Is Buying a Condo in Toronto Worth It?
While a series of interest rate hikes over the course of 2022 sent the Toronto housing market into temporary shock, we remain confident that strong fundamentals and core demand will ensure the Toronto condo market will remain sizzling for years to come. In fact, 2023 presents fantastic buying opportunities to get into one of the world’s top real estate markets. We share the reasons why Canada’s condo capital will continue to grow and prosper in the long-term.
Is it a good time to buy a condo in Toronto in 2023?
The Bank of Canada’s interest rate hiking cycle in 2022 has temporarily cooled demand in the real estate market, and as a result 2023 presents a fantastic opportunity to buy a condo in Toronto while prices are relatively low compared to peak pricing in early 2022. Toronto has strong long term growth prospects and despite short term volatility, prices will continue to rise long-term because core demand for Toronto real estate is so strong.
Toronto has grown into one of the wealthiest cities in the world with over $1.2 trillion CAD in private capital, surpassing the likes of cities such as Paris and Frankfurt. 2022 prices will look like a bargain in 5-10 years as Toronto continues to attract capital and the city’s population continues to grow.
As single family detached homes become further out of reach for more Canadians each year, many would-be home buyers are turning to condos. The fact that condos are the most accessible form of home ownership bodes well for their long-term growth prospects.
Toronto accepts over 100k immigrants each year and these newcomers need places to live - many of them are interested in condos. Statistics Canada estimates that Ontario could see 4.2 million new residents by 2043, many of whom will likely end up in Toronto due to the high availability of employment and business opportunities.
Is buying a condo in Toronto worth it?
Buying a condo in Toronto is a fantastic investment due to the city's booming economy, growing population and scarcity of developable land. Historical price growth of Toronto condos has traditionally been between 5-6% annually. Between 2015-2022 however, the average selling price of Toronto condos has actually doubled due to the booming demand for real estate in the city combined with constrained supply. The fact is, because Toronto’s downtown core is adjacent to Lake Ontario, the amount of land available to build on is highly limited since it is not possible to expand the city southward.
Steady year-over-year price growth is one of the many reasons why buying a condo in Toronto is worth it.
Are Toronto Condos Overpriced?
Condos in Toronto are not overpriced because the high price point is a factor of high demand and low supply. Being situated on Lake Ontario limits the amount of available land in Toronto that can be developed, as the city can only expand North, West and East, Toronto (and surrounding area) is one of the greenest big cities in the world and is surrounded by the Oak Ridges Moraine and other protected lands that cannot be developed, further increasing the scarcity of developable land. The ever-increasing cost of Toronto real estate has pushed many buyers who would otherwise be in the market for detached homes into the condo market, further increasing the demand for this segment of the market.
Toronto’s cultural diversity, beautiful landscape and strong economy make it one of the most highly demanded big cities in the world in which to live and own real estate. Toronto is a very multi-cultural city home to a multitude of ethnic groups, and as such it draws attention from people all over the world. It is one of the cleanest and greenest big cities in the world with relatively low levels of crime and an abundance of lush green parks and forests. Toronto is Canada's financial hub and is now the third most popular home for tech companies in North America, following the San Francisco Bay Area and New York City. All of these factors combine to make Toronto an extremely attractive global city.
For those who feel home ownership in Toronto may be out of reach, we have a popular article that walks you through five proven strategies that will help you make your dream of owning a home in Toronto a reality.
How much is a down payment on a condo in Toronto?
The required down payment for a condo in Toronto is a sliding scale that depends on purchase price. For properties priced under $500,000, only 5% down payment is required. For condo properties priced between $500,000 to $1,000,000, buyers need to put down 5% on the first $500,000 and then 10% on the remaining balance above $500k. For properties prices over $1,000,000, 20% down payment is required.
How much Do I Need To Make to Afford A Condo In Toronto?
Based on a selling price of $689,000, you would need an annual household income of $118,000 to buy a condo in Toronto. At this selling price, you can expect a monthly mortgage payment of about $2500.
Lenders qualify real estate buyers using the GDS (gross debt service) ratio which measures a buyer's household expenses against their income. Expenses related to running the household (mortgage payment, taxes, utilities) are added up and divided by total income to arrive at a ratio to determine how much a buyer can afford to pay. To qualify for a mortgage your GDS ratio must be 39% or less, meaning that you are able to support all payments related to running a home with 39% (or less) of your gross annual household income.
What is Mortgage Loan Insurance?
The CMHC (Canadian Mortgage & Housing Corporation) allows buyers to finance up to 95% of the purchase price of a property. Through this program, lenders add a fee of 2.4 - 4.0% to the purchase price of a property, which is the cost of the insurance premium that helps protect lenders in the event of default. In return, this allows buyers to purchase a property with as little as 5% down payment. Mortgage loan insurance is only available for properties that cost below $1M.
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