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There’s a 25-per-cent-off sale going on in the housing market.

Just buy a home in the suburbs instead of the city. A pricing comparison of housing in and outside Toronto shows a consistent suburban discount for detached and semi-detached houses, townhomes and condos.

Suburban living brings its own costs, such as commuting. But on a pure house-to-house comparison, you could save hundreds of dollars a month in mortgage costs in the ‘burbs.

A Royal Bank of Canada study published Thursday mentioned high housing costs as a reason why the net outflow of millennials from Vancouver, Toronto and Montreal to other parts of the same province has more than tripled since 2015.

A recent poll from Toronto-Dominion Bank documented this willingness to buy homes in the suburbs, a small town or a rural location. Urban living was the top choice at 33 per cent of surveyed millennials in 2018, compared with 38 per cent in 2015.

TD found that the big draws for living outside the city for millennials are increased outdoor space, larger living areas and better affordability. The affordability advantage is big in the suburbs, just like the yards.

According to March data from the Toronto Real Estate Board, the average saving on housing of all types is 25.4 per cent when you leave the city proper, known by its 416 area code, and move to the surrounding areas known by their 905 area code. Here’s a breakdown:

  • Detached homes: Averaged $910,624 in the 905, 28.2-per-cent cheaper than the average cost of $1,267,598 in the 416.
  • Semi-detached homes: Averaged $680,501 in the 905, 33.3-per-cent cheaper than the average $1,020,561 in the 416.
  • Townhouses: Averaged $617,226 in the 905, 16.8-per-cent cheaper than the 416 average of $741,881.
  • Condos: The 905 average was $463,774, 23.2-per-cent cheaper than the 416 average of $603,969.

Cheaper homes mean smaller mortgages and lower monthly payments. Toronto’s average detached house price in March means a stunning monthly mortgage payment of $5,058 if you assume a 20-per-cent down payment and a five-year fixed rate mortgage at 3.49 per cent.

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There are a couple of benefits to the lower average detached house prices in the 905 zone around Toronto, the first being that you can buy with a down payment as low as 5 per cent. Houses that cost $1-million or more can only be bought with a down payment of 20 per cent or more, which means more years of saving before you can buy.

You’ll have to pay for mortgage insurance if your down payment is less than 20 per cent, but you’ll still save a lot every month in the 905 compared with the 416. The payment on the average 905 house bought with a 10-per-cent down payment is $4,214, which means a monthly saving of $844 compared with our 416 example with 20-per-cent down. Let’s see how much of that amount is left after covering the additional costs of suburban living, most of them related to transportation.

In Toronto, you might commute by public transportation and pay close to $150 for a monthly pass. Taking the GO train into the city from the suburbs would cost $300 to $400 or more each month, depending on how far from Toronto you live. On average, figure on paying an extra $150 to $250 per month to take public transportation from the suburbs to the city.

Maybe commuting in your own vehicle suits you better. The average monthly loan payment on new vehicles these days is close to $660 a month, a reflection of the growing preference for pricey SUVs over cars. If you decided to buy a small, fuel-efficient car for your commute, maybe you end up with monthly payments of $400 per month. Add another $200 or so per month in gas costs, based on a round trip daily commute of 100 kilometres.

If you’re buying in the suburb to get a bigger home, bear in mind that more square footage means additional space to furnish and maintain. Landscaping a bigger yard will cost you more as well.

Over all, it’s possible your $844 in mortgage savings could be mostly or entirely used up.

A suggested life plan for millennials who like urban living, but cannot or choose not to pay city house prices: Move to the suburbs to raise a family and then downsize to a more urban location later on. My wife and I are thinking about doing this and we see fellow downsizing boomers at every open house we visit.

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