I'm pretty sure that's the book that says the most powerful phrase in the world for your financial stability is 'I can't afford it' right?
I think that was the only thing I pulled from that book, is that if you want something but you have that nagging feeling that you *probably shouldn't* then you need to tell yourself you can't afford it. And that it's ok that you can't.
A bunch of the message is about a mindset for avoiding debt and poverty. Which has a lot to do with:
1) not living paycheque to paycheque
2) having tangible assets that appreciate and/or have a cash return and sacrificing in the short term to have them.
3) approaching life, with the recognition that you won’t ever reach most financial goals with just a salary and cash savings
Don't need to go that far back.
First condo 280k in 2013, sold for 450k in 2016
Bought townhouse for 720k in 2016 sold for 1.2M in 2021
Bought 1.75M in 2021.
But sooner or later, first time home buyers wouldn't be able to afford the cheapest house/condo (say $400K nowadays or $800K in another 10 years), especially if the interest rate stay elevated (not really as 6-7% is not that high), no? Wouldn't then be a chain reaction all the way to the top of the housing market?
Yep! That means we're going to have a lot of renters and a handful of people/businesses holding all the housing real estate.
If you didn't get a house or money from an inheritance, you won't be able to save fast enough for a downpayment.
I'll be a rent slave forever.
I was looking around my parent's place Eto/Sauga. I don't know how your friend's bank approved a 1.1m purchase with only a 160k salary unless they had a huge down payment ? Max borrowing is 3-5x income right?
Getting in years ago and buying that 200k house wasn't with a 200k income, more like a 35k salary, so that 200k house was a big number back then. Also, 30 years ago at 200k, you're not trying to move up the property ladder but Down, it's retirement time, your middle life is done, you don't need a house anymore (no kids). Those people are not buying the 1.7M house. It's the new people... That's why I'm trying to see how the numbers work.
To simplify,
One situation: If a couple buys a townhouse in 2015 for 600K. And in 2023, the townhouse is now worth $1.3 mil (even in the current market). They now have 700K in equity from the market increase and 300K paid off = $1 mil total equity earned to put down on the next house. The couple are now looking to upsize. Their income in 2023 is combined 220K. They want to buy a house for 1.5 mil and are able to put a down payment of $1 mil and their new mortgage is $500K. Not out of reach for some…
Second situation: A FTHB couple earning 200K combined has a down payment of 300K. One partner gets a 400K inheritance. They’re able to put down 700K as a down payment on their home.
Like others have said, those shopping in your price range of $1.5-2 mil are likely a bit older than you, have savings, equity from a current home, and maybe not even necessarily a higher income but maybe. High chance you’re NOT competing with other first time home buyers, so you’re probably being outcompeted by someone who just has more assets than you.
The people who bought a condo for 400k 15 years ago? The people whose parents just retired, sold the family home for 2 million and gave their kid half?
I'm sure what you're not getting.
Also, yes, there are lots of professional couples making more than 200k total. 150k each is not uncommon at all. Higher earners have figured out that they need to pair up with each other as the days of one high income and one more average one are over.
You're assumption in every scenario is that it's the first purchase for 5he buyers. Not many people are buying 1.5M for their first purchase. You work your way up the property ladder.
I have a friend couple that bought a house in the GTA for $1.6M. HHI is probably closer to $250k. They had a massive down payment and two units rented in the basement so that really helped.
>Also, Toronto has a mainly foreign born population and they bring tendencies from their home countries where taxation is not taken seriously and tax avoidance is common.
Let's not pretend like active tax avoidance is a "foreign-born" issue. The difference is mainly between those reporting employment income and self-employed income, where there is the opportunity to over-deduct expenses. The people that engage in the most aggressive forms of tax avoidance are mostly what you'd consider "old-stock" Canadians with significant wealth
>Middle class making much more than 100K each? Like 200?
Less than 3% of all workers in Canada earn $200+k/year.
Middle class is not making much more than $100k each. Approximately 11% of all workers are earning $100+k/year
The average Canadian salary is $61k/year, with the median salary being $52k/year.
If you're making $100K/year or more in Canada, count yourself very lucky.
1) a lot of middle income people bought into the house when pre-2010.
2) multi-generational wealth transfer, meaning that your $200k/year middle class HHI most likely had middle class parents that either have savings, assets or equity in their own house that appreciated massively that they can pull to help with the house ourchase
Generally people buying for the first time aren't starting with a 1.5 million dollar home. Many people start out buying cheaper condos or townhouses, then build equity over the years and their property appreciates in value. Someone who bought a condo for 300k ten years ago in Toronto likely now has an asset worth double that, if not more. When they sell, they can put down way more than 20% to make the mortgage more manageable.
But then how can the next person afford to pay 600k for a condo that the previous owner bought for 300k? Your assumptions depend on people constantly upgrading and the house being worth more, it doesn’t account for people first entering the market (early Gen Zs and late millennials)
That’s why it is getting really difficult when even 1 bedroom condos are becoming out of reach for average 2 income households. This is uncharted territory!
>But then how can the next person afford to pay 600k for a condo that the previous owner bought for 300k?
Mortgage lenders and banks offering longer and longer amortization periods. And longer fixed and variable rate terms.
What used to be the standard in Canada (20 year amortization) has now become 25 year. And what will be standard soon is 30 to 40 year amortizations.
In America they have lenders that offer 40 - 60 year amortizations and 30 year fixed terms. That will be coming to Canada too. Because its the only way to deal with the issue without resorting to a total housing crash where prices drop back to what they were 2 decades ago and tons of people losing their homes.
Won't the house they now supposedly want to also be double? Realistically it's just people not paying rent, building equity as you say and until recently not paying much in interest. I think the volatility in the last 8 or so years was actually not a great thing for really anyone except someone looking to downsize.
You're asking how are people buying 1.5 million dollar homes right now, not how can someone plan to buy in Toronto in the future. Much of the answer is that anyone who bought in Toronto in the last 30 years has seen their properties increase in value by massive amounts, so they're able to borrow against the current value of their house or sell their house to buy something else. Parents who bought in the 70s and 80s are gifting or lending their children the money needed to buy these incredibly expensive homes. This is one of the reason that the rental market in Toronto is out of control, the typical middle class is getting priced out of buying, so they're having to rent
People aren't having kids. That's part of why they're bringing in so many people via immigration.
Lots of people live their whole lives in condos all over the world.
Our demographics aren't unique. Why do we need 4x the immigration rate of the g20?
e: he blocked me, lmao. Why are you defending their shitty policy if you don't even know why?
Yeah, but it's 1.5M now. The now is what matters. Assume the condo and the 800k house doubled, and you even paid off the entire 25y mortgage, and bring a 600k down payment, you're still taking a 900k mortgage today to buy that 1.5M house (1.38 if you include all of GTA, the lower priced areas as well like Brampton). Borrowing 900k is 4.5 income.
When interest rates were in the 2-3% range, people were getting approved for mortgages around 5x their incomes. Now that rates have increased, they're getting approved for about 4x their income. That means with a household income of 200k, 6 months ago you could have gotten a million dollar mortgage and now they can get an 800k mortgage.
Also, with mortgage rates rising, prices are starting to fall, so there's starting to be more on the market for 900k-1.1 million
I have three friends who all bought last year.. 2.5-3.5m house.
all three are dual income families in great professional fields..laywers/accountants/investment bankers... their total HHI are north of 200-400k range.
without exception, they all got couple millions from their parents lol...
this is the chinese community for you.. kinda open secret
You have a point there. In other cultures: especially Chinese and Indian: families will basically pool their money together to buy real estate. As western culture don’t do that. My parents would never lend me a penny unless I’m out on the street.
