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Why is Toronto Housing So Expensive?

Toronto, Canada's most populous city, is a hub for culture, finance, and a coveted real estate market. Recent years have seen a steep incline in housing prices, causing frustrations for buyers and renters alike. Let's seek to understand the factors that contribute to Toronto's expensive housing market.

High Demand in a Densely Populated Area

Toronto is home to over 2.7 million people, with the Greater Toronto Area (GTA) pushing that number over 6 million. Such dense population creates high real estate demand, specifically in downtown Toronto and its prime neighbourhoods — where schools, workplaces, and amenities are conveniently close. This demand drives up Toronto's housing prices because the market determines that people are willing to pay a premium for these conveniences.

Shortage of Housing Supply

In prior years, Toronto has experienced a housing supply shortage, which can be attributed to limited space for new developments, especially in desirable areas. There are strict urban growth boundaries and zoning laws that limit where and how much new housing can be built, contributing to the shortage. Increased demand coupled with a limited supply naturally results in higher prices.

Foreign Investment

Canadian real estate, and Toronto's in particular, is an attractive investment for global investors. International buyers perceive Canada’s property market as stable and profitable, so they buy properties as investments, often leaving them unoccupied. This contributes to a decrease in housing availability, inflating prices further.

Growth of Tech Industry

Toronto's tech industry has seen impressive growth, attracting a significant influx of high-income professionals. Companies like Google, Amazon, and Shopify have established offices here, creating higher wages and a workforce that can pay more for housing. This bolsters demand, further accentuating the city's escalating housing prices.

Low Interest Rates

Low interest rates make it more affordable for people to borrow money for property purchases, which inflates demand. Furthermore, investors tend to turn to real estate as an investment option when interest rates are low as opposed to putting their money in savings accounts or bonds that yield insufficient returns due to low interests.

Inflation and Cost of Construction

Inflation and the rising costs of construction materials, labour, and land have also impacted Toronto's housing market. The costs for builders to construct new homes inevitably trickles down to prospective buyers, driving up prices in an already expensive market.

Conclusion: A Multitude of Factors

The high cost of housing in Toronto is a manifestation of various interconnected factors – economic, demographic, and political. It's clear that Toronto's appeal attracts demand, but with limited supply, the scales tip towards increasing prices. Understanding these dynamics is crucial as it directs future policies and plans for the city, with the goal of making Toronto’s housing market more accessible and affordable for everyone.