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Buying and owning a home in Toronto can give you and your family a roof over your head without all the restrictions that often come with renting. You’re free to do with your home what you please and are in complete control. 

But not only does owning real estate give you a place to call home, it also offers you a way to build wealth over time as the equity in your home grows and your mortgage is slowly paid down. 

If you’re thinking of buying a home in Toronto, you’ll want to do a little research first to find out how much the average home is going for in the city. Toronto is one of the most expensive real estate centres in the entire country, so be prepared to come up with a hefty down payment and take out a larger mortgage compared to other cities across Ontario and Canada.

How Are Home Prices In Toronto Determined?

Sellers would love the opportunity to pick and choose any price to list their homes at. After all, the goal for sellers is to make the most money possible on a sale. However, failure to pick the appropriate listing price based on the current market is a big mistake. 

It would be extremely difficult, if not impossible, to find a qualified buyer who would be willing to pay more for a house than it’s actually worth. A home that is listed far above its worth will likely end up sitting on the market for longer than necessary, causing the listing to become “stale.” And the longer a home sits on the market before getting an offer, the more buyers will start to think something’s wrong with it. 

Eventually, the seller will end up having to reduce the listing price to start attracting buyers, and often the price may have been brought down under its market value. 

That’s why it’s important for sellers to do their own homework to find out exactly what their home is worth and list it accordingly. The question is, how do sellers and their agents determine listing prices? 

Historical Sales

The best way to determine how much a home is listed for is to look at what other homes have sold for. While you could look at current listing prices, they don’t really tell the full picture, since they may not always be accurate. To get a true sense of what homes are selling for, you would need to look at actual sales that have recently occurred.

Real estate agents will pull a list of “comps” — or comparables — to help narrow down accurate listing prices. The homes that make this list must meet the following criteria:

  • Sold in the recent past, no further back than 3 to 6 months ago
  • Similar to the subject property in terms of number of bedrooms and bathrooms, dwelling type, and so forth
  • Located in the same neighbourhood, and ideally on the same block

Adjustments And Comparisons To Comparable Sales

The more similar the comparable properties are to the subject property, the easier it will be to come up with an accurate listing price. After all, if there’s an identical home next door that just sold a few days ago, there would be little work needed to establish a listing price. The seller could easily list around the same price as what the comparable property sold for.

But more often than not, some adjustments will need to be made. Adjustments require adding to and subtracting from the sale price of similar properties being used for comparison purposes. The additions and subtractions made are based on several factors and features, such as:

  • Type of dwelling (detached, semi-detached, bungalow, two-story)
  • Number of bedrooms and bathrooms
  • Square footage 
  • Layout
  • Age and condition of the home
  • Finished basement
  • Materials and finishes
  • Size of the lot 
  • Location in the neighbourhood
  • Parking
  • View (for condominiums)
  • School district

Once the adjustments are made, the seller can arrive at a listing price that is as close to the market value as possible. The more accurate the listing price, the better the odds of selling in a relatively short amount of time.

Average Price Of Homes In Toronto

The average home price in the Greater Toronto Area is currently $909,500, as of December 2020. That’s an 11% increase from the same month in 2019 when the average home in the city was $819,100. 

In the City of Toronto proper, the average selling price of a home is $979,224.

These prices are extremely high, especially when compared to other cities across the province of Ontario and across the nation as a whole. For comparison purposes, the average price of a home in nearby Cambridge, ON is $631,800, and further north in Thunder Bay, ON, the average home price is $237,582. Clearly, Toronto is one of the more expensive cities in the province of Ontario.

Comparing Average House Prices By City

Let’s compare even more home prices in other cities across Ontario to show how much more expensive Toronto is to buy a home in.

Home Prices 2020Home Prices 2019Year-Over-Year % Change
Canada$607,280  $518,761 17.1%
Barrie $613,200$497,500   23.3%
Cambridge   $631,800$520,300  21.4%
Guelph$672,400$562,000 19.6%
Hamilton-Burlington $756,000$622,100  21.5%
Kingston $504,712$424,926 18.8%
Kitchener-Waterloo $642,100$522,800 22.8%
Mississauga $959,000$847,000  13.2%
London-St. Thomas $483,900$391,700 23.5%
Niagara Falls $532,400$432,600  23.1%
Oakville-Milton $1,185,700$1,030,20015.1%
Ottawa $545,500$446,20022.3%
Sault Ste. Marie $224,960$180,53124.6%
Greater Toronto Area$909,500$819,10011.0%
York Region  $1,077,048$948,37314.2%

How Do Toronto Home Prices Compare To The Rest Of Canada? 

