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ASK JO: The Best Bang for the Buck in the T.O.

Hi Jo,

In your opinion, what area(s) in Toronto currently offer the best value for your hard earned money (i.e. the best bang for your buck)? An area that is still undervalued perhaps?

I'm looking for a great deal in the $150,000 -- $180,000 range in a decent neighbourhood close to the TTC. A lot of condos in downtown are now out of my reach, and I feel that the "deals" downtown are now a thing of the past. I feel with each month passing that I'm getting squeezed out of this insane market, and it's not a good feeling. In fact, I’m quite worried.

Any advice?

Thanks a lot for your time!

-- Andy B., Etobicoke


Hi Andy,

Thanks for your question. With the way the market has been going up consistently for the past decade, it's no wonder that you are feeling the squeeze and are getting a bit concerned about house prices -- you are definitely not the only one.

To be honest, this is a very difficult question to answer because on the one hand, our property values in Toronto are still relatively "low" for a world class city, but as a citizen living here, the barriers to entry do seem quite high. A rough guideline to figure out what an individual and/or family can qualify for mortgage wise is to do a quick calculation of 3.7 times their income, which means that an individual earning $40,000 per year can roughly qualify for $148,000 in mortgage money based on a regular 25 year amortized mortgage. We all know that $148,000 can't get you much these days.

So the question now is how and where we can best stretch the purchasing power of someone who is on a limited budget. Well firstly, location wise - you are correct in saying that $150,000 - $180,000 doesn't take you very far in downtown Toronto unless of course you just want a studio and/or pied-a-terre. However at the same time, it is not impossible to find something, but a majority of the time, it is not in the best condition and/or it needs to be updated to today's standards. There are two basic types of equity you can contribute to a home: sweat equity and financial equity. If you're low on the finances, then you may have to up the sweat portion, be handy and pump a little value into the home with your hard work and time.

Location wise, you may have to move yourself just outside of the core (i.e. for downtown, central districts such as C01, C8, W1 and E1) and go east or west of the city - mind you some of the areas just outside the central core are also getting out of hand. However, if you want specifics of some areas that I think are developing, its the areas with slightly older homes that need work in communities that are set to get revitalized. A few of these off the top of my head are the Bloor and Dundas/Landsdowne area including the Junction and the Wallace Film District... on the east side it's Queen and King St. East areas around Carlaw and properties going east past Woodbine along Danforth. In North York, anything along the Sheppard and Finch from Leslie to Don Mills have a lot of potential for improving and are central to the new subway line. Remember, these are only a few areas off the top of my head - there's locations like these everywhere in the city!  Not just that, you can sometimes find great deals for properties in more established neighbourhoods as well that just need some good ol' TLC.

On a side note, have you ever heard of the Starbucks Indicator (or in ancient times a McDonalds Indicator)? They usually say that when a Starbucks is set to go into an area, it means that area is ready to take off or has probably already taken off to be more accurate, so when you see one, you know the area has made it (i.e. King West / Liberty Village). For real estate (at least in the downtown / central areas), we have sort of a similar indicator: Lofts. Usually When you see one of those hard vintage conversion lofts starting to happen, it's a good sign for the area's redevelopment or rejuvenation (i.e. Wallace Station Lofts in the Wallace Film District). Other tell-tale signs about big things to come are old abandoned warehouses / factories, big parking lots or empty plots of habitable land.

So the bottom line is that in any market and in any place, there are always "diamonds in the rough" to be found, but you have to be ready to act, be realistic and be focused on your criteria. Everyone, for the most part, wants the best location, the best looking and the best of the best of the best, but these are the people that never end up pulling the trigger on home ownership because their wants outstrip reality. To be completely blunt, your first home will probably not be your dream home, but you have to start somewhere. The way the Toronto Real Estate Market looks right now with annual property values increasing on average 3-6% per year, the property squeeze will probably not get any better any time soon... so the best advice I can give is to buy what you can afford now (because the more you wait, the less you can afford tomorrow), get yourself into the market so that your property can move with the market, put in some sweat equity and work your way up the property ladder to your dream home.

Hope that helps Andy and good luck!


Posted on Thursday, April 19, 2007 at 10:02PM by Registered CommenterElaine in | CommentsPost a Comment

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