Toronto’s high house prices are enough to make anyone think twice about investing their money in real estate. But a new report has found that it’s actually worth it — if you can afford it.
MoneySense released their annual ranking of the best Canadian cities to buy real estate on Monday. Toronto came in at No. 22 out of 35 cities.
“[Toronto] offers great employment opportunities, there’s been an uptick in immigration and businesses seem to be investing in the future,” the report noted. “All of this lends itself to a strong economic base for this city—the sort of base that attracts workers, their families and the need for housing.”
The report argues that Toronto’s strong economics means there will always be demand for housing, making real estate a good investment, but this demand is also what’s driving up prices.
The average single-family home in Toronto costs $767,800, according to data from the Canada Mortgage and Housing Corporation. That means the average household income (before taxes) needed to afford a home in the 6ix is $109,480, MoneySense reports.
This finding is similar to a previous study by Zoocasa, which noted that only 10 per cent of Toronto’s top earners could afford a home in the city.
But despite the high costs, property investments in Toronto do pay off. Those who rent their properties will see an average five-year rent increase of 13.39 per cent, MoneySense reports. And overall, the five-year annual ROI is six per cent.
But despite this, Canadians in general are skeptical about buying property this year. An annual home ownership poll by RBC found that 56 per cent of Canadians will wait until 2020 to buy a home, as more than half believe prices will drop.
Whether or not Canadians purchase property this year, it’s important to note that housing demand in Toronto is only getting stronger. The 6ix was recently named the fastest-growing city in Canada and the U.S., and the vacancy rate remains low at just 1.1 per cent.
So how does Toronto compare to MoneySense’s top three best cities to buy real estate? It’s far pricier, which is why its standing dropped to 22 this year, down from 19.
Price is “one reason why this year’s list is dominated by neighbourhoods once considered completely undesirable,” the report noted.
Ontario cities Windsor, Guelph, and Branford took the top spots. The average house prices in these areas were all under $600,000, which is a stark contrast to Toronto prices. Windsor had the cheapest price tag, with homes costing $313,146 on average, while Guelph had the highest cost of the top three at $527,300.