If you are under the age of 50 and live in the Greater Toronto Area (GTA) or the Greater Vancouver Area (GVA), chances are your children will never be able to afford a single-detached home anywhere near you in their lifetime.
In the GTA, the average price for a single-detached resale home was $1.0 million in October 2016, an increase of 26% annually. In Metro Vancouver, the average price of a resale single-detached house was $1.55 million in October 2016, an increase of 29% annually.
Are you in the market for a new home? In the Census Metropolitan Areas of Toronto and Vancouver, CMHC reported that new singles increased 10% and 35% year-over-year to $1.1 million and $2.2 million in the third quarter, respectively.
I consider myself lucky to have purchased a condominium apartment 10 years ago in Toronto, catching the upward price wave before it became a tsunami. Like many of my peers looking to start a family, I bought an entry-level condo townhouse after three years of small-space loft living.
On paper, my home has appreciated by $200,000 since I bought it seven years ago. I should be ecstatic, I should be jumping for joy at my financial windfall. However, strangely, I have not done any joyful jumping whatsoever; like many people in my situation I am stuck on the property ladder.
Despite the substantial increase in the value of my townhouse, single-detached homes in my neighbourhood have increased by $500,000 during the same period!
My kids want a back yard (and so does my dog), but I don't want to double or triple my mortgage for a piece of grass and a couple extra feet between me and my neighbours. Many have suggested we move farther afield, but I don't want to uproot the family, take my son out of his school and my daughter way from her friends -- that is the dilemma.
Families like mine are forced to choose between their preferred neighbourhood and their preferred housing type. Some are settling for apartments or stack townhouses, but there is still a pretty significant exodus happening in the southern Ontario region, as less affluent households move to communities located 30 minutes to 1.5 hours outside the GTA to find affordable single-detached housing.
As these folks move out, higher-income households, or couples/families with significant financial support from their relatives move-in. Despite the likely withdrawal from the 'Bank of Mom and Dad', over 70% of first-time buyers in the GTA are not purchasing a single-detached home.
According to a survey conducted by Genworth Canada and Environics Research Group in 2015, it indicated that just 28% of Toronto first-time buyers and 25% of Vancouver buyers purchased a single-detached house (between 2013 and 2015). Expect these figures to rapidly decline. In the 1990's about 50% of all Toronto CMA housing completions were single-detached houses, and just 35% in the Vancouver CMA -- those shares have dropped to 29% and 24% in Q3-2016.
If this downward trend continues, by the time my children reach their 30s, less than 5% of completions in Canada's major cities will be single-detached homes. All of them will likely involve the tear-down of an existing single-detached property, so there will be no net increase in the housing supply.
So how much will that new single-detached house cost in 2045 when many of the children today are looking for a property? New singles in the Toronto CMA have increase in price by about 9% annually since 2011, in the Vancouver CMA the rate is 12%. If that pace of price growth continued for the next 30 years, a new single-detached home in Toronto would sell for approximately $11.5 million on average and the Vancouver single would go for (wait for it...) over $45 million!
Prices are obviously not going to appreciate at that exceptionally high rate for over 30 years, but lack of supply will send house prices well beyond what even a wealthy household will be able to afford. Even if we could eliminate every foreign buyer, every vacant home and every buyer that wouldn't qualify for a mortgage at the posted rate, demand will continue to exceed supply in Canada's major markets.
For GTA and GVA residents, the American Dream is dead.
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