Talk to any Torontonian and they’ll tell you – a million dollars is pretty much the standard price of a home these days. So it should come as no surprise that real estate sales of homes over $1 million saw bold gains over the summer months.
Sotheby’s International Realty Canada recently reported that sales of all types of homes at this price point had increased 42 per cent year-over-year, while sales over $4 million declined 17 per cent to 39 properties sold this July and August.
While the numbers speak to consumers purchasing homes, the question is – what demographic do these numbers represent?
Earlier this year, the Financial Post wrote it would take millennials 29 years to save enough to afford a home in the GTA. This can be blamed on the affordability gap between baby boomers and their children – as the average millennial has to save for eight years longer than their counterpart in 1976.
Yet owning remains a Canadian stamp of accomplishment for most. The Toronto Star reported that an Ipsos poll showed nearly 47 per cent of Canadians believed the stress of home ownership was worth the price of ownership. That’s led to nearly one in five Canadians claiming to be house poor. To be house poor is to spend over 40 per cent of your monthly income towards your mortgage and other property-related expenses – including taxes.
Yet despite the affordability gap, Canadian consumers still seem to want to buy, even if it might not fit with the feasibility of their financial plan. Sotheby’s reported that condo sales over the $1 million mark also rose by 56 per cent and purchases of attached homes and single-family homes rose by 64 per cent and 51 per cent from their 2018 levels, respectively. Meanwhile Vancouver’s housing prices had dropped, even though the city’s amount of $1 million home sales increased 25 per cent overall this July and August.
“Toronto has made bold strides over the summer months to take its place at the forefront of Canada’s top-tier real estate market this fall, as healthy job gains and fully restored consumer confidence spur steady gains,” says Don Kottick, President and CEO of Sotheby’s International Realty Canada. “After prolonged uncertainty, Vancouver is now poised to regain traction as pent-up consumer demand gradually releases into top-tier resale activity.”
Though sales of detached housing increased, consumers are still also interested in purchasing attached homes. Yet, despite inventory constraints, the largest sales boost during the summer (33 per cent) was in homes priced between $1 million and $2 million.
Sales in the $2 million to $4 million range increased by 12 per cent within the GTA compared to just nine per cent in the downtown core. This revealed a trend of buyers leaving the downtown core.
“Maybe the trade-off of a bigger home and bigger lot compensates for the fact that commute times are longer,” Sotheby’s Kottick told Toronto Star. “There’s a shift toward improving transportation so maybe it’s a long-term view too – that something will be done to improve our gridlock.” Toronto was recently ranked the worst city for commuting in North America by U.K.-based business solution company Expert Market.
The report noted a strengthening Toronto job market coupled with ongoing low interest rates accounted for the sales growth.
Looks like this bubble is far from bursting anytime soon.