Toronto is known for many things as Canada’s biggest and most bustling city. Some of these are positive, like its diverse culture, rich history, and fan favourite sports teams. Others, not so much, like the incredibly high cost of living that Torontonians get to enjoy.

Though the title for most expensive of all is often traded with Vancouver, there is no question that these two cities simply cost the most to live in among all in the country. However, in the case of Toronto, there are at least a few million more residents in the area, making these high prices an issue for many more people.

The cost of living in a given area is a reality that essentially everyone must think about on a daily basis. For those already in the city, the amount of money they need to get by naturally is a major consideration, while for the thousands of new residents that come to the city a year, the cost of living is a major factor that determines whether or not their move is going to work out.

And yes, even for real estate investors the cost of living is a major consideration. Now, if you’re considering investing in real estate in the city of Toronto in 2022, you probably aren’t the type of person who is struggling to make ends meet. However, you are likely hoping your investment performs well and makes you some money in the long run.

The cost of living in a given area can be a major economic driver and will influence local real estate markets in a large way. Understanding this figure can be important for real estate investors looking to conduct due diligence on their property purchases or those who rent properties they own.

In this article, we will explore just what exactly it costs to live in Toronto today, why prices may be going up or down, and ways you can help yourself to afford life in the big city.

What does it cost to live in Toronto?
The amount that a person spends to live in a given area is naturally going to vary from person to person. Each person lives according to their own lifestyle and means, and some may spend far more than others. For this reason, it can be difficult to determine exact figures for the cost of living, though various sources have created estimates based on their own data.

It is also important to know that the cost of living changes all the time, and it isn’t always going up. As prices fluctuate, it can cost more or less to live somewhere on a month-to-month basis. For this reason, data that is even a few months old may not be completely accurate, though it likely doesn’t move so fast as to make it unreasonable to use old data for a ballpark estimate.

With that out of the way let’s look at a few sources of what it costs to live in Toronto.

 

Renting
In the city of Toronto, it is estimated that about half of the population rents the home they live in, meaning rent prices are a major consideration when looking at cost of living. In general, home expenses for renters are some of the largest regular costs they must contend with.

The Toronto Regional Real Estate board tracks rent prices in the GTA on a quarterly basis, with the most recent data release available dating from Q2 of 2022. At that time, the average monthly cost for a one-bedroom apartment was $2269, up from $1887 in Q2 2021.

Rents in Toronto proper were very much on par with the regional average ($2279) while Innisfil reported the highest average monthly rent in the GTA at $2850 for a one-bedroom (though data indicates only 7 such apartments being rented in this period, compared to Toronto’s over 6000).

Recently, Statistics Canada released its most recent census data which reports on average incomes across Canada, though these incomes date from 2020, so they may have increased slightly since. At the time, the average after-tax median income in Toronto was $85,000.

To rent the average one-bedroom apartment for a year would cost about $27,350 or around 32% of this average salary The conventional measure for affordable housing is that it should not cost more than 30% of your income. Based on these figures it is clear that many Torontonians are well into unaffordable territory.

Owning a home
Owning a home may help you to escape the high cost of rent, though you trade that for even higher mortgage carrying costs. This is due in large part to the absolutely massive home prices in Toronto.. At their peak in 2022, home prices hit an average price of above $1.3 million in the GTA.

In recent months, however, prices have begun to fall in many areas, and the current average being reported by TREB is $1,074,754, almost $300,000 less than just months ago. While it may seem that this means the cost of a home has decreased in Toronto, this isn’t exactly true.

The actual price of a home is not the factor that will affect a homeowner most on their monthly bottom line. While home prices have fallen, this has been largely in response to increased interest rates, which actually eroded affordability further for Torontonians. Your home may be cheaper now, but the cost of paying your mortgage will actually have increased.

Down payment costs
Before you can buy a home you need to first surpass the barrier of a large down payment. Remember: On a home greater than 1 million dollars (as many in Toronto are), the minimum allowable down payment is 20%, or about $200,000.

Looking at the median income from before, and assuming a resident could save 10% of their yearly income (on top of the already high rent prices, and ignoring the effects of inflation) it would take them over 20 years to even have enough for a down payment.

