If you read the Globe and Mail or CBC’s coverage of the Canadian housing market, you’d think this country was one of the most expensive places on earth to live. While that may be true for the two hottest housing markets that are grabbing headlines (Toronto and Vancouver), the reality is the rest of the country is entirely different.
I understand why Toronto and Vancouver get all of the glory. For one thing, a significant portion of our population calls these two cities home. For another, headlines like Cool off hot housing markets, OECD tells Ottawa all but guarantee page views.
The coverage these two cities receive in mainstream media is not misplaced. House prices are going bonkers there. In the GTA, prices for single detached homes have advanced by at least 10% year-over-year, rising from an average $709,487 in 2014 to $910,375 this Spring. The full effect of these crazy home prices was not apparent to me until I read over this infographic from LowestRates.ca. Once I read it, I realized: you all are crazy, Torontonians!
Sidebar #1: (I say that with love, I have many friends who live in Toronto, and it IS a great city)
Since I hope to become a homeowner in the next few years, the idea of having to pay almost a million dollars for a single detached home makes my heart hurt. Having to save at least $66,038 for a 5% down payment, not including closing costs? That’s just downright depressing.
Real Estate Is Local
It’s easy to forget that real estate is all about local markets. What is a hot and heavy market in Toronto, can be a sluggish and settling market elsewhere.
While you may be in a hurry to buy in Toronto before you get priced out of the market (because prices will never go down?!), that is not the case here in Halifax.
Here in Halifax, the average price is for a single detached home is $286,611, down from $293,000 last year, or decreasing about 2%. Our market is settling, and prices are declining, which is good news for buyers who plan to purchase and hold for a long time (me).
In fact, my target purchase price is right around the average home price in Halifax, so I thought I’d compare what it takes to buy the average home in my seaside city, compared to the madness of inflated prices in Toronto.
I’ll be using the same parameters as the LowestRates.ca infographic:
Minimum Down Payment
To buy an average home in Halifax, I don’t have to worry about the new down payment rules for homes priced over $500,000. On a $286,611 home, I’d only need to put down 5%, which is $14,331
Sidebar #2: (I don’t plan on buying a home with only 5% down, but I want to make an apples-to-apples comparison.)
Mortgage default insurance on a $286,611 home would be $9,802. While I don’t technically consider mortgage default insurance a closing cost, since you can bundle it into your mortgage, the infographic has it listed as a closing cost, so I will too.
As a side note, if I bundled $9,802 into my mortgage, I’d only have $14,331 – $9,802 = $4,529 in equity into my $286,611 home.
$4,529 in equity on a $286,611 home is only about 1.6% equity – which is why I’m not keen on only putting down 5% for a down payment.
It wouldn’t take very many years of 2% price declines before I’d be underwater on my mortgage!
Land Transfer Tax
In Halifax, I’d have to pay a land transfer tax of 1.5% of the home’s value, which would be $4,299.16
Admin fees is a general estimate and covers stuff like the home appraisal, lawyer’s fees, and the home inspection. We’ll estimate $2,000 for this.
So to buy the average $286,611 home in Halifax, I’d need at least:
- Down payment: $14,331
- Mortgage Insurance: $9,802
- Land Transfer Tax: $4,299.16
- Admin Fees: $2,000
- Total Up Front Cost: $30,432.16
$30,432.16 in Halifax, compared to $131,000 in Toronto (the 5% minimum down payment closing costs)
Not bad! But can you buy anything decent in Halifax for $286,000? I say yes. About a month ago my husband and I fell in love with a 1,000 square foot two bedroom home about a block north of where we live now.
It was in solid condition but could still use some work (think renter’s beige walls and builder grade carpet covering hardwood floors) but had an unfinished full-height attic space (potential master suite) and a large dry basement.
It also had a south facing backyard, a two-car driveway, was on a quiet tree-lined street and was a 15-minute bus ride or 10-minute bike ride to downtown.
It was listed at $279,000 and sold right away. Which is good, because if it had languished on the market, I might have bought it.
I Love Many Things About My City, But I Love the Housing Market Most
Ok, maybe not the most, but being able to afford a half-decent home a five-minute drive from downtown is a huge perk of this city of mine.
I’m not trying to brag or make anyone feel bad about their choice of place to call home, especially when so many of my friends and family are grappling with the fact that they may never become homeowners in their city of choice.
But the fact remains, in addition to the ample green space, the history, the arts and culture, and the dense, walkable nature of this town, I love that this is a place I can afford to put down roots.
How does your local housing market compare to the sky-high prices in Vancouver and the GTA? I want to know!