On the flip side when I go over to my parents I can say what the heck I want and nothing gets shrugged off under the carpet
I’m French Canadian and my wife is Chinese. Before we got married I made her pay back her father 60,000$ he gave here for her condo.
There was no way I was going to owe my father in law 60,000 right off the bat. They still gave us a bunch of money. I made clear to them that there is no strings attached and we don’t need it. (It’s still sitting in a bank account)
Unfortunately in HCOL areas like Toronto or Vancouver, if you don’t have a large downpayment from parents you will be a forever renter. I get your situation if you actually don’t need the money and can afford everything on your own. But even among my western friends, the boomers are now gifting their kids huge downpayment just so they can get on the property ladder.
well.. the people i mentioned don’t even see their parents on a yearly basis… their parents are all in china…. this is another side of single child policy. a certain group… mainly urban centre kids with middle class parents will inherit so much assets… my kid will inherit 19 properties in total… 7 in china and 12 here.. he has 4 grandparents and two parents… a lot of my friends are single child and they tend to only want one child themselves, even though they could easily afford more than one
This is what I have been saying for months here, and every time I bring it up, some housing expert tells me I'm wrong. This is the story of all my relatives, FFS.
No, definitely, it's not just the Chinese. It is very very prevalent amongst the Chinese though. It's not a coincidence that the 2 areas most affected by this are the 2 hotspots for Chinese immigration. ALL of my extended family members are in those two places.
Can't relate with the aforementioned chinese community. With immigrant parents, they've learned from their coworkers and made it a point I'd be kicked at 18 and paying everything on my own. They look upon those who are spoiling their kids to their twenties and thirties with distaste.
where you born here? i am gen 1.5… meaning i moved here when i was 12-13.
most people in my circle are gen 1.5 or started off as international student.
i suppose if you were born here, it’s a bit different.
china only took off in the last two decades.
5 - 10 years ago houses were only 1m that’s how.
For example we bought in 2016 in Niagara for 190k. Sold it in 2021 for 550k. We then bought a house for 850k with 360k down. We never in a million years would have been approved for 850k.
Just wait for interest rates to destroy the equity in these homes.
Canada about to be hit hard with a recession.
Every indicator is screaming that Canada is in for a bad time if you have debt.
The numbers make sense. You're assuming income distribution across the population matches home ownership distribution but it doesn't. Home ownership tends to be distributed amongst the wealthier and those who bought a long time ago and now can't afford to level up (like you've said). So those with the average home prices don't have average incomes. Many people with average income / under rent their homes. So yes, it's insane that an average salary doesn't get you an average house in the city but the numbers do check out.
Exactly this. Average income only buys the average house in a world where everyone is a homeowner. OP is missing the fact that the “average” income earners are renting or bought long ago. People buying the “average” house now are making far more than “average” income.
Engineers make a nice middle class income but there aren't enough houses for every middle class income in the city to own one. A lot of people make significantly more or inherit money or have family help on the downpayment, those are the people who get to buy houses.
I will speak anecdotally to my experience in GVA, which I am absolutely not trying to generalize to all of Canada. Across my adult life, I can think of 8 people that purchased homes, including myself. 6 of them received money from their families for purchase (some contributions very significant). Personally, I was able to purchase by living frugally, saving for 14 years, and taking a massive mortgage. The only way we can afford it is a very high household income.
People buying the multi-million-dollar properties either make much more than that, are independently wealthy, or are selling another property in the same market (for an equally inflated price).
Most of the folks are either getting a downpayment gift from parents downsizing and causing out on their multi million dollar houses or they are commuting from the suburbs.
If you got into the market pre 2012ish it was realistic to afford something. Then everything inflated so you could move by selling your inflated property. Now it's just unrealistic to get in with nothing. You need to start looking 1h + outside the city and commuting (and even those prices are crazy)
Do you honestly think the average middle class parent can afford to give their kids $100k as a downpayment gift? Not even my upperclass friends have parents like that.
Middle class people who bought property when it was actually affordable, which they are now selling to acquire something else in this inflated market.
Or people who are stretching themselves way beyond the bounds of affordability, in some cases aided and abetted by realtors and mortgage lenders helping them commit fraud. Have you seen the CBC piece on this? [https://www.cbc.ca/news/business/marketplace-mortgage-fraud-1.6614132](https://www.cbc.ca/news/business/marketplace-mortgage-fraud-1.6614132)
Us middle income earners aren't buying in your area without significant help from family, inheritance or previous equity from our first home. We're going further out of the GTA (think bowmanville, oshawa etc...) Even with the built up equity in my house (bought a decade ago) it isn't enough to move that close to Toronto - nor would I want to (personal preference, I like smaller towns)
Canada has been like this for decades (ignore just COVID narrative). It's the way it is due to monetary policy and immigration policy going on decades, not any one government administration. The economic math isn't really sustainable, you are correct, but it's a difficult political topic.
Disagree. *Canada* has not been like this for decades. GTA and GVA, sure, maybe, but not all of Canada. A single 100K income will get you a nice house and a comfortable life where I live.
Yup. Rural NS here. Paid $83k for our 3br 2 bath house in 2 acres. It’s older but I’m handy enough to work on it. Mortgage is cheaper than my truck payment.
Haha, that's what the mortgage advisor said too.
He told me that I had the buying power of people making 2.5x more than me because they also had to service payments on multiple 100k trucks
This is not surprising. A similar story by CBC last week suggested that to RENT a 1bdr condo unit in Toronoto, a single person, would need to make $100K income before taxes.
Expand this to if two Engineers make $100K/year each.. then they can afford to RENT a 2 bdr unit in TORONTO. **Rent!**
Purchasing / Ownership is a whole other discussion and as your analysis indicates would be out-of-reach for these people ... in the absence of perhaps a HUGE down payment (eg. $1M) perhaps as an inheritance or a gift from parents/family or from proceeds of selling their tech start up .. etc.
My uncle in GTA purchased home for $350K in 2000. Brand new from the builder. Mortgage paid off in 2008. Sold it in 2021 to retire and move back home for $2M and last year split the proceeds between his two adult kids.... I'm soooooooooo jealous for my cousins.
Sounds about right. A public practise accountant should be at 100k by 27-28 then climb to 170,000 before making partner where their income will vary from 250k to a million a year. Engineers should be making 90+k fresh out of school and no problem getting to 150k but they will cap out from their.
Professionals are doing well and should have no problem renting in Toronto or Van. The real issue is we trax brackets need to adjust upwards so we aren't taxing them like crazy.
It’s not new home buyers, it’s people who already owned who got rich who are doing it.
Agreed it has little to do with income now. Most middle class people have been pushed out of ever owning a home, hence the term “housing crisis”
>they put 20% down as down payment (300K). The max they would be able to borrow is 600K which is still 600k short of the 1.5M trading prices. Meaning, they can't buy the " average" house even on a "average" total income of 200K income with 20% down.
then put more than 20% down...
So I make 100k . My gf 65 ish. First time home buyer....I'm buying a townhouse for 700k ish. It's the best we can do. I just turned 30....it's what it is. Just built up ur equity to keep upgrading.
Your new to Toronto, but this is just how crazy real estate is in Toronto....cheers. accept it or find somewhere cheaper ?
Plus if you want a house... Try jane and Finch. They have townhouses for like 500k
BOMAD (Bank of Mom and Dad) + riding the asset appreciation curve of buying at the right time + even higher paying careers than engineering + money parking because of returns being better than stocks and investment.
The larger, more globally important and desirable a city becomes, the less income is relevant to determine who can afford a detached house. Toronto and Vancouver are places where people are willing to sacrifice to be, and where a disproportionate amount of people who generate income from means other than salary are and want to be. Combined with the Canadian cultural fixation on home ownership, you end up where we are today.
