Buying a detached home and the importance of patience

I have a confession to make - I’m slightly conflicted about the state of the Greater Toronto Area’s housing market. Is there actually an affordability crisis? Does the mortgage stress test actually need to be adjusted? 

A few weeks ago, I expressed my unpopular opinion about how the housing market is in great shape. I mentioned that I agree, there is an affordability crisis, and I also listed a few points about why the stress test is working properly in its current form, according to the Centre for Urban Research and Land Development. 

Recently, more evidence of a healthy market surfaced, and I feel like it should not go ignored. RE/MAX shared the results of a study on the GTA’s resale detached home market. They analyzed 65 Toronto Real Estate Board districts and discovered an uptick in detached home sales in 88% of the markets, and the average price went up in over half of them. 

Detached homes are the most expensive housing type in the GTA. Price growth was strongest in areas where detached homes were selling for above $1 million, and sales growth was greater in areas where average detached homes were priced under $1 million.

If sales and prices are increasing for the highest priced home type in the GTA, is there really an affordability issue? Obviously, there are people who can’t afford a $1 million home, but it seems like there are plenty who can. This may suggest that it’s simply time for small families in the GTA to adjust expectations.

Sure, there was a time when a young family starting out could get a small detached home as a starter home, but that was decades ago. The GTA’s population is booming, demand is strong and supply is low, and the economy is healthy. Would we find ourselves in an affordability crisis if more couples and families considered high density housing as a family-friendly option? 

One thing that I do think would make affordability worse is if more municipalities introduced a land transfer tax on top of the provincial land transfer tax. The City of Toronto is the only municipality that has an MLTT and honestly, I don’t understand it. We already have development charges, property taxes, and the provincial LTT...why should people moving to Toronto have to pay an MLTT on top of all that? 

An MLTT would impact affordability because it amounts to thousands of dollars due upon closing - it can’t be lumped into a mortgage to be paid off over the long-term. You need to have thousands, sometimes tens of thousands of dollars on hand in order to just pay MLTT. For example, a $600,000 home in Toronto would cost $16,950 in LTT and MLTT. 

I wouldn’t be surprised if the MLTT was one of the reasons more families are looking to 905 neighbourhoods to buy a detached home. A $1 million detached home in Toronto will cost $32,950 in LTT and MLTT. You can buy the same priced home in Oakville and only owe $16,475 in LTT. 

There’s one course of action I want to see unfold - it needs to be easier and faster to build high density housing near major transit nodes across the GTA, and there has to be floor plans and designs that accommodate families. This only works if more families in the GTA decide that they don’t need to live in a detached home (right away). 

I’m not saying you need to give up on your dream of owning a detached home, I just think it’s time to accept that there are steps of ownership people need to take and prepare for in order to get to the point of owning a $1 million+ detached home in the GTA. For example, start with a condo, move to a larger condo, then a townhome, then your detached home. 

We live in a world of instant gratification, but when it comes to the GTA’s housing market, we need to have patience and financial discipline.