If you have tried getting a house in Ontario, Canada, you must have asked yourself the unavoidable question “why are houses so expensive in Ontario”
The average price of a detached home in the GTA was $1.3 million in 2019, while the average price of a condo was $563,000.
In the rest of the province, the average price of a detached home was $800,000, while the average price of a condo was $450,000.
And of course, this has drastically increased over the last few years and has in no way shown any sign of coming down.
It keeps heading off the roof, looking like it isn’t a situation that will change anytime soon.
This makes one wonder why it is so, why are houses so expensive in Ontario, and almost not affordable.
We will take a clear look at this situation in this guide, our target is to help you understand the cause of the hike in the housing market in Ontario Canada.
And what the future holds if nothing is done urgently.
The housing market in Ontario Canada
If recent studies in the housing market in Ontario Canada is anything to go by, there is a higher surge in the percentage of the price of housing in the last two years than in the previous 5 years combined.
According to the latest data from the Canadian Real Estate Association, the average price of a detached home in Ontario was $822,681 in May of 2019, up from $746,977 in the same month the previous year.
This is a significant increase, and it shows that demand for housing in the province is strong.
As housing prices continue to rise, it is becoming increasingly difficult for people to find affordable homes in Ontario.
This is especially true for first-time home buyers and low-income families aren’t having it play out smoothly.
As a result, many people will be forced to move to other provinces or face homelessness.
Well, we hope it doesn’t get to this point,
The government is aware of this problem and is working on a solution but what is the cause of this spiking increase in housing pricing?
Why are houses so expensive in Ontario?
Why are houses so expensive in Ontario?
Houses are expensive in Ontario Canada because there is high demand for houses than the supply of houses, the cost of land for building new houses is high, most government policies make it difficult to build new houses, cost of constructing new houses is high, there is also increase in population in Ontario which in return increases the demand for houses.
Other factors such as low-interest rates, foreign buyers’ taxes, and the cost of labor have also contributed to the increase in the price of houses in Ontario.
Here is a little detail on how these factors affect Housing prices in Ontario Canada
High demand for houses than the supply
One of the main reasons why houses in Ontario, Canada are expensive is because the demand for housing is higher relative to the supply of houses.
(Simply put, there is high demand for housing with very few houses available)
This imbalance between demand and supply has caused prices to skyrocket in recent years, making it difficult for many people to afford a home.
In Ontario, you have a situation where there are limited houses with many people trying to pay for them.
Due to the dearth of accessible options, many prospective buyers are scrambling to make competitive bids on the houses they do locate.
The only beneficiary in this situation; is the house owners who in response to the high demand for their properties.
Place a humongous amount of money on the houses, and of course, the highest bidder takes it.
Even with the ridiculous amount, they have many flocking to pay.
It is a situation of limited availability of a necessity, we can’t do without shelter, and in this case.
People are willing to pay anything to get a roof over their heads.
And until the demand is met by a sufficient supply, it isn’t changing anytime soon.
Influx of foreigners
The population of the province has been growing steadily for many years.
As of 2019, there are over 14.57 million persons in Ontario with the number projected to increase in the next five years.
With people moving to Ontario from other parts of Canada and other countries as well.
It has created a situation where more people are looking for homes than there are homes available which has led to a corresponding increase in property prices.
Though the increasing population has led to a surge in foreign investment in recent years.
It has made it difficult for many residents to afford a home, as they are being outbid by deep-pocketed investors.
Who are gradually taking over the housing market in Ontario Canada
Though, the government has introduced several measures to try and cool the housing market.
These include a foreign buyer’s tax, which is designed to discourage foreigners from purchasing property in the province.
While these measures have had some success, it remains to be seen if they will be enough to make housing more affordable for Ontarians.
While we look forward to that, the results so far haven’t proved positive.
The more these laws take effect, the more foreigners are ready to pay to buy houses and in return sell them at a higher price.
As it stands, foreigners pay higher to buy houses, they pay extra on taxes and other policies, while this may look great on the outside.
On the inside, once they are done paying huge amounts to purchase housing, they sell these houses at prices even way higher than the excess they paid to acquire them.
Of course, every business person wants to make a profit.
Unfavorable Ontario government policy.
Another factor that contributes to high housing prices in Ontario is government policy.
The Ontario government has implemented several policies that make it difficult to build new housing
These laws and policies also make it difficult for new home buyers to enter the housing market in Ontario Canada.
For example, the above-mentioned foreign buyers’ tax imposes a 15 percent tax on properties purchased by people who are not Canadian citizens or permanent residents.