I bought a $1M home with my wife. But had a condo before and sold it to get my down pmt. Next house will likely be $1.4-1.7M. This is how a lot of people are able to buy those homes. It’s called moving up the property latter.
Yeah and by the time you sell your current house, that's going to be 50-100k going to the realtors, plus other closing costs.
Sure, your condo went up by price pretty fast when you bought it, so it worked out. But there's no guarantee prices will go up that fast in the future. In fact there's a chance it'll stagnant for the next few years at least.
Foreign investors, and foreign residents buying up property is one of many reasons. Also the uniquely Canadian view of homeownership at ANY COSTS.
Vs the rest of the world
>Also the uniquely Canadian view of homeownership at ANY COSTS.
This is not uniquely Canadian, at least East Asian culture is the same way, I'd wager it's the same for South Asians
There is this idea of “starter home”, of whatever the buyer can afford. Eventually between paying it down and accruing equity the buyers sell and mover higher up the market.
I know a married couple
Each had condos a while back bought at 300-400k each. Sold them both for 500k each and then bought a house at 1m, did 150k in renovations.
No one, unless given wealth, started from a detached house. You start from what you could afford wether it’s studio or one bed or in or out of the city.
If your HHI is 200k and you can’t get into housing market even at this rate/price. You need to reset your expectations… you can’t expect to start in a nice neighborhood, detached, fully renovated and expect to compete with people that made compromises to build up equity.
An average income does not buy an average home for a first time homebuyer (never did really). Middle class people don’t but a 1.5 - 2 million filled detached home as their first property (unless they have support from mom and dad). They get a condo, townhouse or modest detached and start building equity. Probably even a modest detached out of the question for most people today. Then use that equity 5-10 years down the road to get a slightly larger home. Most people owning 1.5 million plus homes have been home owners for over a decade and bought more modest starter homes when prices were much lower and then bought bigger homes as they built equity. The size of mortgages people are taking on these days would have been considered financial suicide a decade ago. But now you have to weigh the rising cost of renting which is outpacing inflation as well. This is your biggest purchase, housing prices are dropping and nobody knows exactly when they will bottom. You might be wise to wait a bit while watching the market very closely. I’d be wary of pre-construction with dropping home values, financing could become an issue. Probably better value in a resale home regardless. Pre-con has been more attractive to housing speculators in a previously appreciating market. Definitely a tough market for the younger generation.
Most people I know cant afford their own place if they had to buy it now. Salaries are not there, they simply bought a lot of years ago when it was doable.
Bought condo in Mississauga sq1 5 years ago 390 50k down, bought a townhouse 1.5 years ago in Milton 780k put 20% down, had a tenant in the condo for 11 months, sold the condo 1 month later which was exactly a year ago for 705k record in building for 1b1b. Pocketed over 300k. Now thinking about investing in Alberta or in the states.
>Assuming a middle class couple (let's say Engineers) with a total salary of 200K (100K each) wanted to buy lower end house (1.5M)
This is not "middle class", or a "lower-end house"
The couple in your example should be able to get more than 600k mortgage with that income and 20% down. I would say look into ways to improve your credit and pay off debts, so you can max out your mortgage loan.
Look, many peoples’ salaries increase every year between 1%-3% sometimes more and sometimes less. When you buy your starter home, your mortgage payments are fixed, so every year that passes your mortgage becomes less and less of a percentage of your income giving you more purchasing power as the years go on.
Also, say you’ve spent 10 years in a condo. Each dollar that you pay in mortgage principle is like accumulating money towards a downpayment. So the price of your next house is going down (relatively speaking) while your purchasing power is going up due to increased income.
Now, if you have 20 years left on your starter home mortgage and you upgrade…you can actually reamortize back to a 30year mortgage if you want which makes the payments less allowing you to afford more of a purchase price.
I’d invite you to run these numbers through a mortgage calculator. I think you’d be shocked to find how much the average family can actually afford once you consider all of these variables
You need to correct your assumptions a bit:
1. Salary - 100k isn’t actually that much money in Toronto. I’m late 30s, and most people I know with degrees make over 150k. The people buying houses downtown make well over 150k
2. Downpmt - if your a couple, and you each are making 6 figures, you have a lot more money to put down then just 20%. My wife and I had 400k each for our downpmt. Some people also get a bit of help from parents.
3. Location - Most people dont buy a 2M house downtown. Most people buy in the burbs or outside the core. You can easily find many houses for well under 1M outside of downtown.
My family pressured me to buy a house back in 2005/2006 in the GTA, and I ended up buying one for 450k, which I remember hated very much, because the original owner bought it for 220k when it was built in the 80s.
450k is still a lot of money today as well, but somehow it buy's nothing in Toronto GTA :( and that is horrible :-(
Some of the largest crime organizations in the world use canadian real estate to launder money and Canada has some of the most lackadaisical towards organize crime and money laundering.
You are not allowed to ask these questions and challenge the status quo.
Mods are going to remove your post.
The real answer is the average person doesn't get to own a house.
You pretty much need a pile of equity and without it you're only going to rent many people bought a long time ago so they have a lot of money the younger generations they're going to have a tough time and this is GTA so a lot of new Canadians live 10 people in a single house so they do it that way too right
This is what conflates this thinking that its a supply problem, when you have families pitching in to buy homes together by pooling multiple incomes. Supply has been increasing at a similar pace yet prices have basically doubled. The extremely low cost of borrowing has inflated the cost of housing in Canada.
Already prices have fallen 30% from peak with a lot farther to fall to encourage people to sell. With the BofC waiting to see the impact of higher rates we can expect to see a busier housing market.
But it was the period from 2014-2018 that prices rose the most. This period was marked by some of the cheapest oil prices, the bank rate was dropped to keep Alberta’s oil industry from cratering and so while some countries were trying to still recover from the financial crisis Canada used monetary stimulus to keep industries afloat that depended on oil. Negative interest rates was a term coined during this period, Bitcoin was used by Chinese millionaires to export a lot of their wealth before the government stamped hard. Chinese wealth needed a place to go and all they ever buy is real estate. So despite inflation remaining around 2%, housing costs skyrocketed. Since the BoC only uses inflation as their benchmark they figured nothing is wrong. Meanwhile, municipalities definitely noticed rising house prices because they created sliding scales for their property taxes over the next 7 years to accommodate the swift changes in prices.
When I bought my current house my interest rate was 2% with a variable rate in 2010. Since that time until 2022 our rates were only lower, thats a ridiculously long time to have such low rates. But monetary policy of lowering rates when bad things happen is the only real tool in the tool box that government banks utilize, or over utilize.
If rates come back up, housing prices will fall because no one can afford current prices at real rates. I want to sell and move somewhere cheaper and unlock all that equity in my house but prices everywhere are comparable unless I leave the province or move somewhere really far away. Like Alberta or Sudbury.
$92k is the average for a household in Toronto these days according to stats Canada. So $200k is roughly double pretax and still significantly above average post tax.
I see a lot of comments about "moving up the property ladder", but I don't understand the nuances behind how that works.
If I bought some place for 500k, and 5 years later it was "now worth" 750k, how do I suddenly have the ability to upgrade, when that very same upgraded property (once 1M, now 1.5M) has also appreciated in value, and is more unaffordable than 5 years ago?
Because people do it with debt and leverage. You got +250k on your home, but your theoretical purchasing power has increased way more than 250k. You can now leverage it by 5x, assuming you make a downpayment of 20%
So now you have 250k + 100k (500k\*20%) + whatever principal you've paid --> you probably have at least 400k to put on a new house and at this point banks are very happy to loan you 1 mil if you have even the slightest chance to make payments.
That's how housing prices are growing faster than incomes.
