Why Is Toronto so Expensive?

How much does it cost to live in Toronto? If you wish to live in the heart of North America’s fourth-largest city, you should be aware that the average price for a home in the Toronto real estate market was $1,114,267 (January 1-October 31, 2024). Put simply, it takes plenty of capital to live in Toronto.

Now, by comparison, the national average home price sat just below $700,000 in October 2024, the Canadian Real Estate Association (CREA) notes. Even on the rental side of the Toronto housing market, the typical one-bedroom apartment is more than $2,400, based on a long-running monthly report. Evidently, housing costs and the overall cost of living in Toronto are much higher than in other municipalities, be it major urban centres or suburban towns. So, why is Toronto so expensive anyway?

Let’s sift through some of the reasons why Toronto is expensive.

Why Is Toronto so Expensive?

According to data from Numbeo, the estimated monthly cost for a family of four is around $5,550 (without rent). For a single individual, the approximate monthly expenses are north of $1,500 (again, without rent).

How does this compare with a city like, let’s say, Vancouver? In other words, is Vancouver more expensive than Toronto? Surprisingly, Numbeo statistics suggest that the cost of living, including rent, is a little more than five per cent lower than in Vancouver. Additionally, the data suggest that Toronto is the most expensive city in Canada, followed by Vancouver, Montreal, Ottawa, and Calgary. It is also the 90th most expensive city in the world.

Of course, housing is the primary issue for many Torontonians. Everything from monthly mortgage costs to property tax rates to home insurance, buying a home in Toronto is a costly endeavour. While condominiums are priced lower than detached, semi-detached, or townhomes, the maintenance fees associated with condo living can be quite expensive.

Why are Houses in Toronto so Expensive?

It is a case of supply and demand.

Toronto is the most populated city in Canada, and many newcomers are planting roots in Toronto. So, there is increased competition for limited supply for a city that suffered lacklustre housing inventories. Plus, the figures highlight that common things like garbage pickup and electricity can be quite elevated in Toronto.

Unfortunately, the gap between household incomes and monthly living expenses (housing, utilities, groceries, and transportation) is widening, too. It is important to note that while the city is becoming more and more expensive to live in, the median income for people in Toronto has not witnessed comparable income gains. In 1990, the real (inflation-adjusted) median income for a prime working-age (25 to 54) individual in Toronto was about $54,000. Today, based on 2021 Census data, incomes have been relatively unchanged after reflecting inflation trends.

Put simply, the cost of living has long surpassed any sizeable increase in median income.

As The Toronto Star reported in October 2023: “While the average income for individuals in the Toronto area has increased since the 1990s, the median income is the same, according to census data, adjusted to inflation, suggesting pay has remained stagnant for the lowest earners, but increased somewhat for higher earners.”

Even parking and traffic have metastasized into substantial problems in Toronto. This is why many individuals choose not to use an automobile and avoid the high expenses of car payments, auto insurance, and parking. At the same time, the costs can still be quite high for those who select public transportation as their primary mode of transportation, as a one-month transit pass in Toronto costs $156. This is one of the most expensive transit passes in North America.

Toronto is Canada’s economic powerhouse. It is home to the five largest banks, major law firms, and large corporations. The Toronto Stock Exchange is the seventh largest in the world in terms of market capitalization. All these factors directly impact the cost of living in this city.

Toronto Is Still a Great City

The challenges gripping Toronto are happening in big cities nationwide. For years, many municipalities have possessed strict zoning regulations that limit the availability of land for development. The influx of new immigrants in Canada, record low mortgage rates, and changing consumer trends have all been factors that have influenced housing markets everywhere.

Is it only a matter of trying to answer the age-old question of “Why is Toronto so expensive?” Or has the conversation evolved into “Why is Canada so expensive?”

In the end, Toronto maintains a vibrant cultural hub in Canada. Despite its growing list of issues, Toronto continues to be an attractive destination for immigrants, single individuals, young couples, and families. Yes, homeownership is expensive, and rents continue to increase at a high pace, but what other Canadian city is not enduring these same developments?