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The most depressing sale I witnessed in my hunt to purchase a Toronto home with my now-husband four years ago was of a tiny east-end bungalow with a 20-foot frontage, no front yard and a kitchen in the crawlspace basement, suitable only for those who don’t mind sautéing on their knees. The house was squeezed so tightly between homes on either side that if the occupant sneezed with his window open, his neighbours would catch his cold. For two bedrooms and one bathroom, the sellers were asking $679,900, which at the time seemed reasonable (I can hear your gasps from here, Calgary readers) for a home a stone’s throw away from a subway station and steps to plenty of great restaurants and shops. I assumed that the house would sell for something in the vicinity of the asking price. Instead, it went for $1,050,000.

Home buyers risk ‘big trouble’ in overzealous bidding

If the market was sick then, it is in palliative care now. Not only have resale detached house prices in Toronto and Vancouver – the most inaccessible markets in the country – jumped 23 per cent and 13 per cent respectively over the last year (where the average selling price is $1.4-million and $1.6-million) but the frenzy has started to bleed into other areas, fuelled by rock-bottom interest rates and a severe lack of supply. Prices in certain regions of Ontario’s cottage country have jumped more than 35 per cent year over year. The average price of a home in Hamilton is up more than 27 per cent, and up 36 per cent in Barrie, Ont. Home prices in Montreal have skyrocketed 18 per cent year over year.

Rob Carrick: Big-city housing affordability is over. Now what?

When I was looking for a home, the astronomical prices were attributed largely to speculative buying by foreign investors. And though the market did cool after Ontario imposed a 15 per cent foreign buyer’s tax on the Greater Golden Horseshoe (following the B.C. government’s example), it did not revert to a point where even tiny bungalows with basement kitchens were suddenly accessible. Supply was and remains an issue, yet even record high condo construction in Toronto over the last few years could not keep up with demand (that is, until COVID-19 hit and Airbnbs were suddenly sitting vacant), with tens of thousands of people moving into the city each year.

The approval of multi-unit dwellings in residential neighbourhoods could theoretically ease the pressure, and would make for healthier cities overall, but Toronto and Vancouver can’t triplex-their-way out of their unaffordable realities. The conditions of the government’s First-Time Home Buyers Incentive (the total value of the mortgage cannot exceed $480,000 for now) renders it of little use to those hoping to buy in the most expensive markets, even if the mortgage limit is set to rise. Tougher mortgage rules have also made it harder for those with more limited means to first break into the market. And though additional controls such as vacancy and speculation taxes could have cooling effects on prices – as could perhaps the elimination of the capital gains tax exemption on primary residences, should any party want to get behind that idea and lose the next election – their effects likely won’t be substantial enough to fundamentally change the nature of the market. The real estate game in big cities is broken. Absent a truly radical policy initiative, there’s no going backward.

In retrospect, I was lucky to be looking for a home four years ago (but not as lucky as I would have been had I been looking four years before that), and finally landed a property after an exhausting and demoralizing search. But knowing what I know now about the total cost of home ownership – which includes the price of a new roof, parging repairs, property and land transfer taxes, emergency water heater maintenance, a plumber’s hourly rate, the cost to remove a family of skunks from under a backyard shed and the reliability of a furnace that is old enough to drink in the United States – I would probably look elsewhere if I was hoping to enter the market for the first time in 2021.

Indeed, many city-dwellers have already made their urban exodus – more than 50,000 people moved out of Toronto and nearly 25,000 out of Montreal between July 2019 and July 2020, according to Statistics Canada – as many employers shifted to a work-from-home model for the pandemic and the attractions of city living were shut down due to COVID-19. Rental living has its perks – especially when you can make use of urban amenities – and the cost of home ownership combined with exorbitant city prices arguably isn’t worth what you get for a tiny piece of land, even if it is close to a subway. Would-be first-time homebuyers should at least get an above-ground kitchen as a reward for scraping together a down payment and earning a qualifying income. If that was true in 2017, it’s probably about 10 to 30 per cent more true, depending on the neighbourhood, now in 2021.

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