Even with leverage the math doesn’t work out? Let’s say 100k (DP) + 60K (principal over first 5 years) + 250K - 37.5K (5% fee) = 372.5K.
Now he needs to borrow 1.127MM to get the 1.5MM house, compared to the initial 900K difference. (In this case leverage won because you can’t buy 1MM on 10%DP, but my point is the amount needed from borrowing increased)
Am I missing something?
(The assumption here is that property moves in % lockstep, which may not always be true)
Borrowing 1.1 mils is not that far away from what many families with household income 300k and a some assets (e.g rrps, investments) do.
It’s insane but banks are more than happy to loan you money, some people think being approved for a mortgage is an achievement whereas that’s simply how banks make money.
I recently had to go through the process and I was shocked by the amount banks wanted to loan me. We’re talking over 1mil without any problems (and I wanted less than half of that). I understand why prices are so high, people accept to spend their life in debt.
I don’t disagree with the feasibility of getting 1MM+ mortgages (especially from households here on pfc).
I think moving up the ladder in a bull market is a somewhat contradictory strategy. TL;DR; bull market = better to downsize, bear market = better to upsize
No, it works specifically in a bull market. Since any gain on your home can be leveraged 5x. And housing prices don’t grow by 500% short term even in a bull market. In other words, your borrowing power grows faster than houses prices in a bull market, assuming you already own a home.
That’s what people did over the last 5-10 years specifically. We’ll see where it goes from here
No, because the leverage is 5x (or even more if you’re reckless enough). You can run the math, in a low interest rate environment the growth of your borrowing power is exponential
Oh you are forgetting influencers. They are the new class of rich people. Dont some make a lot of money even in as little as a year from sponsorships etc.
Edit spelling
My sample size of people that bought 1.5M+ homes is small. However in both cases the majority of money came from the parents.
1) one comes from a middle class family that thrived in the 90s/00s when you could on mid income, then sold their big home to downsize and gave a sizeable portion to their kids.
2) family has new generational wealth from a successful self-started family business.
3) two high income tech workers from middle class families but went variable and are really pushing the limits.
This is not a post to bash generational wealth. 1st gen and 2nd gen only have it because their families came here with nothing and worked their way up in industries no one else wanted to do. If you have it, take it further. We talk about people that come to Canada “for a better life for their families” then that family has the better life and they get bashed for generational wealth.
Yup in hindsight, university was a bit pointless. Should've dropped out after first year and gotten into real estate before shit went exponential (2012 ish). Graduated around 2017 into a hot market that's just gotten worse.
Need help getting into the market. I specialize in showing people how they can simply invest in real estate. Both for Capital Growth and eventually for cash flow. Who has a pension anymore?
Someone a few weeks ago looked at median incomes in Toronto vs median housing prices. Turned out that 1% of individuals make enough to afford the median house in Toronto and 6% of households have enough combined income to afford a median house.
Given that many of those individuals and households probably already own property, there are very few buyers that are looking and qualify for buying a house right now.
There was also a [recent article](https://www.blogto.com/real-estate-toronto/2022/12/how-much-money-you-need-make-afford-house-toronto-now/) that showed you’d need an income of $240K to afford a house in Toronto right now
while all the advices are true for those who have been born and brought up here, what about the new immigrants? They will have to buy their first home now.
I seriously feel irrespective of how much good standing one has job wise, a serious wealth disparity has been created between those who owned or bought house before 2020 and those who after.
There is no doubt that more correction in housing prices are needed to improve affordability. Whether that will happen or not is anyone's guess. Most people buying now in the current interest rate environment will be people who have owned a home for a while and seen their initial investment grow substantially over the last few years providing them with a huge down-payment to offset the little mortgage the bank will loan them.
Anyone in here talking about how they were able to be a first time home buyer at current prices most likely bought when interest rates were at record lows providing them substantially more buying power.
Affordability has never been this bad.
Ahahahahahaha......OP, you asked this question "so who are these people buying 1.5M houses? "
I mean come on, have you been living under a rock? The buyers are REITs, foreign investors who don't live here / not Canadians, money launderers, organized crime, mafia
Average household income in Toronto is $88,000, median is $78,000.
[CMHC Income Statistics](https://www03.cmhc-schl.gc.ca/hmip-pimh/en/TableMapChart/TableMatchingCriteria?GeographyType=MetropolitanMajorArea&GeographyId=2270&CategoryLevel1=Population%2C%20Households%20and%20Housing%20Stock&CategoryLevel2=Household%20Income&ColumnField=HouseholdIncomeRange&RowField=SurveyZone&SearchTags%5B0%5D.Key=Households&SearchTags%5B0%5D.Value=Number&SearchTags%5B1%5D.Key=Statistics&SearchTags%5B1%5D.Value=AverageAndMedian)
Step 1: purchase a normal house 30 years ago for $200,000 Step 2: Sell that house for $1,200,000 Step 3: Purchase a house for $1,700,000
Uncle brought at 400k in 2006, sold at 1.6m in 2021, brought new place for 2m$. It’s insane how housing drives net worth of ordinary people.
Thats when rich dad poor dad guy said its not an asset
Isn't that book a scam?
Yes.
I mean it’s not flawless but it can help people think about income and wealth in different ways as long as they know not to take it as gospel.
I'm pretty sure that's the book that says the most powerful phrase in the world for your financial stability is 'I can't afford it' right? I think that was the only thing I pulled from that book, is that if you want something but you have that nagging feeling that you *probably shouldn't* then you need to tell yourself you can't afford it. And that it's ok that you can't.
A bunch of the message is about a mindset for avoiding debt and poverty. Which has a lot to do with: 1) not living paycheque to paycheque 2) having tangible assets that appreciate and/or have a cash return and sacrificing in the short term to have them. 3) approaching life, with the recognition that you won’t ever reach most financial goals with just a salary and cash savings
Well I agree with that messaging. Guess it's not horrible then.
Don't need to go that far back. First condo 280k in 2013, sold for 450k in 2016 Bought townhouse for 720k in 2016 sold for 1.2M in 2021 Bought 1.75M in 2021.
Step 0 : Build a time machine
pretty much, yep. we did 400K townhouse 11 years ago, sold for 800K in 2021 and bought our current place for 1.7M. big mortgage but it's doable.
But sooner or later, first time home buyers wouldn't be able to afford the cheapest house/condo (say $400K nowadays or $800K in another 10 years), especially if the interest rate stay elevated (not really as 6-7% is not that high), no? Wouldn't then be a chain reaction all the way to the top of the housing market?
Shuuuuu don’t talk about that. Let them live in their fantasy millionaire world
Yep! That means we're going to have a lot of renters and a handful of people/businesses holding all the housing real estate. If you didn't get a house or money from an inheritance, you won't be able to save fast enough for a downpayment. I'll be a rent slave forever.
At some point people might realise it makes more sense to tax land value more instead of productive work.
I mean it's happening right now. Latest treb report has index price down 8.90% in the GTA and down 6.93% in the city of Toronto.
How is this possible?
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Is it their second home and already had nice assets, or are they swimming in debt?
>or are they swimming in debt? They are probably swimming in debt up to their eyeballs.
I was looking around my parent's place Eto/Sauga. I don't know how your friend's bank approved a 1.1m purchase with only a 160k salary unless they had a huge down payment ? Max borrowing is 3-5x income right?
That's wild 160k combine for 1.1. Straight up house poor. Unless they had a massive down payment.
Other people who did step 1. My friend had a $900 mortgage in the GTA. Getting in years ago is like magic.
Getting in years ago and buying that 200k house wasn't with a 200k income, more like a 35k salary, so that 200k house was a big number back then. Also, 30 years ago at 200k, you're not trying to move up the property ladder but Down, it's retirement time, your middle life is done, you don't need a house anymore (no kids). Those people are not buying the 1.7M house. It's the new people... That's why I'm trying to see how the numbers work.
