It certainly wouldn't be the first place where the average person can't afford the average property. I think that we are seeing a fundamental shift across the globe where anywhere half-way desirable to live will become outrageously expensive. Especially if it attracts the attention of monied Mandarins looking for their plan-B, or yield-chasing baby boomers looking to fund retirement (because let's be honest, there are no other "safe" investment avenues with decent returns right now)
I have no clue what the deal is with Canada RE. You certainly don't move there for the weather, that's for sure.
A. Canada, like Australia, has ridden the commodities bubble which is now ending.
B. Canada has damn few places with jobs. Only 3 cities have over a million people, only 4 have 500k to a million. Everyone crowds into where the jobs are.
C. Canada has really bad weather. No one commutes 100 miles in the Canadian winter. Everyone wants to live close to work.
D, Canada has a GST/VAT tax plus local taxes. There are much higher taxes paid on construction. Work is taxed as well as materials.
E. Canada has strict zoning and growth boundaries. Growth boundaries are expended very slowly. Buildable land is expensive. Same problem in oz. On the plus side endless suburban sprawl ala America doesn't exist.
F. Canadians believe it's different here so they continue to be in a real estate frenzy like America 2007. That will be rudely disproved when commodities collapse. It's already happening in oz.
Toronto home buyers are paying a lot for the status of owning.
I live downtown Toronto across from the Art Gallery of Ontario on a quiet one way street in a public housing townhouse at $1,200 per month. The other townhouses built for sale in the same project go for over $1,000,000. We have two floors they have three. I have had in the last ten years: a new roof; new patio; new hardwood kitchen with wonderful ceramics; new appliances; new bathroom vanity, toilet and ceramic tiling; and new high efficiency windows all around. Also in addition to bigger back yards then the owners, we also have our own playground park and laundramat. Rent is controlled and the landlord is the city. We pay market rent. The opportunity cost to live next door in an owned occupied home is about $70,000 per year. They are going through the same renos we did, however they are paying for theirs. When we had a garbage strike a few years back. Our six townhouses had the garbage picked up, the rest of the homeowners had to cart theirs to the dumpsite.
Toronto residents want to own at any price. The condos next door are filling every corner with 50 story plus towers. Glass falls out weekly from the badly designed sites.
As a professionals it costs us about 10% of income to have our housing covered, I can't imagine ever owning unless I got a place for under $200,000 in this neigbourhood. Until then, likely stay here for life.
"Rent is controlled and the landlord is the city. We pay market rent."
Those two sentences make no sense.
Odd isn't it. Toronto like most cities have rent control on maximum increases each year. (about 1-2%) regardless who is the landlord.
On the other hand, the City of Toronto has over 164,000 apartments it rents out under Toronto Community Housing. The vast majority are subsidized rent geared to income. (well into the 90%). But a small number of units or buildings are owned by the City yet are rented to tenants the same as a private landlord. The rent is set by the market, taking into consideration the above restriction of rent controlled increases.
In fact, they are doing this again in a major development where they are mixing their apartment building with new condos. You can rent a five bedroom apartment for $1,689 new next to condos that would go for over $600,000 in the same complex.
So the difference between renting and owning like properties is extreme. src='http://patrick.net/content/uploads/2012/11/tch_block32_3754-s.jpg' width=326 height=480 >
Here is a 4 bedroom condo on the street over. condo fees are $651. Running Patrick's rent to own calculator, you have the renter having his investments cover the cost, so buying is not a factor. Now that is a 5 bedroom compared to a 3 bedroom condo. So a three bedroom rental is going to be even more lopsided for the renter
With over 70% owning real estate, rent control has not been a factor in keeping people from buying. Ownership is pure status play. However lots of new regs like amortization down to 25 years from a high of 40 and CMHC (Fannie Mae equivalent) has stopped insuring $1,000,000 plus houses, so 25% down and tightening of HELOCs. Generally, the feds have been trying to close the barn door after they let out the cows.
The markets in Vancouver and TO are starting to correct. Not sure if its a big bang or a slow wimper, but deflationary pricing on real estate is here.
Allowable rent increases in Ontario has actually gone up to 3.1% from an average 1.89%. However, lots of rentals coming on the market, (condo speckers) will see rents stay low or even decline in 2013. The condo owner will likely be below water in 2013 and rent their unit will only cover a fraction of the condo fees, mortgage and insurance. Hard to know how long most speculators can hold on.
2012 Rent Increase Guideline
Ontario's annual Rent Increase Guideline is based on the Ontario Consumer Price Index (CPI), which is a measure of inflation calculated monthly by Statistics Canada. This year, the rate of allowable rent increases for 2012 will be 3.1 per cent.
The guideline is the maximum amount that most landlords can increase a tenant's rent during the year without making an application to the Landlord and Tenant Board.
The 2012 guideline applies to rent increases between January 1 and December 31, 2012.
The average yearly increase from 2004-2011 was 1.89 per cent.
I remember about a year ago I came across some sort of Canadian bubble site. It was sort of like some of the California bubble sites of the 2004-2007 era: pictures showing houses and the crazy prices they were asking. Well- the houses and prices on this Canadian site ( I think this was for Vancouver) made the peak prices in the juicy parts of Palo Alto look like chicken feed. As in knock-down, falling apart, tiny little shack houses for well north of 1 million dollars. CRAZY!