16 October 2012 ~ 0 Comments

Are Real Estate Agents Responsible for Today’s High Cost of Homes?

I was reading an article a few weeks back on the high cost of homes in Toronto today with the average price of a detached house hitting $800,000. Pretty much the article labelled real estate agents as the cause for today’s high price of homes. I chuckled to myself (and others around me in the Starbucks I was in) as I read through the article.

The entire article read that agents were responsible due to multiple offers and bidding wars of creating the higher prices we see in housing today. Don’t even ask me how this article saw the day of light, but I will say sadly it was in a real estate magazine geared towards consumers.

It got me thinking about some of the things that I feel have contributed to the escalating costs of purchasing a home in Toronto today outside of the standard inflation mumbo jumbo reasoning. Below are my top 10 reasons and in no particular order.

  1. Updating and improving of our existing housing stock. Many of Toronto proper existing homes were built between the late 1800’s and $1920’s. Most of these homes are situated in established neighbourhoods in the central core of the city…a place where many people fight like heck to live in. Bringing these older homes up to modern standards and amenities comes at a huge cost. The payoff? They will last another 100 years!
  2. The cost of labour and materials to renovate these homes. Don’t believe what you see on design and renovation shows about how much things cost. That’s called T.V. drama. Same thing as how on the popular T.V. show Friends, an out of work actor, a coffee shop waitress and a part-time chef could all live in huge apartments in prime New York City! And still afford to hang out at the coffee shop all day!
  3. The municipal, provincial and federal governments plan to intensify housing in established city neighbourhoods (and away from the urban sprawl that was running rampant).
  4. The purchase and tear down (or add-on) to bungalows throughout the city to allow people to live in larger, modern homes without needing to spend an hour commuting each way to downtown Toronto.
  5. HGTV. Yes that’s correct. This television station has everyone feeling that they are experts in all things real estate and that it is “cool” to constantly rip up, tear out and renovate whenever you feel like it. Visit homes in older neighbourhoods where the owners have lived there for 40 or 50 years. The only thing that is modern is usually the wiring or whatever the insurance company made them update. They weren’t changing the bathrooms and kitchens every five to seven years.
  6. Buyers. Today’s buyers have been cultivated to “expect” that everything should be perfect or near perfect on their wish list. The proverbial “diamond-in-the-rough” house has now almost exclusively gone to the professional renovator.  Gone are the days where a savvy buyer could see “past” the clutter and shag carpet and look at the bones of the house.
  7. Staging. When it comes time to sell staging has become (see above) a crucial part of the selling process and it does so at a big cost that the seller expects to recuperate. It is uncommon for furniture rental and consultation to cost between $5,000-$10,000.
  8. The re-discovery of city living! I’m not sure why this ever fell out of favour but most people prefer to live, entertain and play not too far from where they work. Look at the recent commute statistics projected for Toronto and you can only assume that housing is only going to be more costly in the future.
  9. A long period of low interest rates. And I’m not only speaking of since 2008. Seven years ago a 5% five year rate mortgage was a good deal! Today’s rates are a steal!
  10. Immigration. Yes this is a very real thing. It has been written in numerous publications and reports about how high demand a country like Canada is to both work and live. Toronto has received many of these settlers rumored to be as high as 100,000 annually.

I wish as an agent I could entirely take credit for the massive amount of wealth my clients who have bought homes have made over the past 10 years or so but as you can see from above, maybe some or all of these factors had some part to play in the cost of housing today?


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