Unfortunately, the median income earner in Toronto would likely have a hard time even being approved for a mortgage Toronto given their high prices. According to a recent report from Ratehub.com, a buyer of an average home in the city would need to make over $200,000 a year in order to service a mortgage.

Mortgage costs
Once you buy the home, you need to consider the carrying cost of a mortgage. Assuming a home of $1 million with 20% down and a fixed mortgage at about 5.5%, your monthly payments would cost over $4800 a month. This is before you consider all other costs of owning a home such as utilities, repairs, furniture, and more. With interest rates still rising, mortgage costs may continue increasing even further in the near future.

Property tax
One piece of good news about the city of Toronto is it does have some of the lowest property taxes in the province. Even given the high cost of homes, residents in Toronto pay less property tax than much cheaper homes in other municipalities. The cost is still not negligible, however, at about 0.6% of the value of your home, or around $6000 a year for the average home.

Other expenses
We’ve spent some time looking at the cost of housing in the city of Toronto. Though this is the largest part of most people’s spending, it is only one component of a household’s average monthly costs. Here are some more costs to consider.

Utilities
For most people their home is much more than just a shelter. We must pay for the various utilities that keep our homes comfortable and keep us connected, such as water, gas, electricity, internet, and mobile phones. These costs will vary a lot between homes and lifestyles, but the estimated monthly costs for utilities can add up in the range of $200 – $500 monthly.

While things like internet costs can vary based on individual plans, the rates for utilities like water, gas, and electricity will be the same across most houses in a given area, so your main option for reducing costs will be simply to conserve your usage.

Essential purchases
Then there are also the essentials of everyday life, such as clothing and food costs. Numbeo.com estimates that an average household in Toronto may spend up to another 30% of their monthly income on food and clothing costs.

Unfortunately, things like grocery costs have been on the rise in recent months, however, residents can save money by reducing food waste, opting for low-cost options, and taking advantage of sales and points programs.

Transportation
Finally, another major component of life in the city is transportation. Luckily, those who live within big cities have much better public transit options than in many other areas. Say what you like about the TTC, but you must admit that it is far better than the alternative of no transit at all, such is the case with many rural and remote areas.

With public transit, residens can get around the whole city quite easily via subways stretching from Union Station in Downtown Toronto to the far edges of the city, as well as an extensive system of bus routes. Though the routes in the TTC system cover the city quite comprehensively, everyday riders will inevitably be forced at some point to contend with delays and other headaches that come with public systems.

With a yearly plan, riders can get a discount on their monthly pass and access the TTC network for $143 a month. Without a yearly plan, a monthly transit pass regularly costs $156, and discounts are available for seniors, youth, and post-secondary students. While this can likely be much cheaper than a car based on how much you travel, it may also be much more inconvenient based on your lifestyle.

If you choose to own a car in the city you open yourself up to a whole new range of expenses. The cost of each household’s personal vehicle will vary on a number of different factors including the car you buy, financing costs, your insurance rates, your maintenance needs, and how much you drive. All transportation costs factored in this can easily cost a driver more than $500 a month.

How much do I need to make to live in Toronto?
If you are hoping to live in the City of Toronto or the GTA, figuring out if you have enough money will be a major deciding factor. As mentioned before, the most recent census reports an average median income of $85,000, meaning at least half of the city is at or below this line.

Now, naturally the more you can make the better, and those who are only earning minimum wage will find it much harder to get by than higher earners. Though it may seem intimidating, there are a number of benefits that can make a life in the city comfortable despite the costs.

One such factor would be a large number of housing options, allowing you to split your bills with various roommates (though you will still need to contend with low vacancies). Another benefit is a large number of jobs in the city, many of which are relatively well paying. And finally, options like public transit can help you to reduce expenses that may be harder to reduce in smaller cities and towns.

For those hoping to buy a home, you have a much harder task ahead of you. Saving a large enough down payment will likely be your largest difficulty in buying a home in Toronto, but in order to maintain your mortgage estimates indicate you would need to make a combined household income of over $200,000 or more. Again, similar benefits apply when buying in the city – lots of job options, and many different housing types and areas. If you plan on buying a family home and you work in the city, it may be worth considering becoming a commuter to enjoy less crowded, and less expensive, areas in the region.

