If inflation were the only factor, how much would real estate in Toronto really cost?
When we read headlines related to Toronto’s real estate market, they’re usually highlighting climbing housing costs in the city. One hundred years ago, it would be hard to believe that the average price of a detached home would surpass the $1.15 million mark.
A recent article in published in the Toronto star explored home sales in some of the city’s older neighbourhoods and compared the numbers to the price of houses in the same area 100 years ago. Consider this—in 1915, one could purchase a semi-detached home near Woodbine Beach for $3,450. Payment could be made either in cash or a small cash payment, and land trade. If we were to adjust the price of that home for inflation using the Bank of Canada’s inflation calculator, its value would be around $69,369—a far cry from $675,000, the price that it was recently sold for.
For those who had more substantial incomes during the turn of the century, desirable neighbourhoods such as High Park or the Junction area offered larger detached family homes that would set the buyer back roughly around $8,800. Adjusted for inflation, a High Park home in today’s market should cost around $182,000—an amount more suitable for a studio condo rather than $1.2 million, the actual average selling price of a detached home in that area.
When we compare estimated real estate costs adjusted for inflation to actual current market statistics, it becomes a little bit easier to see the truth in reports of Toronto property being overvalued. Unlike retail goods, however, the cost of real estate depends on several other factors, including the health of the local economy and employment rates. Despite the stark difference in a century over century comparison, and what seem to be astronomical housing prices, there is still a shortage of low-rise family homes in the city. Combined with historical property statistics, this proves that people still believe that real estate is a solid, long-term investment—especially those whose families purchased these beautiful century homes, and have kept them in the family to this day.