The dream of home ownership has been slipping further and further away for many Canadians. It was once a rule of thumb to aim for a home that was roughly priced less than or equal to four times your annual income. However, with skyrocketing home prices and property values, this is an incredibly outdated rule.
With the average home price in the GTA over $1 million, first time home buyers are struggling to find a property within their budget. Income has stagnated as wage growth pales in comparison to property value.
Even without the pandemic buying frenzy which pushed housing prices through the roof of our predictions and expectations, housing prices have increased at four times the pace of income in a decade.
Analysing the data between 2008 and 2018 in the GTA, housing prices increased approximately 115% while median income only increased by 25%. With housing prices far outpacing income, the unfortunate reality is that many potential buyers have been left behind.
But, due to the pandemic, things got worse.
In July 2018, the average home price in the GTA was $782,129. That included condos, townhomes and detached homes. By July 2021, just three years later, the average price was $1,062,256. That’s a huge 35.8% increase in just three years!
During the 2008-2018 period, it wasn’t just home prices that increased. Rent prices also increased to the point where they doubled the increase of income! Housing in Toronto has become a nightmare.
While prices and the market have eased since the pandemic frenzy, the prices are still way too high in comparison to income and wage growth. Bidding wars are still frequent in the GTA market with reports indicating that bidding wars are becoming increasingly more common again.
So what’s to be done?
Unfortunately, there is no easy answer. Our federal election is barely a month away and housing affordability has become a huge topic across the different parties’ campaigns. The Liberal and the Conservative party have already released their statements and campaign promises on how they will tackle the housing crisis in Canada.
It’s a topic that is important for everyone. If prices continue to increase at the same pace as the 2008-2018 period, in 2028, the average price of home in the GTA will be $1.7 million.
It’s no wonder that buyers in the GTA are searching for alternative methods to purchasing a home! Co-ownership is on the rise as well as creative solutions such as laneway housing. However, it will take a long time for prices to correct.
For more information about co-ownership, check out our Co-Ownership Ultimate Library!