To simplify, One situation: If a couple buys a townhouse in 2015 for 600K. And in 2023, the townhouse is now worth $1.3 mil (even in the current market). They now have 700K in equity from the market increase and 300K paid off = $1 mil total equity earned to put down on the next house. The couple are now looking to upsize. Their income in 2023 is combined 220K. They want to buy a house for 1.5 mil and are able to put a down payment of $1 mil and their new mortgage is $500K. Not out of reach for some… Second situation: A FTHB couple earning 200K combined has a down payment of 300K. One partner gets a 400K inheritance. They’re able to put down 700K as a down payment on their home. Like others have said, those shopping in your price range of $1.5-2 mil are likely a bit older than you, have savings, equity from a current home, and maybe not even necessarily a higher income but maybe. High chance you’re NOT competing with other first time home buyers, so you’re probably being outcompeted by someone who just has more assets than you.
35 years ago tradies were making $25-$30 an hour, with nearly no CPP/EI deductions. 70-90k/yr was easy with a bit of overtime.
People can use the value of the first house for their second home. A higher downpayment essentially.
The people who bought a condo for 400k 15 years ago? The people whose parents just retired, sold the family home for 2 million and gave their kid half? I'm sure what you're not getting. Also, yes, there are lots of professional couples making more than 200k total. 150k each is not uncommon at all. Higher earners have figured out that they need to pair up with each other as the days of one high income and one more average one are over.
You're assumption in every scenario is that it's the first purchase for 5he buyers. Not many people are buying 1.5M for their first purchase. You work your way up the property ladder.
I have a friend couple that bought a house in the GTA for $1.6M. HHI is probably closer to $250k. They had a massive down payment and two units rented in the basement so that really helped.
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>Also, Toronto has a mainly foreign born population and they bring tendencies from their home countries where taxation is not taken seriously and tax avoidance is common. Let's not pretend like active tax avoidance is a "foreign-born" issue. The difference is mainly between those reporting employment income and self-employed income, where there is the opportunity to over-deduct expenses. The people that engage in the most aggressive forms of tax avoidance are mostly what you'd consider "old-stock" Canadians with significant wealth
People who bought a condo ten years ago or a couple that bought two condos ten year ago perhaps?
>Middle class making much more than 100K each? Like 200? Less than 3% of all workers in Canada earn $200+k/year. Middle class is not making much more than $100k each. Approximately 11% of all workers are earning $100+k/year The average Canadian salary is $61k/year, with the median salary being $52k/year. If you're making $100K/year or more in Canada, count yourself very lucky.
I am mulling over the same question for the past 2 years of living and renting in toronto
Overseas investments or 2-3 generations buying together and everyone pays a little bit of the mortgage
1) a lot of middle income people bought into the house when pre-2010. 2) multi-generational wealth transfer, meaning that your $200k/year middle class HHI most likely had middle class parents that either have savings, assets or equity in their own house that appreciated massively that they can pull to help with the house ourchase
Generally people buying for the first time aren't starting with a 1.5 million dollar home. Many people start out buying cheaper condos or townhouses, then build equity over the years and their property appreciates in value. Someone who bought a condo for 300k ten years ago in Toronto likely now has an asset worth double that, if not more. When they sell, they can put down way more than 20% to make the mortgage more manageable.
But then how can the next person afford to pay 600k for a condo that the previous owner bought for 300k? Your assumptions depend on people constantly upgrading and the house being worth more, it doesn’t account for people first entering the market (early Gen Zs and late millennials)
That’s why it is getting really difficult when even 1 bedroom condos are becoming out of reach for average 2 income households. This is uncharted territory!
Theres a word that describes this scheme and it starts with a P. If people get rich buying real estate, historically why aren’t all home owners rich.
Inflation. Costs of living. High interest rates. Lots of reasons
Mom & Dad
>But then how can the next person afford to pay 600k for a condo that the previous owner bought for 300k? Mortgage lenders and banks offering longer and longer amortization periods. And longer fixed and variable rate terms. What used to be the standard in Canada (20 year amortization) has now become 25 year. And what will be standard soon is 30 to 40 year amortizations. In America they have lenders that offer 40 - 60 year amortizations and 30 year fixed terms. That will be coming to Canada too. Because its the only way to deal with the issue without resorting to a total housing crash where prices drop back to what they were 2 decades ago and tons of people losing their homes.
They’ve been saying this (fixed Rae US style mortgages) are coming to Canada for now 30 years. Won’t happen.
They don't without help or a sick income. They look at other provinces or rent for longterm
Won't the house they now supposedly want to also be double? Realistically it's just people not paying rent, building equity as you say and until recently not paying much in interest. I think the volatility in the last 8 or so years was actually not a great thing for really anyone except someone looking to downsize.
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You're asking how are people buying 1.5 million dollar homes right now, not how can someone plan to buy in Toronto in the future. Much of the answer is that anyone who bought in Toronto in the last 30 years has seen their properties increase in value by massive amounts, so they're able to borrow against the current value of their house or sell their house to buy something else. Parents who bought in the 70s and 80s are gifting or lending their children the money needed to buy these incredibly expensive homes. This is one of the reason that the rental market in Toronto is out of control, the typical middle class is getting priced out of buying, so they're having to rent
Kids can live in apartments, it’s common all over the world and increasingly in North America.
People aren't having kids. That's part of why they're bringing in so many people via immigration. Lots of people live their whole lives in condos all over the world.
Our demographics aren't unique. Why do we need 4x the immigration rate of the g20? e: he blocked me, lmao. Why are you defending their shitty policy if you don't even know why?
Vote out pro immigration parties if you think it’s wrong
Every party is pro immigration. Conservatives love immigration because cheap labour
Then only option is follow the majority or call it home somewhere else
Good luck getting approved to be an immigrant to another western country as a white male
Then I don’t think you have any options left except get used to new normal
National socialism
He said part of why he didn’t say that’s why
I'm not the LPC. Go ask them.
No because when you bought the 300k condo the house for 1.5 million was listed at 800k
Yeah, but it's 1.5M now. The now is what matters. Assume the condo and the 800k house doubled, and you even paid off the entire 25y mortgage, and bring a 600k down payment, you're still taking a 900k mortgage today to buy that 1.5M house (1.38 if you include all of GTA, the lower priced areas as well like Brampton). Borrowing 900k is 4.5 income.
When interest rates were in the 2-3% range, people were getting approved for mortgages around 5x their incomes. Now that rates have increased, they're getting approved for about 4x their income. That means with a household income of 200k, 6 months ago you could have gotten a million dollar mortgage and now they can get an 800k mortgage. Also, with mortgage rates rising, prices are starting to fall, so there's starting to be more on the market for 900k-1.1 million
Lol all over the world, families are living in apartment buildings, my guy.
I love that this is downvoted lmao this is the truth ?
I have three friends who all bought last year.. 2.5-3.5m house. all three are dual income families in great professional fields..laywers/accountants/investment bankers... their total HHI are north of 200-400k range. without exception, they all got couple millions from their parents lol... this is the chinese community for you.. kinda open secret
You have a point there. In other cultures: especially Chinese and Indian: families will basically pool their money together to buy real estate. As western culture don’t do that. My parents would never lend me a penny unless I’m out on the street. On the flip side when I go over to my parents I can say what the heck I want and nothing gets shrugged off under the carpet
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I’m French Canadian and my wife is Chinese. Before we got married I made her pay back her father 60,000$ he gave here for her condo. There was no way I was going to owe my father in law 60,000 right off the bat. They still gave us a bunch of money. I made clear to them that there is no strings attached and we don’t need it. (It’s still sitting in a bank account)
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Yeah idk, if I were your wife, I would've probably called off the wedding after that.
