Canada Home Prices Head Through the Roof
THE average person is being priced out of the housing market in Canada, especially in the big cities of Toronto and Vancouver. A study issued this month by the Royal Bank of Canada, the nation's largest bank, shows the average family in Toronto would have to spend fully 75 percent of its pretax income on mortgage, utilities, and property taxes. In 1985 that figure was just 41 percent.
It takes 65 percent of income for an average family to buy and maintain a small bungalow in Vancouver. That compares with 51 percent in 1985.
Even in relatively inexpensive cities such as Montreal, housing is getting beyond the reach of the average wage earner. Buying and maintaining a home there takes 47 percent of pretax income, compared with 34 percent only four years ago.
The median family income in Toronto is $38,500 (Canadian; US$32,121) and the average price of a detached bungalow (modest house) is C$264,000 (US$220,255) up from C$124,000 (US$103,453) three years ago. That is a small home; the so-called average home is priced higher.
``Housing affordability has again become a serious problem for the second time in this decade,'' says economist Michele Bourque, author of the report. ``There is going to be a point where people are just not able to afford homes.''
Economists predict that because incomes are not rising above the rate of inflation, home prices will inevitably fall. That is already happening and predictions it will continue have real estate agents worried.
Home prices in Toronto are dropping and boosterish press releases from the Toronto Real Estate Board are not stemming the tide. For example, a report last week by Wood Gundy, a Toronto brokerage house, predicted that housing prices could fall by 25 percent by year's end.
The author of the report was branded a ``backroom economist'' in a Real Estate Board press release, which said such reports could start panic selling. A few days later the Real Estate Board sheepishly issued another release saying that home prices had indeed fallen during the previous month.
It was not much, but the average Toronto home price fell to C$271,309 (US$226,353) in May from C$280,122 (US$233,706) in April. And home sales were down 37 percent as the number of homes on the market rose by 51 percent. Economists say the rise in supply coupled with a fall in demand cannot help but depress prices.
Still, the Royal Bank report noted that Toronto is rapidly becoming a city for the rich only. ``The Toronto housing market is becoming accessible only to high net worth, high income households and investors,'' the report said.
In many neighborhoods in Toronto, such as Rosedale or Forest Hill, it is almost impossible to find a home under C$1 million (US$834,300). Downtown housing is in the half-million-dollar range.