The Canada Housing and Mortgage Company (CMHC) recently came out with high-risk warnings for detached house prices in Toronto.

With the price of a detached house hovering around the One Million Dollar threshold, this warning seems to be plausible, especially in a city where some buyers can be seen with ‘crazy eyes’ like facial features (from the loveable character in Orange is the new Black).

What’s important to note is that the CMHC specifically mentioned that both the condo market and affordability are NOT a concern at this point, specifically referring to detached homes in the Toronto area.

There are some factors that have contributed to our 7-digit home price average that are often overlooked or misunderstood. I’ve listed below a few of the factors that I feel have helped push the average up.

The first two are obvious so I’ve listed them at the top. The rest are in no particular order.

1. Low interest rates that have been low for so long that many consumers have forgotten what a normal rate looks like. Some say low rates may very well be the NEW norm!
2. Scarcity of good housing in high demand neighbourhoods. Another obvious ones but the next point ties into this as well.
3. Punitive high land transfer taxes that often force buyers to jump ‘ahead’ in the move-up cycle and go from first time home buyer/seller to their trophy home.
4. A higher percentage of home sales in the $2.5 million and up range.
5. A huge surge in Infill housing (tearing down a smaller/older home and rebuilding a newer larger one).
6. Home renovations. Canadians spent $68 billion on home renovations in 2014 (HGTV effect) that was $20 billion more than was spent on new housing last year! (Read more about that here.)
7. Growing income disparity. Two income families making $200,000/year combined offer options for higher priced properties and renovations.

As you can see from my list, it only takes one or two of these factors to push house prices higher. When you add four, five, or all seven, you can easily understand why prices are where they are.

In the 20 years that I’ve been helping people buy and sell real estate in Toronto, I have come to believe that the key to successful home ownership is simple. First, figure out if it’s the right time for you to make a purchase; this is something that a good Realtor can assist with. Next, make a purchase that will meet your needs depending on where you land in the home buying process. These two things help to ensure that you sleep well and enjoy the experience of being a home/condo owner.