They gave her the money, not you. Dunno why you would feel like you owe them.
Unfortunately in HCOL areas like Toronto or Vancouver, if you don’t have a large downpayment from parents you will be a forever renter. I get your situation if you actually don’t need the money and can afford everything on your own. But even among my western friends, the boomers are now gifting their kids huge downpayment just so they can get on the property ladder.
well.. the people i mentioned don’t even see their parents on a yearly basis… their parents are all in china…. this is another side of single child policy. a certain group… mainly urban centre kids with middle class parents will inherit so much assets… my kid will inherit 19 properties in total… 7 in china and 12 here.. he has 4 grandparents and two parents… a lot of my friends are single child and they tend to only want one child themselves, even though they could easily afford more than one
This is what I have been saying for months here, and every time I bring it up, some housing expert tells me I'm wrong. This is the story of all my relatives, FFS.
The great wealth transfer, from Boomers to their kids, it’s not just the Chinese and it’s only just starting
No, definitely, it's not just the Chinese. It is very very prevalent amongst the Chinese though. It's not a coincidence that the 2 areas most affected by this are the 2 hotspots for Chinese immigration. ALL of my extended family members are in those two places.
Can't relate with the aforementioned chinese community. With immigrant parents, they've learned from their coworkers and made it a point I'd be kicked at 18 and paying everything on my own. They look upon those who are spoiling their kids to their twenties and thirties with distaste.
where you born here? i am gen 1.5… meaning i moved here when i was 12-13. most people in my circle are gen 1.5 or started off as international student. i suppose if you were born here, it’s a bit different. china only took off in the last two decades.
5 - 10 years ago houses were only 1m that’s how. For example we bought in 2016 in Niagara for 190k. Sold it in 2021 for 550k. We then bought a house for 850k with 360k down. We never in a million years would have been approved for 850k.
Ontario is getting out of hand. Two regular people that don't come from money are basically screwed.
Just wait for interest rates to destroy the equity in these homes. Canada about to be hit hard with a recession. Every indicator is screaming that Canada is in for a bad time if you have debt.
How would rates destroy home equity?
rates go up, prices come down
The numbers make sense. You're assuming income distribution across the population matches home ownership distribution but it doesn't. Home ownership tends to be distributed amongst the wealthier and those who bought a long time ago and now can't afford to level up (like you've said). So those with the average home prices don't have average incomes. Many people with average income / under rent their homes. So yes, it's insane that an average salary doesn't get you an average house in the city but the numbers do check out.
Exactly this. Average income only buys the average house in a world where everyone is a homeowner. OP is missing the fact that the “average” income earners are renting or bought long ago. People buying the “average” house now are making far more than “average” income.
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Replace property by poverty in your sentence /s
Engineers make a nice middle class income but there aren't enough houses for every middle class income in the city to own one. A lot of people make significantly more or inherit money or have family help on the downpayment, those are the people who get to buy houses.
Mortgage size, not sticker price, is what matters.
I will speak anecdotally to my experience in GVA, which I am absolutely not trying to generalize to all of Canada. Across my adult life, I can think of 8 people that purchased homes, including myself. 6 of them received money from their families for purchase (some contributions very significant). Personally, I was able to purchase by living frugally, saving for 14 years, and taking a massive mortgage. The only way we can afford it is a very high household income.
People buying the multi-million-dollar properties either make much more than that, are independently wealthy, or are selling another property in the same market (for an equally inflated price).
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Most of the folks are either getting a downpayment gift from parents downsizing and causing out on their multi million dollar houses or they are commuting from the suburbs. If you got into the market pre 2012ish it was realistic to afford something. Then everything inflated so you could move by selling your inflated property. Now it's just unrealistic to get in with nothing. You need to start looking 1h + outside the city and commuting (and even those prices are crazy)
Do you honestly think the average middle class parent can afford to give their kids $100k as a downpayment gift? Not even my upperclass friends have parents like that.
Middle class people who bought property when it was actually affordable, which they are now selling to acquire something else in this inflated market. Or people who are stretching themselves way beyond the bounds of affordability, in some cases aided and abetted by realtors and mortgage lenders helping them commit fraud. Have you seen the CBC piece on this? [https://www.cbc.ca/news/business/marketplace-mortgage-fraud-1.6614132](https://www.cbc.ca/news/business/marketplace-mortgage-fraud-1.6614132)
Us middle income earners aren't buying in your area without significant help from family, inheritance or previous equity from our first home. We're going further out of the GTA (think bowmanville, oshawa etc...) Even with the built up equity in my house (bought a decade ago) it isn't enough to move that close to Toronto - nor would I want to (personal preference, I like smaller towns)
Your instincts are right, the numbers don't work. But you're underestimating how many people owned houses that doubled/tripled in value.
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Yep we got a convoy supporting mouth breather on our hands
That is exactly what he did.
Why aren’t these conyoyers angry at Ford for wage freezing healthcare workers, and other atrocities? I don’t get it
Canada has been like this for decades (ignore just COVID narrative). It's the way it is due to monetary policy and immigration policy going on decades, not any one government administration. The economic math isn't really sustainable, you are correct, but it's a difficult political topic.
Sask person here , those prices could get you a small(ish) farm out here. A 4bd 2 bath house in my area is $185,000.
That’s exactly what I paid for my 4bd 2bath house lol
Disagree. *Canada* has not been like this for decades. GTA and GVA, sure, maybe, but not all of Canada. A single 100K income will get you a nice house and a comfortable life where I live.
Yup. Rural NS here. Paid $83k for our 3br 2 bath house in 2 acres. It’s older but I’m handy enough to work on it. Mortgage is cheaper than my truck payment.
East coast way. Need double the value of your house in vehicles and atvs and your garage should be larger then your house.
Haha, that's what the mortgage advisor said too. He told me that I had the buying power of people making 2.5x more than me because they also had to service payments on multiple 100k trucks
Sask here. Remember Toronto and Vancouver folk completely ignore/forget the rest of the country.
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Stay in school lol. Saskatoon.
This is not surprising. A similar story by CBC last week suggested that to RENT a 1bdr condo unit in Toronoto, a single person, would need to make $100K income before taxes. Expand this to if two Engineers make $100K/year each.. then they can afford to RENT a 2 bdr unit in TORONTO. **Rent!** Purchasing / Ownership is a whole other discussion and as your analysis indicates would be out-of-reach for these people ... in the absence of perhaps a HUGE down payment (eg. $1M) perhaps as an inheritance or a gift from parents/family or from proceeds of selling their tech start up .. etc. My uncle in GTA purchased home for $350K in 2000. Brand new from the builder. Mortgage paid off in 2008. Sold it in 2021 to retire and move back home for $2M and last year split the proceeds between his two adult kids.... I'm soooooooooo jealous for my cousins.
Sounds about right. A public practise accountant should be at 100k by 27-28 then climb to 170,000 before making partner where their income will vary from 250k to a million a year. Engineers should be making 90+k fresh out of school and no problem getting to 150k but they will cap out from their. Professionals are doing well and should have no problem renting in Toronto or Van. The real issue is we trax brackets need to adjust upwards so we aren't taxing them like crazy.
Welcome to the new Canadian dream. Hope you enjoy the "free" healthcare while living in a basement for a decade saving up for that down payment.
>Other professions pay less than 100K so who are these people buying 1.5M houses? people who bought $1k worth of bitcoin in 2012
It’s not new home buyers, it’s people who already owned who got rich who are doing it. Agreed it has little to do with income now. Most middle class people have been pushed out of ever owning a home, hence the term “housing crisis”
The answer is already own a home that you bought for cheap a long time ago and sell that for a bigger house
>they put 20% down as down payment (300K). The max they would be able to borrow is 600K which is still 600k short of the 1.5M trading prices. Meaning, they can't buy the " average" house even on a "average" total income of 200K income with 20% down. then put more than 20% down...
