for the transaction costs of buying and selling real estate.   Clearly, what was once the case was no longer true!

Given that review was almost nine years ago, we thought it would be nice to update it so we could see how long it takes these days.  We almost immediately realized that we can’t do an updated version of the same analysis now.  Let’s go over why we can’t do as detailed an analysis in these current market conditions and then we’ll review what it actually costs to buy and sell real estate now.

We’ll start with how long it takes to recover transaction costs these days.

Let’s see, how does never sound?

Our analysis back in 2016 took place in a time where the average annual price increase for real estate ranged from about 7% per year for condo apartments up to almost 20% per year for detached homes.  With some reasonable assumptions about costs and projecting prices continuing to increase at the same level in the next year, we could calculate how long it would take to fully recover the costs of buying and selling real estate.

If we tried that now for each of the four major housing types, we’d have a range of year over year price changes going from -1.6% for condo apartments to 2.1% for detached homes.  If we segmented it further by Toronto vs the 905, we’d have stats like semi-detached homes dropping in value by 3.7% in Toronto, yet the same type of home rising by 2% in the 905 area.

With so much of a range between housing types and parts of the market, the average becomes far less reliable as a proxy for your home’s past performance and any predicted value.

For semi-detached homes and condo apartments, the negative price appreciation (or loss in value to be clear) means that if you wanted to calculate how long it would take to recover the costs of buying and selling, the answer would be never.  After all, you need your home to increase in value in order to cover the real estate commissions, land transfer taxes, bank fees and legal fees.  If it is going down in value, then you’ll never recover those costs.

Gimme the big picture review.

While it’s clear that the market differences in housing types and location mean the overall average isn’t as applicable as it once was, we can still do some basic analysis.

When we take the likely-not-applicable-to-your-home average price increase in 2024 and forecast it forward, it looks like this.

The above includes the Toronto Municipal Land Transfer Tax, so if you don’t buy in Toronto, it won’t be applicable.  We put in a 2.5% realtor commission on both the buy and the sell side, but if you think it would be lower for your case, then the above is a bit overstated.

The analysis tells us that, using the latest average prices and recent market history, it now takes about six years to recover the transaction costs.  Put another way, if you buy a place and sell it six years later, you’d have the same amount of money as when you bought it.  If you’re paying CMHC mortgage insurance premiums or breaking a mortgage term with a lender, then those costs would mean you’re actually losing a significant amount of money.

So, how much of my value is being eaten up by fees?

It is very expensive to buy and sell real estate and we often find clients who are unhappily surprised by how much it actually costs when you add in all the expenses, fees and taxes.

Let’s go through an example of what it costs, using a $1M home in Toronto.  That’s pretty close to the average price in the city as of January, 2025.

First off, let’s look at additional costs for when you buy.

  • On a $1M purchase price, the Ontario Land Transfer Tax payable by the buyer is $16,475. That’s about 1.7% on top of your purchase price.
  • In Toronto, you have the additional Municipal Land Transfer tax, which is the same as the Ontario LTT, namely $16,475. So, add another 1.7% in taxes onto your purchase.
  • Bank and legal fees will likely be around $2,500 for most typical purchases. This does change somewhat based on the purchase price, but if you budget between a quarter percent to half a percent of your purchase price, you’d likely be in the right area.  Note that if you’re using a Class B or C lender, they will likely charge additional fees far in excess of what a major bank would likely charge.  It is not uncommon to see 1% fees on the mortgage amount!
  • If you’re putting down less than 20% of the purchase price, you will also have to pay CMHC Mortgage Insurance fees. These range from 2.8% to 4% of your total mortgage cost, plus HST.  While the HST on the CHMC fees has to be paid up front, you can typically add the CMHC fees themselves onto your mortgage amount, so you get to pay interest on the fee you were charged!

Put it all together and you’re likely to see between 3.5% to 4% in taxes and fees on top of your purchase price.  If you use an alternate lender for your mortgage, add 1% onto to that and if you buy with less than 20% down, you’re looking at somewhere in the 3% to 4% range in additional costs from CHMC.

When your transaction costs are between 3.5% to 4% for a typical purchase and double that if you have a low down payment or don’t qualify with an A lender, you can see how expensive it can be to buy!

Now let’s turn to the sell side of the equation.  For our purposes here, we’re going to say you’re selling for the same $1M you paid when you purchased the home.

  • Real estate commissions in Ontario are not set and can vary considerably. There are many different approaches that you can take, including private deals with no commissions, flat fee brokerages and so forth.  In addition, different parts of the GTA have slightly different typical commissions being charged by listing agents and offered to buying agents.  In our experience, real estate commissions of between 4.5% to 5% of the sale price are common.  HST is due on top of that, which adds another 0.65% to these costs.  For our $1M home example, it would cost about $60,000, including HST, in real estate commissions.
  • Bank and legal fees are similar on the sell side as they are on the buy side, so for a typical sale, with one mortgage to discharge, somewhere around the $2,500 mark is likely a reasonable estimate. That works out to the same quarter of a percentage of the value of the home for the sale as it did on the purchase side.  Note that if you have a mortgage and you are breaking that mortgage before the end of the term (and not porting – or transferring – the mortgage to a new purchase) you will likely incur breakage fees from the lender.  These can be as little as three month’s interest or they can be a significantly more expensive amount based on what is called the Interest Rate Differential calculation.  Make sure you speak with your lender well before you make a transaction to understand the costs.

When you add the real estate fees and the bank and legal fees, along with the HST on both, you’re looking at costs that equal around 5% to 5.6% of the sale price.

If we combine the costs from buying and selling, most people end up paying transaction fees that equal 8.5% to 9% of the value of the home.  While some of these costs vary depending on the approach taken – and the professionals involved – make no mistake, it is expensive to transact in real estate in Ontario!

If you’re considering buying or selling real estate, then we’d love a chance to show you why our clients choose to hire us to help them through the process.  We believe that hiring the right agent means you pay less when you buy and get more when you sell.  This goes a long way to helping alleviate the transaction costs.  If that sounds appealing, get in touch with us to chat further.