Toronto has been ranked among the five most expensive cities for real estate in the entire world. A new report which looks at average income versus housing prices, found that housing affordability worldwide continued to deteriorate throughout the pandemic. Toronto scored 9.9, compared to the worst offender, Hong Kong, which scored 20.7, Vancouver was ranked second at 13.0, followed by Sydney 11.8, Auckland at 10.0 and San Francisco at 9.6. Other stats have shown you now need to have an annual income of at least $178,499 to afford to enter the Toronto market, with the average price for a detached home in the city now more than $1.5 million.
Thanks to low interest rates and a desire to have more space during pandemic lockdowns, the housing market has followed up a decade of steady gains. The term bubble is starting to be used in connection with real estate. The effect of rising prices on affordability is a worry among some who feel they will never be able to afford a house.
Older generations, especially those who bought homes during the high-interestrate era of the early 1980’s experienced affordability problems of their own. Imagine paying over 18% interest on a 30-year fixed mortgage? Affordability dropped to an all-time low and priced most Canadians out of the market. So why are current buyers unwilling to equate the challenges of previous generations to the current situation?
While some economists are warning the Toronto housing market could be approaching a bubble, others are stopping short of using that term. What’s different now? Economists believe the “fundamentals” of the Toronto market -the economy, interest rates, population growth and the sources of demand for housing are far more solid than they were in the late 1980s.