Canada's Condominium Magazine

Is Toronto unaffordable? Relative to comparable world cities 2017 data indicates Toronto is a good value at current prices

Toronto home price increases have created an affordability crisis. Affordability, in part, is the rationale used by the Ontario Government to bring in significant market-dampening tactics. Although these rules have dramatically (and most likely temporarily) put the brakes on market sales, price continued upwards last month (June, 2017). According to the latest TREB data condo prices are up 23.7% in the 416 Toronto. [See this feature reporting on the June numbers>>]

Condo.ca researchers compiled data for mid-2017 (averaged) for multiple city centers of comparable weight in terms of economy, size and urban livability. These numbers compare the downtown core prices per square meter (not foot). Non-downtown condos are compared below.

 

How unaffordable is Toronto? Data indicates it might be priced right

Affordability indexes help analysts determine if home prices are unaffordable. Current mid-2017 data compiled by Condo.ca from various sources, indicate that relative to other financial-business centers around the world, Toronto is a relative bargain. It may not be affordable to many of us, but if we can afford it, there is good reason to invest in Toronto properties.  On the worldwide stage it is still a good place to invest in a home — or even, despite Ontario’s new speculator tax, as an investment. This relative affordability is one reason international investors targeted Toronto’s market, and likely will continue to do so.

On most indexes or comparables — price-to-income ratio, mortgage to income ratio, affordability ratio — Toronto is attractive when compared to the likes of Vancouver, New York, London (UK), Paris (France) and Hong Kong.

 

Price to income ratio is one of the easiest ways to compare affordability between cities. The lower the ratio, the better.

 

Of course, compared to other cities — Montreal, Chicago, Winnipeg and so on — Toronto is less affordable. However, the fundamental value of Toronto is certainly there; in other words, there are sound reasons Toronto is so popular and expensive: financial center, thriving urban life, economic fundamentals, employment.

 

On affordability indices, Canada, and Toronto, are in the middle. Indicated on the map in red are dangerously unaffordable areas, in green are the most affordable, and in yellow trending less affordable, orange is not affordable. Data from Numbeo.

 

Numbers by the City

Here’s our Mid-2017 run down of condo numbers (and financial factors that play into affordability) based on various sources (all $ in Canadian dollars) for comparable cities worldwide (comparable in terms of economic centre, fundamentals, income, financial centre) [1]:

 

Price per square meter city center

Toronto $7216.28

Chicago (Toronto’s sister city U.S.) $4213.23

Vancouver $10,514.48

New York NY $15,774.27

London UK $26,6844.39

Paris France $14,154.00

Hong Kong $33,138.14

 

Price per square meter for condos outside of the main downtown areas.

 

 

Price per square meter outside city center

Toronto $5529.46

Chicago (Toronto’s sister city U.S.) $2404.31

Vancouver $7,121.27

New York NY $8883.57

London UK $11.836.11

Paris France $9169.59

Hong Kong $20,608.14

 

Average monthly NET income after tax.

 

 

Average monthly net salary after tax

Toronto $3516.16

Chicago (Toronto’s sister city U.S.) $4892.52

Vancouver $2950.01

New York NY $5826.44

London UK $3693.62

Paris France $3562.12

Hong Kong $3497.31

 

Various factors compared between Canada’s two hottest condo markets: Toronto and Vancouver.

 

 

Average mortgage interest rate yearly

Toronto 2.77%

Chicago (Toronto’s sister city U.S.) 3.88%

Vancouver 2.78%

New York NY 3.87%

London UK 3.19%

Paris France 1.89%

Hong Kong 2.24%

 

Mortgage as a percentage of net income isn’t great in any of the compared cities, but it is significantly lower in Toronto.

 

 

Mortgage as a percentage of net income

Toronto 59.52%

Chicago (Toronto’s sister city U.S.) 24.34%

Vancouver 96.59%

New York NY 76.10%

London UK 162.72%

Paris France 96.36%

Hong Kong 238.59%

 

Outside of the affordability index, if Income to price ratio is compared, Toronto and Canada are “in the green” in terms of worldwide comparison. See full data below.

 

 

Price to Income Ratio

Toronto 9.14

Chicago (Toronto’s sister city U.S.) 3.38

Vancouver 14.95

New York NY 10.58

London UK 24.04

Paris France 16.37

Hong Kong 28.42

Price to Rent Ratio (city center)

Toronto 20.76

Chicago (Toronto’s sister city U.S.) 8.45

Vancouver 26.11

New York NY 17.92

London UK 38.16

Paris France 37.73

Hong Kong 48.13

Full data by country summary (Canada #83):

 

[1] Sources: Numbeo, Statscan, Global Property Guide.

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