This tax is designed to cool the housing market and make it more accessible for Ontarians.
However, it has had the opposite effect, as many would-be buyers are simply priced out of the market.
In addition, the province has a land transfer tax, which is a tax that must be paid when a property is bought or sold.
This tax is based on the value of the property, and it can be quite expensive for high-end properties.
Another such policy is the Greenbelt Act and the Growth Plans for the Greater Golden Horseshoe.
The high cost of land in Ontario
Another reason why houses are so expensive in Ontario is the high cost of land.
The province has some of the most expensive lands in the country, and this is one of the main factors driving up housing prices.
In 2017, one acre of land in Ontario was valued at 10,310 CAD, this has increased to 15,231CAD in 2021 according to Statistics Canada
The price of land is determined by several factors, including demand, location, and availability.
In Ontario, the demand for land is high, while the availability is low.
This combination has resulted in a high cost of land, which in turn has made housing more expensive.
Those who intend to buy land and build new housing can’t find land and if found, they are quite expensive and almost unaffordable.
Due to a lack of land to build new houses, intending tenants are forced to make do with the limited houses that owners place ridiculous amounts on.
Or course, you’ve got to pay, else, you’ve nowhere to stay.
With many seeking to take the very few available houses and no land to build new ones, the Housing prices in Ontario Canada keeps going high.
Leaving tenants with no option but to pay up.
High taxes on housing in Ontario
The Ontario government has several different taxes that apply to owning a home in the province.
These taxes can add up to thousands of dollars per year, making it difficult for many people to afford a home in Ontario.
See Also: Why dual citizenship is bad
One of the biggest expenses for homeowners in Ontario is the Land Transfer Tax, which is charged when you purchase a property.
This tax can range from 0.5% to 2% of the total purchase price of the home, and it is one of the biggest factors contributing to the high cost of housing in the province.
Another significant tax expense for Ontario homeowners is the Provincial Land Tax.
This tax is based on the value of your property, and it is levied every year.
The amount of tax you owe will depend on the municipality you live in.
These taxes and other expenses levied on house owners discourage Ontarians who intend to build houses in Ontario from doing so.
Living them with the rental system as the only means of housing.
High cost of borrowing money to finance housing in Ontario
In addition to the high price of housing, another reason why houses are so expensive in Ontario is the high cost of borrowing money to finance housing.
Mortgage rates in Ontario are some of the highest in the country, and this makes it very difficult for people to afford to house.
As a result of the high cost of borrowing money, the price of homes in Ontario has increased significantly.
This is especially hard on first-time home buyers who are already struggling to afford a home in the province.
If you’re thinking of buying a home in Ontario, be prepared to pay a high price.
High cost of construction in Ontario
Another reason why houses are so expensive in Ontario is the high cost of construction in Ontario.
The province has some of the highest construction costs in the country, which drives up the price of new homes.
According to a recent report by CBC News, the cost of construction in Ontario has increased by about 30% in the past five years.
While the Canadian Home Builders’ Association reports that the cost of building a new home in Ontario is about 20% higher than the national average.
This is due to a variety of factors, including the high cost of land, the high cost of labor, and the high cost of materials.
As a result of these high costs, new homes in Ontario are often priced out of the reach of many buyers.
This puts even more pressure on the existing housing market and drives up prices even further.
It’s becoming increasingly difficult for people to afford a home in the province, which is preventing many young people from getting a foothold in the housing market.
All of these factors combine to make housing in Ontario one of the most expensive markets in Canada.
There are several ways to address this problem, but it will require some time and effort to fix.
In the meantime, we can only hope that the trend of increasing housing prices will slow down or even reverse itself.
Summary of why houses are so expensive in Ontario
There is no doubt that houses are expensive in Ontario and there seems to be no end to it.
There are several reasons why housing prices in Ontario are so high.
First, the province has a strong economy and a high standard of living.
This attracts people from all over the world, who are willing to pay a premium for property in Ontario.
Secondly, the province has strict zoning laws that limit the supply of new housing.
This creates a situation where demand exceeds supply, driving up prices.
In addition, there is high demand for housing in the province. The population of Ontario is growing rapidly, and there is not enough housing to meet the demand.
This has caused prices to rise.
Furthermore, the price of land has been rising steadily for years, and this has made it difficult for people to buy homes.
Lastly, Ontario has a land transfer tax, which adds to the cost of buying a home.
All of these factors put together are the reason why houses are so expensive in Ontario, Canada.