# Some real estate price facts



## Pluto (Sep 12, 2013)

Toronto:
1970 average house price 29,429
2015: 622,120

that represents a 7% compound annual increase over 45 years. 

According to BoC inflation calculator 29,429 = 183,967 today.


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## GoldStone (Mar 6, 2011)

Annual inflation rate from 1970 to 2015 according to the same BoC calculator: 4.16%

7% - 4% = 3%

Toronto property taxes: 0.7%

Maintenance expenses: 1% (common rule of thumb)

Real rate of return after inflation, property taxes and maintenance: 2.3%


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## GoldStone (Mar 6, 2011)

TSX Composite average geometric annual return from 1970 to 2015: 9%

(too bad you can't live in TSX Composite)


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## janus10 (Nov 7, 2013)

I don't think it's entirely representative as I'd imagine houses built in 1970 are nothing like what we see today. 

Somewhat analogous to my first car in 1987. Not even adjusting for inflation, I could spend the same amount and get so much more comfort, features, safety, performance and fuel economy, by spending the same amount today.

Of course, how much do condos bring down the average price considering I'd assume there were a fraction contributing to those numbers from 1970 vs. today.


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## AltaRed (Jun 8, 2009)

1. One can make statistics say anything one wants if one cherry picks.
2. Toronto is not representative of the Canadian RE market
3. Houses today are not the same as in 1970
4. Average price is a much worse indicator than median price
5. RE cheerleaders are in denial about costs of ownership
6. RE cheerleaders do not factor in inflation
7. RE cheerleaders do not factor in that RE prices are also reflective of interest rates, amortization period and relaxed mortgage terms


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## Pluto (Sep 12, 2013)

^^
Well this house here is 625000 It doesn't say when it was built but probably pre- 1970. One could get the same house today for 625000 as in 1970 for 30000. I'm not sure one could get a brand new house for 625000. 

https://www.realtor.ca/Residential/...-RD-Toronto-Ontario-M6N3B4-Weston-Pellam-Park


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## AltaRed (Jun 8, 2009)

^
That is not a house. It is 3 one bedroom apartments. And stlll TO. What point are you trying to make? 

Try 2016/1970 comparisons in places more representative of Canada. Perhaps Peterborough, Guelph, Sudbury and Thunder Bay?


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## steve41 (Apr 18, 2009)

My place in WVan (modestly built circa 1954) is now worth $3M and climbing. All lot value, needless to say.


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## Pluto (Sep 12, 2013)

AltaRed said:


> 1. One can make statistics say anything one wants if one cherry picks.
> 2. Toronto is not representative of the Canadian RE market
> 3. Houses today are not the same as in 1970
> 4. Average price is a much worse indicator than median price
> ...


1. I used only the data that was available. there was no preconceived editing of it. 
2. Of course it is not representative of all of Canada. 
3. the selected house was probably around long before 1970. https://www.realtor.ca/Residential/...-RD-Toronto-Ontario-M6N3B4-Weston-Pellam-Park
4. Yes. I prefer median but it was not available. 
5. There is a cost of living. Part of that is housing. Rent or own, it costs. The selected house rents for 2000/mo. (x12 x 45 years = $1,080,000.00 rental cost for same place in todays dollars). Besides, I'm not cheer leading I'm observing and analyzing. 
5 (a) If a landlord owned that house in 1970 and rented it for 45 years, who would come out ahead, the land lord or the tenants who paid a million to live there? I don't have an answer to that...haven't done enough analysis yet.


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## Pluto (Sep 12, 2013)

steve41 said:


> My place in WVan (modestly built circa 1954) is now worth $3M and climbing. All lot value, needless to say.


Good point. 
Do you know the 1954 price?


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## sags (May 15, 2010)

More importantly the cost of a single family home in 1970 was about 5 times wages.

In Toronto today it is about 22 times average wages and in Vancouver 34 times average wages.

As long as lenders are willing to risk their capital people will take it. They will take as much as the lenders will push out the window. Paying it all back................that might be another matter.