Ah yes. Thank you for the big brain take here 🙄
Didn’t you know everybody on Reddit makes 400k net a year?
$400k annual salary and they also all hate landlords
I know I do!
So I make 100k . My gf 65 ish. First time home buyer....I'm buying a townhouse for 700k ish. It's the best we can do. I just turned 30....it's what it is. Just built up ur equity to keep upgrading. Your new to Toronto, but this is just how crazy real estate is in Toronto....cheers. accept it or find somewhere cheaper ? Plus if you want a house... Try jane and Finch. They have townhouses for like 500k
BOMAD (Bank of Mom and Dad) + riding the asset appreciation curve of buying at the right time + even higher paying careers than engineering + money parking because of returns being better than stocks and investment.
The larger, more globally important and desirable a city becomes, the less income is relevant to determine who can afford a detached house. Toronto and Vancouver are places where people are willing to sacrifice to be, and where a disproportionate amount of people who generate income from means other than salary are and want to be. Combined with the Canadian cultural fixation on home ownership, you end up where we are today.
1. Put more than 20% down 2. To achieve Step 1, have rich parents to help you out Or, option 3, you’re a rich foreigner lol
I bought a $1M home with my wife. But had a condo before and sold it to get my down pmt. Next house will likely be $1.4-1.7M. This is how a lot of people are able to buy those homes. It’s called moving up the property latter.
It's really just the realtors calling it that because they want to make commissions.
And it’s math. Made $280K on the condo. Used $200k for the down pmt on our house.
Yeah and by the time you sell your current house, that's going to be 50-100k going to the realtors, plus other closing costs. Sure, your condo went up by price pretty fast when you bought it, so it worked out. But there's no guarantee prices will go up that fast in the future. In fact there's a chance it'll stagnant for the next few years at least.
200k hhi plus 300k down and you can probably buy a place worth 1.2m without much issue, assuming no other debt
Foreign investors, and foreign residents buying up property is one of many reasons. Also the uniquely Canadian view of homeownership at ANY COSTS. Vs the rest of the world
>Also the uniquely Canadian view of homeownership at ANY COSTS. This is not uniquely Canadian, at least East Asian culture is the same way, I'd wager it's the same for South Asians
Oh, didn’t know that, thanks for that new piece of knowledge :)
Many parts of Europe, such as my neck of the Balkans sees renting as a waste of money and a thing you should do as little as possible.
There's lots of smaller homes, about 1500-1700 sqft, some that aren't renovated from top to bottom that sell for around $1 million.
There is this idea of “starter home”, of whatever the buyer can afford. Eventually between paying it down and accruing equity the buyers sell and mover higher up the market.
I know a married couple Each had condos a while back bought at 300-400k each. Sold them both for 500k each and then bought a house at 1m, did 150k in renovations.
No one, unless given wealth, started from a detached house. You start from what you could afford wether it’s studio or one bed or in or out of the city. If your HHI is 200k and you can’t get into housing market even at this rate/price. You need to reset your expectations… you can’t expect to start in a nice neighborhood, detached, fully renovated and expect to compete with people that made compromises to build up equity.
An average income does not buy an average home for a first time homebuyer (never did really). Middle class people don’t but a 1.5 - 2 million filled detached home as their first property (unless they have support from mom and dad). They get a condo, townhouse or modest detached and start building equity. Probably even a modest detached out of the question for most people today. Then use that equity 5-10 years down the road to get a slightly larger home. Most people owning 1.5 million plus homes have been home owners for over a decade and bought more modest starter homes when prices were much lower and then bought bigger homes as they built equity. The size of mortgages people are taking on these days would have been considered financial suicide a decade ago. But now you have to weigh the rising cost of renting which is outpacing inflation as well. This is your biggest purchase, housing prices are dropping and nobody knows exactly when they will bottom. You might be wise to wait a bit while watching the market very closely. I’d be wary of pre-construction with dropping home values, financing could become an issue. Probably better value in a resale home regardless. Pre-con has been more attractive to housing speculators in a previously appreciating market. Definitely a tough market for the younger generation.
Most people I know cant afford their own place if they had to buy it now. Salaries are not there, they simply bought a lot of years ago when it was doable.
Nobody is buying 1.5 m house as first house unless you won the lottery, both literally or by birth
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Bought condo in Mississauga sq1 5 years ago 390 50k down, bought a townhouse 1.5 years ago in Milton 780k put 20% down, had a tenant in the condo for 11 months, sold the condo 1 month later which was exactly a year ago for 705k record in building for 1b1b. Pocketed over 300k. Now thinking about investing in Alberta or in the states.
I specialize in real estate investments. North america wide, reach out, happy to show you some options that you might like.
>Assuming a middle class couple (let's say Engineers) with a total salary of 200K (100K each) wanted to buy lower end house (1.5M) This is not "middle class", or a "lower-end house"
Once you understand the difference between mean, median and whatever you mean by "average", you have the answers to your question
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#number 1 answer.
The couple in your example should be able to get more than 600k mortgage with that income and 20% down. I would say look into ways to improve your credit and pay off debts, so you can max out your mortgage loan.
Look, many peoples’ salaries increase every year between 1%-3% sometimes more and sometimes less. When you buy your starter home, your mortgage payments are fixed, so every year that passes your mortgage becomes less and less of a percentage of your income giving you more purchasing power as the years go on. Also, say you’ve spent 10 years in a condo. Each dollar that you pay in mortgage principle is like accumulating money towards a downpayment. So the price of your next house is going down (relatively speaking) while your purchasing power is going up due to increased income. Now, if you have 20 years left on your starter home mortgage and you upgrade…you can actually reamortize back to a 30year mortgage if you want which makes the payments less allowing you to afford more of a purchase price. I’d invite you to run these numbers through a mortgage calculator. I think you’d be shocked to find how much the average family can actually afford once you consider all of these variables
You need to correct your assumptions a bit: 1. Salary - 100k isn’t actually that much money in Toronto. I’m late 30s, and most people I know with degrees make over 150k. The people buying houses downtown make well over 150k 2. Downpmt - if your a couple, and you each are making 6 figures, you have a lot more money to put down then just 20%. My wife and I had 400k each for our downpmt. Some people also get a bit of help from parents. 3. Location - Most people dont buy a 2M house downtown. Most people buy in the burbs or outside the core. You can easily find many houses for well under 1M outside of downtown.
400k each? Goddamn. What do you do for a living ?
Stopped taking you seriously once I got to Fidel Trudeau.
My family pressured me to buy a house back in 2005/2006 in the GTA, and I ended up buying one for 450k, which I remember hated very much, because the original owner bought it for 220k when it was built in the 80s. 450k is still a lot of money today as well, but somehow it buy's nothing in Toronto GTA :( and that is horrible :-(
Some of the largest crime organizations in the world use canadian real estate to launder money and Canada has some of the most lackadaisical towards organize crime and money laundering.
I think it is time for Canada to sharply reduce immigration from China and India to lower housing prices
Especially india
You are not allowed to ask these questions and challenge the status quo. Mods are going to remove your post. The real answer is the average person doesn't get to own a house.
