What kind of home will $1 million buy in Toronto? More than you’ll get in Vancouver, new report finds
In Toronto, $1 million can buy someone an entry-level home, but if they want to upsize it will be difficult to find freehold property in the city, a Royal LePage report says.
By Clarrie Feinstein, Business Reporter
Thursday, February 22, 2024
Forget that semi-detached house — the new starter home in Toronto is a $1-million two-bedroom condo or stacked townhome. That's according to a new report from Royal LePage, which found Toronto and Vancouver offered up the smallest properties with a $1 million price tag.
The average price of a home in Toronto has skyrocketed over the course of the pandemic, with an average home selling for $1.02 million — an increase of around 20 per cent in four years.
"Those shopping in the $1 million segment are mostly first-time buyers, newcomers, and young families who are looking to transition from a rental into home ownership," said Shawn Zigelstein, broker and team leader of Team Zold, Royal LePage Your Community.
The report analyzed what $1 million would get homebuyers in 10 major cities, looking at the number of bedrooms, bathrooms and square footage.
Vancouver had the smallest accommodation available for homes valued between $950,000 and $1,050,000 with 1.8 bedrooms, 1.6 bathrooms and 900 square feet, followed by Toronto with 2.8 bedrooms, 1.9 bathrooms and 1,218 square feet. Both were below the national average of 3.2 bedrooms, 2.1 bathrooms and 1,760 square feet.
If the home value increased to $2 million, Toronto buyers would only get an addition 191 square feet.
The reason why Vancouver is the worst ranked on the list in terms of size for value is due to that city's less varied housing stock, Shawn Zigelstein said, which is primarily made up of condo units. Toronto still has more semi-detached and detached homes available for sale, which is why there's an increase in available square footage. But, as multi-unit developments come online and the available supply tips towards condos, Toronto will increasingly head in the direction of Vancouver, he added.
"In Toronto, there isn't just the financial pressure that dictates what people can afford but also the product available," Shawn Zigelstein said.
"If people want to stay in the city they'll have to get used to the smaller property types. Maybe it means their two kids need to share a room or they won't have that backyard. But people learn to live differently based on what they can afford."
As a starter home, a condo or unit in a townhome might be desirable, but it will become increasingly difficult to upsize in the city as a household expands.
"The number of homes that sold over the $1 million threshold in the GTA has increased dramatically over the past six years," he said. "As home prices continue to rise, the lower end of Toronto's real estate market is facing increased demand and mounting upward price pressure."
That means homebuyers looking to upsize will have to look further afield to Durham Region, Milton, or Simcoe area.
"Maybe they'll be able to afford a home in Guelph or Waterloo but that means they're moving significantly further away."
What contributes to making home ownership difficult in Toronto is that once a home costs $1 million or more, a 20 per cent down payment is needed. But if the home costs $999,999 or less, they can put down a five per cent deposit.
"That one dollar difference can be a huge barrier in home affordability in cities like Toronto and Vancouver, where most properties are listed over $1 million," Zigelstein said.
"Someone could have saved up $50,000 for a down payment but not $200,000 and that greatly impacts first-time buyers."
It's the reason why more buyers are getting sizable financial help from parents and family members, the report said, and also why more people are moving out of expensive markets altogether — Calgary has seen a boom of newcomers especially from B.C. and Ontario.
“Finding employment has historically been one of the primary drivers for Canadians relocating to regions outside of major cities," said Karen Yolevski, chief operating officer, Royal LePage.
"Now, as housing affordability remains front and centre for many, we are seeing families move to new locations specifically to find a home within their budget, and prioritizing employment second."