Affordability continues to be a major challenge for first-time home buyers in Toronto, according to a recent report by Desjardins. The study explores the difficulty of buying a house in Toronto and suggests that this issue is likely to persist for years to come. With the average price of a home in Ontario surpassing $850,000 as of July 2023, and the median price for a single detached home in Toronto reaching $1,350,000 in the second quarter of the year, it is clear that housing affordability is a pressing concern.
Marc Desormeaux, one of the authors of the report, explained that Toronto was chosen as a case study due to its status as the largest city in Canada and its potential impact on housing prices. He also mentioned that the state of the economy and the housing market after a weaker than expected second-quarter GDP warranted a closer examination of possible scenarios in Toronto.
One factor contributing to the lack of affordability is the high demand for housing compared to the limited supply. More people are seeking housing than there are available homes, leading to soaring prices that are out of reach for many first-time home buyers, including newcomers. Desormeaux highlighted the significant rise in house prices relative to incomes over the past few years, making it increasingly challenging for individuals to enter the housing market.
The report outlines three potential scenarios to illustrate the future of housing affordability in Toronto. In a severe recession comparable to that of the early 1990s, house prices would drop by $185,000. However, even with this decrease, the home price-to-per capita disposable income ratio would still be stretched, indicating that affordability would remain an issue. A less severe recession would result in a 5% decrease in house prices, slightly improving affordability but not significantly. The best-case scenario assumes steady population growth and high demand for housing. However, it also assumes that new home listings remain below equilibrium, further straining affordability.
The health of the labor market is identified as a key driver of the housing market’s health. A stronger labor market leads to increased income and job creation, which drives housing demand. Conversely, a rise in unemployment weakens sales demand and prompts more people to list their homes. The latest employment data from Statistics Canada indicates a rise in employment but also a population growth that outpaces job creation, resulting in a decrease in the proportion of employed individuals in Canada.
The report highlights the consequences of declining affordability in Toronto. As the city becomes less affordable, more young people are leaving, leading to a loss of economic dynamism and a decline in its competitiveness as a global financial hub. Desormeaux emphasizes that the housing supply-demand imbalance has been building for a long time and will require significant time and effort to address.
In conclusion, the report emphasizes the need for collaboration between all levels of government and the private sector to tackle the housing affordability crisis. It calls for a collective effort to find solutions and warns against wasting time on blame or partisan attacks. The future of Toronto’s status as a welcoming and prosperous place to live depends on addressing this challenge effectively.