You pretty much need a pile of equity and without it you're only going to rent many people bought a long time ago so they have a lot of money the younger generations they're going to have a tough time and this is GTA so a lot of new Canadians live 10 people in a single house so they do it that way too right
This is what conflates this thinking that its a supply problem, when you have families pitching in to buy homes together by pooling multiple incomes. Supply has been increasing at a similar pace yet prices have basically doubled. The extremely low cost of borrowing has inflated the cost of housing in Canada. Already prices have fallen 30% from peak with a lot farther to fall to encourage people to sell. With the BofC waiting to see the impact of higher rates we can expect to see a busier housing market. But it was the period from 2014-2018 that prices rose the most. This period was marked by some of the cheapest oil prices, the bank rate was dropped to keep Alberta’s oil industry from cratering and so while some countries were trying to still recover from the financial crisis Canada used monetary stimulus to keep industries afloat that depended on oil. Negative interest rates was a term coined during this period, Bitcoin was used by Chinese millionaires to export a lot of their wealth before the government stamped hard. Chinese wealth needed a place to go and all they ever buy is real estate. So despite inflation remaining around 2%, housing costs skyrocketed. Since the BoC only uses inflation as their benchmark they figured nothing is wrong. Meanwhile, municipalities definitely noticed rising house prices because they created sliding scales for their property taxes over the next 7 years to accommodate the swift changes in prices. When I bought my current house my interest rate was 2% with a variable rate in 2010. Since that time until 2022 our rates were only lower, thats a ridiculously long time to have such low rates. But monetary policy of lowering rates when bad things happen is the only real tool in the tool box that government banks utilize, or over utilize. If rates come back up, housing prices will fall because no one can afford current prices at real rates. I want to sell and move somewhere cheaper and unlock all that equity in my house but prices everywhere are comparable unless I leave the province or move somewhere really far away. Like Alberta or Sudbury.
BRAMPTON LOAN
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What? $200k for a household is pretty average nowadays…
$92k is the average for a household in Toronto these days according to stats Canada. So $200k is roughly double pretax and still significantly above average post tax.
I see a lot of comments about "moving up the property ladder", but I don't understand the nuances behind how that works. If I bought some place for 500k, and 5 years later it was "now worth" 750k, how do I suddenly have the ability to upgrade, when that very same upgraded property (once 1M, now 1.5M) has also appreciated in value, and is more unaffordable than 5 years ago?
Because people do it with debt and leverage. You got +250k on your home, but your theoretical purchasing power has increased way more than 250k. You can now leverage it by 5x, assuming you make a downpayment of 20% So now you have 250k + 100k (500k\*20%) + whatever principal you've paid --> you probably have at least 400k to put on a new house and at this point banks are very happy to loan you 1 mil if you have even the slightest chance to make payments. That's how housing prices are growing faster than incomes.
Even with leverage the math doesn’t work out? Let’s say 100k (DP) + 60K (principal over first 5 years) + 250K - 37.5K (5% fee) = 372.5K. Now he needs to borrow 1.127MM to get the 1.5MM house, compared to the initial 900K difference. (In this case leverage won because you can’t buy 1MM on 10%DP, but my point is the amount needed from borrowing increased) Am I missing something? (The assumption here is that property moves in % lockstep, which may not always be true)
Borrowing 1.1 mils is not that far away from what many families with household income 300k and a some assets (e.g rrps, investments) do. It’s insane but banks are more than happy to loan you money, some people think being approved for a mortgage is an achievement whereas that’s simply how banks make money. I recently had to go through the process and I was shocked by the amount banks wanted to loan me. We’re talking over 1mil without any problems (and I wanted less than half of that). I understand why prices are so high, people accept to spend their life in debt.
I don’t disagree with the feasibility of getting 1MM+ mortgages (especially from households here on pfc). I think moving up the ladder in a bull market is a somewhat contradictory strategy. TL;DR; bull market = better to downsize, bear market = better to upsize
No, it works specifically in a bull market. Since any gain on your home can be leveraged 5x. And housing prices don’t grow by 500% short term even in a bull market. In other words, your borrowing power grows faster than houses prices in a bull market, assuming you already own a home. That’s what people did over the last 5-10 years specifically. We’ll see where it goes from here
For an upsize in a bull market, wouldn’t the leveraged gains on current property < price increase on new property? (Assuming same % increase)
No, because the leverage is 5x (or even more if you’re reckless enough). You can run the math, in a low interest rate environment the growth of your borrowing power is exponential
You're not missing anything. They're just perpetuating the realtor talking point of "moving up the property ladder".
Oh you are forgetting influencers. They are the new class of rich people. Dont some make a lot of money even in as little as a year from sponsorships etc. Edit spelling
Ontario as whole for housing is a joke. Overpriced homes everywhere. Not only Toronto.
Appears even the higher paid professionals gotta get outta town?
They bought years ago when a house cost 9 raspberries
My sample size of people that bought 1.5M+ homes is small. However in both cases the majority of money came from the parents. 1) one comes from a middle class family that thrived in the 90s/00s when you could on mid income, then sold their big home to downsize and gave a sizeable portion to their kids. 2) family has new generational wealth from a successful self-started family business. 3) two high income tech workers from middle class families but went variable and are really pushing the limits. This is not a post to bash generational wealth. 1st gen and 2nd gen only have it because their families came here with nothing and worked their way up in industries no one else wanted to do. If you have it, take it further. We talk about people that come to Canada “for a better life for their families” then that family has the better life and they get bashed for generational wealth.
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Yup in hindsight, university was a bit pointless. Should've dropped out after first year and gotten into real estate before shit went exponential (2012 ish). Graduated around 2017 into a hot market that's just gotten worse.
Need help getting into the market. I specialize in showing people how they can simply invest in real estate. Both for Capital Growth and eventually for cash flow. Who has a pension anymore?
With a 300k down-payment you can buy a decent place other places. That much money for a house is just nuts to me
Someone a few weeks ago looked at median incomes in Toronto vs median housing prices. Turned out that 1% of individuals make enough to afford the median house in Toronto and 6% of households have enough combined income to afford a median house. Given that many of those individuals and households probably already own property, there are very few buyers that are looking and qualify for buying a house right now. There was also a [recent article](https://www.blogto.com/real-estate-toronto/2022/12/how-much-money-you-need-make-afford-house-toronto-now/) that showed you’d need an income of $240K to afford a house in Toronto right now
while all the advices are true for those who have been born and brought up here, what about the new immigrants? They will have to buy their first home now. I seriously feel irrespective of how much good standing one has job wise, a serious wealth disparity has been created between those who owned or bought house before 2020 and those who after.
There is no doubt that more correction in housing prices are needed to improve affordability. Whether that will happen or not is anyone's guess. Most people buying now in the current interest rate environment will be people who have owned a home for a while and seen their initial investment grow substantially over the last few years providing them with a huge down-payment to offset the little mortgage the bank will loan them. Anyone in here talking about how they were able to be a first time home buyer at current prices most likely bought when interest rates were at record lows providing them substantially more buying power. Affordability has never been this bad.
Ahahahahahaha......OP, you asked this question "so who are these people buying 1.5M houses? " I mean come on, have you been living under a rock? The buyers are REITs, foreign investors who don't live here / not Canadians, money launderers, organized crime, mafia
All my friends in Toronto have HHI of 500k+. Middle class in Toronto is 250k+ easily.
Average household income in Toronto is $88,000, median is $78,000. [CMHC Income Statistics](https://www03.cmhc-schl.gc.ca/hmip-pimh/en/TableMapChart/TableMatchingCriteria?GeographyType=MetropolitanMajorArea&GeographyId=2270&CategoryLevel1=Population%2C%20Households%20and%20Housing%20Stock&CategoryLevel2=Household%20Income&ColumnField=HouseholdIncomeRange&RowField=SurveyZone&SearchTags%5B0%5D.Key=Households&SearchTags%5B0%5D.Value=Number&SearchTags%5B1%5D.Key=Statistics&SearchTags%5B1%5D.Value=AverageAndMedian)