That average rent costs are rapidly rising in many of Canada’s largest urban centres isn’t a new narrative. As the cost of ownership housing also steadily increases, more would-be real estate purchasers are lingering in the rental market for longer; in fact, according to a recent survey by Canada Mortgage and Housing Corp., 31 per cent of first-time buyers reported remaining in the rental market for at least a decade before purchasing their first home.
That’s putting increased pressure on available rental stock, especially in markets where the vacancy rate is extremely low, there is a lack of new rental-purpose supply, and there is a prevalence of short-term rental and investor activity that further remove units from the market.
As a result, the cost of rental living is rising in major urban centres across the country. In Vancouver, the average one-bedroom rent rose 0.7 per cent to $1,987 in November, while Montreal rent growth soared by 8.1 per cent to $1,285. Meanwhile, the Toronto Real Estate Board reports that the average Torontonian could expect to pay $2,262 per month for a one-bedroom, while a two-bed unit approached the $3,000-mark in the third quarter of the year.
For those renting in these cities, could these steep shelter costs present hurdles to the ownership market? Is it possible to save for a sufficient down payment when rent commands a significant portion of take-home pay?
To find out, Zoocasa ran a study comparing rent costs to those of condo unit ownership. Focused on the City of Toronto, the data is based on lease rates for condo apartment rents and sold prices for condo units as reported by TREB in 35 neighbourhoods across the 416 region. The minimum mortgage down payment to purchase a condo was calculated for each neighbourhood, as well as the number of months of rent equivalent to that down payment amount.
From this, the study determined which neighbourhoods had the highest and lowest rent-to-homeownership-cost ratios, and the length of time it would take to save for a down payment in each, if the home buyer faced no additional shelter costs.
Now, while living rent-free isn’t a realistic scenario for many Torontonians, it could be a point of consideration for the 47.7 per cent of young adults that Statistics Canada reports dwell within the family home in the city. The numbers also illustrate the minimum financial commitment to purchase a home in each neighbourhood, as well as the cost of moving from renting to homeownership in each.
The numbers also identified in which neighbourhoods renters will face the steepest challenges when saving for a down payment, which is a prevalent issue for the city as a whole; according to the numbers, to purchase the average City of Toronto condo unit priced at $628,074, a home buyer would need to save $37,807, requiring a timeline of 14.7 rent-free months.
However, the study reveals there are pockets of affordability across the 416; in 13 neighbourhoods, home buyers not paying rent would be able to save the necessary down payment for a condo unit within 12 months. However, it should be noted that most of these neighbourhoods are located on the western and eastern fringes of the city, far from the downtown core and major transit corridors. They include West Hill Centennial Scarborough, Malvern Rouge, Kipling-Rexdale and Black Creek.
While there are a handful of luxury neighbourhoods where the savings timeline was extremely prohibitive – for example, upwards of 74 months in Yorkville Summerhill, a neighbourhood where the average unit sells for over $1 million – the majority of Toronto’s neighbourhoods actually fall within the 13- to 24-month timeline. These include Liberty Village and City Place, extremely popular multi-family residential neighbourhoods that boast a high prevalence of both renters and unit owners. In this slice of the city, the average unit fetches $713,000, requiring a savings timeline of 17 months. In the similarly popular neighbourhoods of Leslieville and Roncesvalles, the timelines are 24 months and 17 months, respectively.
Check out the infographic to see how months of rent compare to minimum down payment amounts in neighbourhoods across the City of Toronto.