Toronto-area real estate broker John Pasalis is warning that home affordability in the nation’s largest city is reaching a “crisis point” in the wake of the massive run-up in home prices through the course of the pandemic.
In an interview Tuesday, Pasalis, the President of Toronto brokerage Realosophy Realty, said the decoupling of economic and wage fundamentals from home prices has pushed prospective buyers to the very brink, and perhaps pushed them out of the Toronto market altogether.
“People are frustrated: I mean, if you’re making, [as] a household in the [Greater Toronto Area] $120,000, $130,000 a year, the reality is you can’t buy a home for your family. You can’t afford a three-bedroom home on that income, even though it’s well above the median household income, because there’s just no homes under that $700,000 price range,” he said.
“We are getting to this crisis point where a lot of families are considering just moving out of the city to other parts of Canada or to the U.S. because housing is so unbelievably expensive here, especially in markets like Toronto and Vancouver.”
While home sales activity has been moderating in recent months, the housing market has remained extremely tight in the Greater Toronto Area (GTA). In July, the average home price rose 12.6 per cent year-over-year to $1,062,256, while active listings plunged 35.2 per cent.
While much has been made about that lack of affordability hampering millennials looking to secure their first home of their own, Pasalis said that the strain on the Bank of Mom and Dad should not be underestimated as younger Canadians seek help from family members get a foot in the door in the red-hot housing market.
“I think there’s this misconception that homeowners constantly want to see this rapid acceleration in the value of the home: the reality is, a lot of homeowners have children or have grandchildren, and at least the ones we speak with are very, very worried about their kids or their grandkids ability to buy a home,” he said.
“Many of them find themselves stretched, where they have to cut cheques for $100,000 to their kids so they can get a down payment for their house. This is one of the challenges that we’re in, where most of the people buying homes are able to because they have parents, or grandparents who basically are giving them significant down payments for their homes. I do think this is creating a lot of pressure, not just for first-time homebuyers, but for a lot of the people who own homes and whose kids want to buy homes tomorrow.”
Pasalis said that policymakers are best served by looking for ways to constrain home price appreciation, rather than stoking demand with election-time pledges, especially given the pressures Canada’s immigration targets also put on the housing market.
“One of the reasons why house prices have exploded over the past five years, is because our population has exploded over the last five years. Our population is growing at a faster rate than we can actually build homes. I think these are some of the tensions that the federal government needs to look at when it thinks about how to slow down this rapid appreciation in home prices.”