Will our children be able to afford a home in Toronto?

That question is being asked increasingly as the GTA housing market continues along its inflationary trajectory. As parents and as a caring society, we provide for our children, helping them to be successful, wanting them to be able to enjoy life’s rewards.

Private home ownership is part of this legacy and up to recent times, one that we have fulfilled; certainly, our parents made it possible for us, but will this generation do the same for our children?

Million dollar teardown

The short answer is maybe not…not when in the first week of February, the Toronto real estate market recorded its first, million dollar teardown sale. That’s correct: the news reported that a home which sold for one million dollars is slated to be demolished and replaced. I wouldn’t want to speculate as to what the new home will cost.

The news in the very beginning of January, 2017 was that the average Toronto home advanced to a new high of approximately ¾ of a million dollars. This continued growth, despite historical evidence that all markets eventually flatten, seems to be driven by a number of factors: a diminishing supply of available houses – at least single family homes – low interest rates, off-shore investment and easy qualification, mortgage criteria.

As well, this increase comes despite Toronto’s double land transfer tax, and the news that Ottawa, becoming somewhat concerned about the overheated market, has ‘toughened’ the mortgage criteria. On the other hand, perhaps anyone who can afford a million dollar teardown isn’t too concerned about mortgage criteria.

The Bank of Canada’s January 18th report was generally positive for the economy and so house buyers can be reasonably assured that there won’t be any sudden rush to raise interest rates. A cursory inspection of mortgage rates shows a range of 2% to 3% depending on the type of mortgage, the length (two to five years) and the lending institution. Compared to mortgage rates of 15% “back in the day,” these low levels are astounding.

Good news/bad news

The good news for homebuyers is that the low rates make financing your homes cheaper. The even better news for the homeowner is that your home’s value is ever-increasing. The bad news, of course, is that this contributes to the inflationary pricing and your children just might be living in your basement, if they aren’t there already.

An article in the Feb 4th edition of the Toronto Sun says that the Toronto Real Estate Board is predicting 110,000 homes will sell in Toronto this year, with an average price increasing to $825,000.  True, a prediction isn’t a fact, but the writer, Jim Warren, has some expertise in this area; that aside, the main thrust of his article is the possibility that foreign investors have moved into the Toronto market and that their speculation is helping to fuel the over-heated prices. He hasn’t been able to find a definitive answer yet, but regardless, his major concern is, like mine, whether or not our children will be able to afford homes in the Toronto area.

Warren’s investor concerns aside, as noted above, the continued low interest rates, the lack of housing stock and more exacting qualifying criteria are indeed contributing to the heated GTA market which is shutting some buyers out of the single-family market.

Advice for first-time Toronto real estate buyers

My personal feeling is that the important thing for such buyers is to get a toehold in the market and this is where alternatives to the traditional, detached home such as town homes and condominium homes become valid options. Once the preserve of the young single and the downsizing senior, today’s condominiums can offer home ownership to families as well. They clearly are not inexpensive, but certainly, they can be much more affordable; as well, many come with attractive amenities such as recreation centres, pools, underground parking, proximity to neighborhood conveniences and the TTC.

Final thoughts

A final thought to the government and the home industry. A city lives and thrives on the quality of its residents. After raising and educating our children and getting them ready to replace the older generations, namely us, if we now force them to move elsewhere, someone else will benefit. Not only that, but when they are gone, we will be risking our own future and viability as a city.

Accordingly, we all have a responsibility to help our first-time home buyers especially; as a lawyer, I can give you peace of mind that the legal work of your purchase will be thorough and professional, and that it will protect you as a consumer to the full extent of real estate law. Please feel free to contact me at Howard Nightingale Professional Corporation, 416-663 4423 or 1-877-224-8225.