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Real Estate

The Death of Toronto’s Middle Class

House price appreciation in Toronto is destroying the middle class.

The middle class in Toronto is dying. Some would argue it is already dead.

With the average home price in Toronto flirting with $1 million, most Torontonians have zero hope of ever affording a home. Nope. Real estate is now the sandbox for the rich and their heirs.

A Millennial or Gen Z with a top 10% income and aggressive savings plan will never afford a home.

Over the past decade, the average annual price increase has been over $51,000. This will only worsen as prices rise at an exponential rate. Indeed, over the past 12 months, the price of an average home in Toronto rose by over $81,000. This means if you didn’t save more than $81,000 over the past 12 months your ability to buy a house hasn’t improved.

Even with an astronomical 50% savings rate, a couple would need to have a gross income of $220,000 ($110,000 each) just to keep up with rising house prices. And they’d have to save/earn considerably more to put a dent into their proportional down payment.

This is next to impossible for families in Toronto – the median family income in Toronto is $86,600, according to Statistics Canada.

Nobody but the ultra rich are able chase home prices, and this real estate reality is spreading throughout Canada. Frankly, this is disgusting and will have a huge impact to the quality of life and stability of Canadian society.

Toronto homeowners are now made up of three classes of people. 1) True middle-class and working class people who bought their house decades ago. 2) The moneyed class. 3) Foreign speculators and money launderers.

Eventually, legacy homeowners will die off or sell their homes to fund retirement and we’ll be left with a housing stock fully owned by the rich. Where will the average person live then? Who the fuck knows.

Working class and middle class people lucky enough to have bought a house decades ago likely have a lot of equity. You’re probably thinking they should just take out a second mortgage and give their kids a couple hundred grand towards a down payment. This is what many people do, but it’s not without massive downside. Effectively, it simply spreads the cost of home ownership across generations. Moreover, it puts people who are approaching retirement severely in debt. The initial intent is that the kids repay their parents, but that’s highly infeasible while they still owe the bank $800,000. Giving the money back to parents might take decades, by which point their parents are working themselves to death to repay their second mortgage and afford retirement. So not only is the middle class collapse hitting Millennials and Generation Z, it’s impacting Generation X and even younger Boomers, who can no longer retire (a component of the middle class dream).

None of this takes into consideration that this massive pile of mortgage debt is balancing on a knife’s edge of low interest rates and presumed real estate price appreciation. Canadians are so indebted that the slightest reversal of these two assumptions can collapse the Canadian economy.

This is everyone’s problem. The middle class – citizenry with a decent paycheque and a decent quality of life – is the glue that holds society together. If the most basic necessity (shelter) is unobtainable – or only obtainable by taking massive risk and to the detriment of every other part of dream – there will be no middle class.

Fairness, justice, economic prosperity, social stability all require a solid middle class (and vice versa). The further stratification of society into a rich minority and poor majority will only lead to a mass population with nothing to gain…and nothing to lose.