Clearly, Toronto has some of the highest home prices in Ontario. But how does it compare to the rest of the country?

Right now, the average price of a home in Canada is $607,280, compared to Toronto’s average of $979,224. From December 2019 to December 2020, Toronto’s home prices have increased by 11%, compared to Canada’s increase of 17.1% over the same period of time.

Toronto and Canada as a whole have experienced very healthy gains in home prices in only 12 months. The City of Toronto is one of the reasons why the province-wide average home price is so high, and Ontario’s home prices contribute largely to the high nation-wide average home price. 

Why Are Home Prices In Toronto So High?

Toronto boasts one of the busiest and most expensive real estate markets in Canada. Toronto is the largest city in the country and is home to international business dealings, offering plenty of employment opportunities to residents. 

Many people choose to live in and around Toronto specifically for this reason. As long as Toronto continues to be a hub of employment, its real estate market will always be expensive. 

Toronto is also a cosmopolitan city and is among the most diverse multicultural cities across the globe. The city features a large population of immigrants, which has long been fueling population growth. 

Right now, historically-low mortgage rates are also driving Toronto real estate prices up. Earlier in 2020, the Bank of Canada cut its interest rate to 0.25%, which impacts mortgage rates. When interest rates for mortgages are low, borrowing costs are much more affordable, which drives demand for housing and pushes home prices up.

Check out the average home prices in the rest of Ontario.

How To Avoid Becoming “House Poor”

When you eventually buy a home, you want to make sure that you still have plenty of money left over after your mortgage payments have been made and you’ve paid all other bills. Otherwise, you run the risk of becoming “house poor,” which means almost all of your money is going towards covering the cost of homeownership. 

To avoid falling into this trap, consider the following.

Save Up For A Big Down Payment

In order to secure a mortgage, you’ll need to put a down payment towards the purchase price of your home. Rarely will a lender offer 100% financing for a home purchase. Instead, lenders expect you to make an effort to put at least some amount of money towards the purchase of a home in the form of a down payment.

The down payment required will depend on a few things, including the following:

  • Type of mortgage you apply for 
  • Purchase price of the home
  • Loan amount
  • Your financial profile

Generally speaking, the minimum down payment amount you can make is 5% of the purchase price of the home. The more you put down, the lower the loan amount will be required. Lenders prefer to see down payments much higher than 5%, since this will lower their risk. Plus, a lower loan amount taken out means lower mortgage payments for you, leaving you with more money in your pocket every month.

Before you buy a home, take the time to save up for a sizable down payment amount so you can minimize the amount of money you eventually have to borrow and reduce your monthly costs of homeownership.

Understand What Homeownership Costs

There’s a lot more that goes into owning a home than just your mortgage payments. While your mortgage will likely be your biggest debt payment, there are a bunch of other homeownership-related bills that you’ll need to cover and budget for, including property taxes, home insurance, and utilities.

Just because your lender approves you for a certain loan amount doesn’t necessarily mean you should take it. Instead, you may be better off applying for a loan amount that’s lower than the maximum amount you’ve been approved for to avoid stretching yourself too thin financially. 

A good rule of thumb to follow is to make sure that your mortgage payments do not use up any more than 30% of your income. For instance, if you earn $7,000 a month, then your mortgage payments should be no more than $2,100 a month. 

You should also calculate your debt-to-income (DTI) ratio, which is a measure of your mortgage relative to your monthly income. Ideally, your DTI should not exceed 40%, otherwise you may find it more difficult to get approved for a mortgage. And even if you do get approved, you may find yourself struggling to cover all mortgage payments.

Maintain A Healthy Credit Score

Several factors play a role in your ability to secure a mortgage, and your credit score is one of them. Not only does your credit score determine your ability to get approved for a home loan, it will also determine your mortgage interest rate.

A lower mortgage interest rate means that you will pay less in interest over the life of the loan, and therefore your overall mortgage will be cheaper. A good credit score can ensure that you are offered a lower rate, helping you save money on your mortgage payments. 

If your credit score is not as high as it could be, consider taking some time to improve it before applying for a mortgage.

Final Thoughts

Buying a home is a big deal. You’ll be spending a big chunk of change on a home purchase, especially in the City of Toronto where home prices are extremely high relative to the rest of the country. Be sure to take the time to get your finances in order and boost your credit score, and only apply for a loan amount that your current budget can comfortably handle.

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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