Are prices going up in Toronto?
Across the board, the cost of living has generally been increasing in Toronto, like in most of Canada. The way we know this is due to the inflation rate.

Many people think that the rate of inflation is an abstract measure, but in reality, it is based on a well understood formula known as the Consumer Price Index (CPI). The CPI tracks a set basket of everyday costs that reflect the average cost of living. These include things we have mentioned here: food prices, clothing, housing, utilities, transportation, and more.

The CPI is a retroactive measure – it looks back at how prices have risen over a given period, meaning an increase in CPI indicates an actual rise in prices, not a hypothetical future increase.

Even as the Bank of Canada attempts to slow inflation, a lower inflation rate still represents an overall growth in prices. Inflation when kept under control, is not a huge issue – when growth is slower, however, people are able to adjust more easily and wages can keep up with inflation. When inflation is too high, it can quickly become too much to handle, thus recent efforts to slow its pace.

Why is rent increasing?
As mentioned before, the price of rent has been increasing for the last year or so as well. This is due in part to the increased costs of things like utilities and maintenance equipment that increase the costs of running a rental property.

On the other hand, the rise in rent can also be seen as a symptom of supply and demand. The supply of rental inventory in the city is very low, with less than 1% vacancy across much of the GTA. At the same time, the demand for homes is only increasing with the return of many post-secondary students, immigrants, and those wishing to live close to their jobs. There has also been an increase in the rental market from the many people being pushed out of homebuying by increased costs of buying.

Why are home prices falling?
The prices of homes in Toronto have actually been trending down in recent months. The largest cause of this downtrend is the rise of interest rates, which affects how much buyers are able to afford to borrow, putting downward pressure on the sky-high prices seen previously.

However, Toronto real estate has long held value very well. While the city has gone through down periods in the past, it has always turned around eventually, and the upward growth of prices in the city over the long term is a near certainty. Prices may be down temporarily, but they are unlikely to fall so low to be considered anywhere near cheap or even affordable.

Affordability tips for living in Toronto
For those concerned with the rising costs of living in the city, there are luckily some ways that you can help to make your lifestyle more affordable. Short of increasing your income, which is often out of one’s control, the best options are ways to reduce your overall expenses. here are some things to consider:

• Use public transportation whenever possible if you aren’t already. The cost of gas, parking and car payments can take a serious dent out of your finances.
• Reconsider your living arrangements. This could include living with roommates to help split bills, moving to a different neighbourhood if you are a remote worker or don’t mind the commute, or even leaving the city altogether if the high housing costs simply aren’t worth it anymore. Living as a single person will usually cost more than living with others.
• If buying a home, consider looking into first-time home buyer incentives and rebates, such as the land transfer tax rebate that can save you thousands on your home purchase.
• You may also want to consider alternate housing outside of the popular single-family home. Townhouses and condos are both abundant and much cheaper for example. Another option may be to co-buy with friends and family or live in a multigenerational living arrangement.
• If you own a home, think about renting out a portion of your property to help offset the costs of your mortgage. This not only helps you to save money but also adds much-needed rental inventory to the marketplace.

These days, the word real estate is often synonymous with structures. Homes, apartments, shops, factories and the like are all often thought of as real estate – but this is really only half the picture. Underneath every building in real estate is the land it rests on, which is itself a valuable asset and an opportunity for investors.

Though it may be a slightly different market with different players, there is just as much interest in buying vacant land in Ontario as there is in buying homes. The biggest appeal for vacant land comes down to its potential: a raw piece of land can be shaped into nearly anything the owner wishes.

For some, this means buying land to build their dream home. Others, like developers, will buy larger plots of land to build whole neighbourhoods or apartment buildings. A third use may be for commercial purposes, buying land for a new warehouse, factory, or shop for your company.

As the literal foundation upon which any building is constructed, the land is clearly important. That’s why it’s crucial when you plan on pursuing a construction or development project to ensure you understand how buying land works and how to choose the right land for you.

