Toronto and Vancouver are two of Canada’s most expensive and in-demand cities for real estate, both buying and renting. Buying a home in either will set you back by over $1,000,000 – Toronto homes average $1,161,200 and Vancouver homes $1,208,400, according to the Canadian Real Estate Association (CREA). The price in both is a challenge to meet for many homebuyers, but properties continue to trade hands in both at a high rate. So, what drives the popularity in these cities, and why are they so expensive to buy in?
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What’s all the Fuss About TO and Van?
Both Vancouver and Toronto are massively populated cities that have had huge growth in residents compared to many other cities in the country.
Toronto is one of Canada’s most notable cities. Its importance grew in the mid-20th century, when manufacturing moved to the city before it became a more specialized centre with the rise of globalization. Toronto also benefited from multiple banks and a dominant stock exchange taking advantage of metal mines, building its importance as a strong financial centre. Toronto became a major financial, real estate, educational, retailing and tourist centre in the following years and its growth has continued to the present day. While expensive, it’s a city with a strong global presence, multiculturalism and good public transit, making it an ideal place to live for working types. It’s far and away Canada’s strongest city in terms of GDP, at $442,180,000,000.
Vancouver as a city has grown remarkably as well, with a lot of that owed to its status as a port. The opening of the Panama Canal in the early 20th century made it economically viable to export grain and lumber from Vancouver to the east coast of the United States and Europe, and by the 30s it was Canada’s major Pacific coast port. After the second world war, the city developed into Canada’s main business hub for trade with Asia and the Pacific Rim. All of this has helped lead the development of the city, turning it into the industrial, commercial and financial heart of British Columbia. Forestry, tourism and mining are important economic factors, while the city has become well known for its high-technology industries and film and television production. All of this has led to Vancouver having the second-highest GDP by city in all of Canada, at $163,475,000,000.
How Much Have These Cities Grown?
Much of their popularity is owed to the newcomers to Canada or Canadians relocating. In 2021, Toronto had a population of 6,202,225. That was made up of 46.6% immigrants to the city. Interestingly, growth has actually slowed a little in the last decade, particularly as affordability has tightened. The population in the city only grew by 4.6% between 2016 and 2021, whereas between 1996 and 2001, it grew by 9.8%, from 2001 to 2006 by 9.2% and 2006 to 2011 by 9.2%. Toronto in particular, although more broadly Ontario, is one of the first places migrants look to because of the many opportunities for work and education.
Vancouver isn’t as populated as Toronto, but it’s still one of Canada’s highest-ranking cities. In 2021 there were 2,642,825 people living in the city. 41.8% of the population were foreign-born immigrants. The popularity of the city has actually increased recently, growing by 7.3% between 2016 and 2021 as opposed to 6.5% in the five years prior. Vancouver is a very attractive city, particularly for young people, and its growth and development into one of Canada’s most economically important cities makes it an ideal place to relocate to.
Why Are They So Expensive?
With a greater population and stronger economic situations, home prices are inevitably going to be higher in both cities. More opportunities for work, social activities and public transit help to increase the popularity of the city. Greater population drives a higher demand for homes, and the increased competition puts upward pressure on home prices. While home supply is continually tight in these cities, and nationally overall, that makes the competition for what’s on the market even more fierce.
Vancouver, for example, has had home price growth of over $800,000 in the last eighteen years, according to CREA. This doesn’t mean it has been a steady increase, as home prices fell in 2018 as a result of rising interest rates and new mortgage requirements. Toronto, in the same time period, has had a home price growth of around $780,000. Looking at less populated or economically weaker cities shows how rapid that growth actually is. In Montreal, the average home price as of August was $521,600, increasing by around $320,000 since 2005. Calgary’s home price has grown by $312,000 to $553,800 in the same time period.
Important to note is just how much home prices have grown in both since the pandemic. The home price in Vancouver has increased by just under $300,000 since February 2020 – over a third of the growth seen since 2005 has come in the last three years. In Toronto, that figure is around $280,000. Historically, the two cities have generally been more expensive than the majority of Canada, but the pandemic really pushed home prices higher as demand skyrocketed with minimal borrowing costs.
Also showcasing the popularity is the high number of sales you’ll find in Toronto and Vancouver compared to other cities across Canada. This is partly owed to the larger populations – more people means more real estate and greater demand. Vancouver, however, has slumped in the last year or so. 2022 sales numbers were impacted by the eight interest rate hikes we saw throughout the year, but Toronto still had 75,643 sales, over 33,000 higher than second on the list, Montreal. Toronto actually dropped by 38.1% in sales numbers from 2021, while Vancouver dropped by 34.8% to 29,261.
Whether you’re looking to buy in Toronto, Vancouver, or anywhere else, you should give us a call! Our experienced real estate agents can answer any questions you have about the home buying process and can give you market insights tailored to your local area.