Nobody forces people to live in Toronto or Vancouver though. As others have noted, there are lots of other nice places to live in Canada where home prices are still relatively affordable.


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## Pluto (Sep 12, 2013)

GoldStone said:


> TSX Composite average geometric annual return from 1970 to 2015: 9%
> 
> (too bad you can't live in TSX Composite)


TSX annual compound rate 1970 - 2016 = 6.34%


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## sags (May 15, 2010)

In Canada the mortgages are recourse loans and must be paid back. That is good for lenders.

But also in Canada, bankruptcy laws are pretty lax and people can declare bankruptcy and mail the lender the keys to the home. That is not good for lenders.

It will be interesting to see which dynamic has the stronger effect in the future.


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## Pluto (Sep 12, 2013)

sags said:


> More importantly the cost of a single family home in 1970 was about 5 times wages.
> 
> In Toronto today it is about 22 times average wages and in Vancouver 34 times average wages.
> 
> As long as lenders are willing to risk their capital people will take it. They will take as much as the lenders will push out the window. Paying it all back................that might be another matter.


Yes good point. average price / average income is relevant.


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## Pluto (Sep 12, 2013)

AltaRed said:


> ^
> That is not a house. It is 3 one bedroom apartments. And stlll TO. What point are you trying to make?
> 
> Try 2016/1970 comparisons in places more representative of Canada. Perhaps Peterborough, Guelph, Sudbury and Thunder Bay?


OK try this one, or whatever you deem to be a house with average price. 
https://www.realtor.ca/Residential/...Toronto-Ontario-M6E4W2-Corso-Italia-Davenport

I'm not making any point yet.


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## Pluto (Sep 12, 2013)

Apparently average wages in Toronto are about 50,000 and average house 622000. ratio is 12.44


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## steve41 (Apr 18, 2009)

Pluto said:


> Good point.
> Do you know the 1954 price?


I believe it was 38,000.


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## GoldStone (Mar 6, 2011)

Pluto said:


> GoldStone said:
> 
> 
> > TSX Composite average geometric annual return from 1970 to 2015: 9%
> ...


Where did you get your number? Does it include dividends?

I quoted annual compound rate of return from 1970 to 2015, including dividends.

My source


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## twa2w (Mar 5, 2016)

AltaRed said:


> ^
> 
> Try 2016/1970 comparisons in places more representative of Canada. Perhaps Peterborough, Guelph, Sudbury and Thunder Bay?


Well considering the GTA has a population of about 6,000,000 and the 4 places you mention likely have a population of less than 500,000 combined, one could argue that the Toronto real estate market is a lot more representative of the Canadian RE market.
Just saying. ;-)


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## Mukhang pera (Feb 26, 2016)

You are right on that score, twa2w. 

I think Canadian political leaders, both federal and provincial, agree with you. For some time now there has been talk in those circles about an "overheated" real estate market in Canada. To the extent that might be true, I think it applies only to Toronto and Vancouver and their surrounding areas. In more locations than not, prices have not moved much in years, but that gets overlooked, probably because Toronto and Vancouver are seen as defining the Canadian RE market and nothing else is worth mentioning.


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## AltaRed (Jun 8, 2009)

twa2w said:


> Well considering the GTA has a population of about 6,000,000 and the 4 places you mention likely have a population of less than 500,000 combined, one could argue that the Toronto real estate market is a lot more representative of the Canadian RE market.
> Just saying. ;-)


GTA and GVA might be 10 million total. There are 35 million people in Canada. The sun does not rise and set on either of GTA or GVA. I simply used other Ontario examples in case certain members are fixated on Ontario.


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## kcowan (Jul 1, 2010)

sags said:


> In Canada the mortgages are recourse loans and must be paid back. That is good for lenders.
> 
> But also in Canada, bankruptcy laws are pretty lax and people can declare bankruptcy and mail the lender the keys to the home. That is not good for lenders.
> 
> It will be interesting to see which dynamic has the stronger effect in the future.


It is not good for Taxpayers thanks to CMHC.
Should you walk away?


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## Just a Guy (Mar 27, 2012)

Not all provinces have recourse mortgages.


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