Why buy vacant land?
Vacant land can be as sound an investment as any other real estate purchase. Though we have a lot of it in Ontario, land is still a limited resource and will hold its value over the long term.

Vacant land won’t offer investors a lot of cash flow upfront, but there are near limitless options for improvements that can add value to the property. Buying vacant land may be an excellent option for those looking for an alternative to residential investments or someone looking to get into real estate developments.

The three types of vacant land in Ontario
Though empty plots of land may seem all the same to you, there are three distinct classifications of land in Ontario. These are vacant land, raw land, and crown land. These three classifications differ on a few points, such as the cost to buy, the cost to develop, how they are financed, and more.

The first is vacant land, which is land that usually exists within a municipality and has some existing utility services such as power, water, and septic, and is therefore prime for development. As a result, vacant land can be a bit more expensive than other plots.

The second type is raw land. As opposed to vacant land, raw land is almost entirely undeveloped and is usually found in more remote areas. There will be no utility connections, and there may not even be road access. Naturally, this offers great potential but also higher costs of development, and these pieces of land are a bit cheaper.

The final type of land in Ontario is Crown land, which is land owned and managed by the provincial government. In Ontario, 87% of our province is classified as Crown land. Crown land is primarily found in the North, with little Crown land existing south of Sudbury.

Crown land can be either purchased or rented from the government, but there are special processes in place that differ from your standard land purchase. We will cover this in more detail further on. Once you buy or rent crown land, there will also be restrictions on how you can use it.

Buying vacant land
Buying vacant or raw land is a lot like buying a residential property. You can find listings for land through online listing services. After, you may work with a real estate agent to make the purchase, and a bank can help you by financing the purchase. But, buying vacant land isn’t exactly the same as buying any residential property.

When buying land, it is important to consider what you plan to do with it and what properties will work for your purposes. For example, if you are planning on building a home, buying vacant land with existing road and utility access may be ideal, and you may want to purchase near a city of your choice.

Once you know what you are looking for, you can start looking for land listings in your area. Before you purchase anything, you must do some research on the property and local laws.

Unlike a home, it may not always be obvious what you are getting with land, and in terms of construction, there may be local regulations and zoning laws that will need to be accounted for. In some cases, it may actually be legally impossible to build the structure you want on a given piece of land, and you need to be aware of this before you buy.

Buying land often includes a land survey to determine boundaries, a geological survey, a soil test, and more. These are all crucial to determining the viability of your project.

Some real estate agents specializing in vacant and rural land purchases will be an invaluable help in this process, especially if you are inexperienced in the field or new to the area. Your agent may also be able to connect you with other people that will be essential to your land purchase, including land surveyors, real estate lawyers who specialize in vacant land, and developers or builders.

Buying or renting Crown land

Crown land has its own unique process for purchasing or renting that requires you to go through the Ministry of Natural Resources and Forestry. One crucial fact to know is that if you plan to build a residential home on Crown land, you will only be able to buy within the bounds of an existing municipality.

When you are approved to use Crown land, also as Occupational Authority, you will be granted one of the five following documents:

• A land use permit allows the property to be used for specified activities for up to 10 years but does not offer any ownership or interest in the land. No extensive improvements or developments may be made to the land.
• A license of occupation is similar to a land use permit but can last for up to 20 years and is transferable between parties (subject to ministry approval).
• A lease provides exclusive use of the land for as long as the lease is active. With a lease, improvements and developments can be made on the land, and the lease can be used as loan collateral.
• An easement is a limited lease generally designed for things like the construction of power lines, pipelines or roads. The ministry may sell any land with an easement, but the buyer will be subject to the easement holder’s rights.
• A freehold letters patent grants the holder of the patent private ownership and use of the land. This is the least restrictive form of occupational authority and is only subject to conditions like road construction rights and mining rights. In addition, the rights granted by a freehold letters patent can be transferred through a sale.

The price of purchasing or renting crown land will be based upon the determined market value of the property. For more information or to apply for disposition of crown land, visit the Ontario government’s page on how to rent or buy Crown land.

Financing for vacant land
Vacant land is generally seen as a less secure loan for lenders due to the lack of any extensive structures that hold value and the fact that borrowers of vacant land aren’t at risk of losing their homes in the event of a default. As a result, a vacant land loan will usually require a higher down payment of 30% to 50%. These loans will also likely have larger interest rates.

