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Homeowners priced out of trading up in Toronto and Vancouver

May 27th, 2016  |  Canadian Business

It’s not uncommon to view your first home as an entry point into the whole housing market game, buying more affordable entry-level homes with the idea that they would be able to sell it and buy something better later. But for many in Toronto and Vancouver who’ve tried doing just that, they’re finding it impossible to afford to make the upgrade.

The problem is only exacerbating the already volatile housing markets in two of Canada’s biggest cities. According to economist Beata Caranci of TD Bank Group, the high prices have worsened the supply of affordable entry-level homes by keeping owners from being able to move out of them even when they want to.

With such a hot market it might be surprising to hear that homeowners are having trouble trading up when prices have appreciated so well. While it is true that these entry-level homes are turning nice profits, the rate of appreciation is not matching up with the higher level options. In the GTA it costs on average about twice as much to buy a detached home than it does a condo, which is what many entry-level buyers have. In Vancouver that gap is as high as 3 times as much.

At this point, buying a home in Toronto or Vancouver is simply out of reach for the majority of its residents, which really begs the question: when are we going to stop teaching each other that everyone should be working as hard as possible, making sacrifices, and taking on huge debts just to buy a place to live?