Raw land will usually have worse loan conditions than vacant land due to its high cost of development, low potential for returns, and low potential resale value if the bank must execute a power of sale.

Due to their higher risk, you may need to consider multiple lenders before finding one willing to finance your property purchase. This may include alternative lenders and private landlords.

Some buyers who already own a home may choose to instead purchase land with funds from their existing home equity, such as with a HELOC. This will secure the money against your home and allow you to access better interest rates. Other options for financing may include personal loans or seller financing.

Does vacant land have property taxes?

Vacant land within a municipality and remote land will be required to pay some property taxes. Just because there are no structures on the land doesn’t mean that your property won’t benefit from other municipal services such as roads and utilities.

Generally, municipalities have different tax rates for various property types, so your tax rate will differ from your home’s property tax cost. In addition, because there is no home on the property, your tax payment will likely be based on a lower appraised value.

In more remote areas, the province will administer its own Provincial Land Tax that is calculated similarly to a municipal property tax. For more information, see: Do you pay property tax on vacant land in Ontario?

There are also some other taxes and fees to consider on vacant land. One cost to consider when buying vacant land is the cost of land transfer tax, which will need to be paid on all transfers. In addition, some things like HST and capital gains taxes may apply.

Building on vacant land
Once you buy land, you will probably want to build on it. This is a whole other process with many intricacies to consider. However, if you make sure to purchase suitable land to begin with, this will help make things go a lot smoother.

Building a home can take up to two years and will require the help of many different skilled professionals. Your first step should be to shop around for quotes from other builders in your area and try to find a reputable one who you would like to work with.

Conclusion
Vacant land, like any real estate, can be an excellent investment and offers opportunities like no other. With opportunity comes many important decisions that will need to be made to ensure you get the right property for you.

As the foundation where any home is built, choosing the right land in the right area will be one of the most important decisions in any development or construction project. You must conduct thorough research before purchasing land in Ontario.

New home sales in the Greater Toronto Area (GTA) continued to ease in June.

According to a new report from the Building Industry and Land Development Association (BILD), the total new home sales of 1,694 units were down a notable 56% from June 2021 and 52% below the 10-year average.

The data is generated by Altus Group, BILD’s official source for new home market intelligence, and reveals a telling tale of the current climate — one where the frenzied pandemic-inspired real estate drama is decidedly a thing of the past (at least, for now it is).

“New home sales numbers for June reinforced the expected easing of sales from last year’s exceptionally fast pace,” said Edward Jegg, Research Manager at Altus Group. “With interest rates continuing to rise, high inflation, affordability pressures and general economic uncertainty, many buyers are adopting a wait-and-see attitude that is expected to run through at least the summer months.”

 

Sales of new condominium apartments — including units in low, medium and high-rise buildings, stacked townhouses, and loft units — with 1,519 units sold, were down 44% from June 2021 and 36% below the 10-year average. Single-family homes, including detached, linked, and semi-detached houses and townhouses (excluding stacked townhouses), accounted for just 175 units sold, down 85% from last June and 85% below the 10-year average.

While new home sales may be down, prices are up, says BILD.

The benchmark price for new condominium apartments in June was $1,189,894, which was up 12.4% over the last 12 months and the benchmark price for new single-family homes was $1,843,595, which was up 31.2% over the last 12 months.

Total new home remaining inventory increased compared to the previous month, to 11,639 units, comprised of 9,717 condominium apartment units and 1,922 single-family lots, representing 3.5 months and 2.7 months of inventory respectively. A balanced market would have nine to 12 months of inventory.

“While many prospective home buyers in the GTA are delaying purchasing the homes they need in the midst of economic uncertainty, our region’s fundamental challenges around housing supply remain unresolved,” said Dave Wilkes, BILD President & CEO. “Shorter-term demand-side economic conditions and inflationary pressures cool demand but increase the costs of new builds simultaneously. This will continue to impact overall supply. Now is the time for bold decisions by all levels of government to ensure we provide the housing supply and choice future generations of GTA residents will need.”