Why Is Toronto So Expensive To Live In? [Housing & Rentals]

Why is toronto so expensive

If you’re reading this, odds are that by now you’re aware that Toronto is an expensive city to live in. Or, you landed up here, after surveying the housing market in Toronto, and are desperate for some answers that explain the cause of the high prices in Canada’s real estate market. Maybe you’ve been thinking about investing in Toronto real estate and are wondering how these factors impact the housing market, and in turn, your return on investment.

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Either way – you’re here for answers.

Is it a bubble or are there systemic factors driving up the cost of living in Toronto? Well, according to me – it’s been this way for a few years now and I see no signs of it slowing down. So it’s definitely not a bubble. I have identified a number of factors contributing to the above-average housing prices in Toronto and that’s what I’d like to share with you.

Toronto: Why You So Expensive?


What Is The Cost Of Living In Toronto?

The cost of living in Toronto is very high when compared to other North American cities. The average monthly cost for a family of three living in Toronto amounts to approximately $4950, while for one person your costs would range between $1500-$2500, depending on your accommodation.

In addition to housing – transit is super expensive in Toronto. The monthly transit pass is issued for $156 making it the third most expensive transit pass in all of North America. In fact, when looked at from a global lens everything – from housing (especially) to entertainment – is expensive in Toronto.

Is Toronto Too Expensive To Live In?

Yes, Toronto is definitely one of the most expensive cities to live in Canada. According to Mercer’s 2023 Cost of Living Survey Toronto is officially the most expensive city in Canada – ahead of Vancouver, Montreal, Ottawa & Calgary (in that order). This year, all Canadian cities dropped in terms of their overall ranking – which means that – comparatively at least – they’re getting more affordable than other cities in North America. All Canadian cities ranked above the 100s – except Toronto that ranked as 90th most expensive city in the world. While life it Toronto may be expensive – it was still listed as one of the most attractive cities in the world – along with Vancouver, Stockholm, Frankfurt & Lisbon.
With all this said – is it too expensive? That’s a question that I leave for you to answer!

Why Is Toronto Housing So Expensive?


Growing Popularity, Surge Of Immigrants Amplifying Population Growth

The Huffington Post reported Toronto as the fastest-growing city in the U.S. and Canada. Toronto’s tech sector alone has been growing quickly, earning the name Silicon Valley of the North and luring big business from global companies. The city is the economic center of the country attracting immigrants by the numbers. In 2022 GTA, or the Greater Toronto Area registered an increase in immigrants by 103%. For all of the job opportunities it provides, along with being very culturally diverse, Toronto has become a popular destination for many people – both local and abroad.

Toronto’s population is growing quickly for more than just the economic opportunity it offers. Toronto earns global recognition by continuously ranking at the top of Global Liveability lists such as Mercer’s Quality of Living Report, where Toronto ranked 2nd in North America and 16th the world over, and The Economist’s Global Liveability Index where we’ve landed 7th for the second straight year.

Related: Toronto’s Popularity Continues to Grab Global Attention

Downtown Toronto: A Multi-Cultural Hub That Promises Convenience

When you live in downtown Toronto, you have so much at your disposal. From an array of arts and culture to some of the best international cuisines, Chinatown is always open whenever you want. Not to mention, the convenience of grocery stores within walking distance no matter where you live. Urban living offers so much in the way of convenience.

For this reason, when you live in Toronto you don’t need to own a car — unless your job requires it. You will pay a premium for the convenience of living downtown, much like you will pay a premium for living in close proximity to the subway. If you can’t walk or bike to where you need to go, the TTC can get you there. And while it suits some people just fine to opt for that house in the suburbs, the time and money they spend getting to and from work each day, they can’t ever get back. If you’re commuting to work each day, you’re roughly paying $300 per month on transit and if you’re driving you have gas, parking, and monthly car payments to consider. While suburbanites are stuck in traffic, us city-dwellers are already back at home with our kids. Not to mention the savings this amounts to on child care.

Related: Why Condo Families are Getting it Right

Housing Supply Unable To Match Housing Demand


This is a simple case of supply and demand. As we mentioned earlier, our population in Toronto is increasing quickly as we grow in popularity. In a recent report by rentals.ca they said that Canada’s “annual [population] growth rate was 1.4%, the highest among G7 countries… The growth rate was even higher in Ontario at 1.7%.” Frankly, it’s challenging to keep up with our growing need for housing.

This, of course, is just part of the story. As more baby boomers are staying put, the demand for single-family homes in Toronto has increased sending prices up. In turn, the condo market has become an affordable option for many first-time buyers, subsequently putting the demand on Toronto’s condo market.

High Cost To Build


The cost to build property in Canada has gone up significantly over the last five years. In this Statistics Canada article from February, they say that “Residential building construction costs increased 3.8% in the fourth quarter of 2021, building construction costs for residential construction in the 11-city composite rose 21.7% year over year in the fourth quarter, surpassing the previous high registered in the third quarter. The largest increases were in Calgary, Toronto, Edmonton, and Ottawa”. The price increase trickled down to the developers, the buyers, and then the renters.

In July 2022, the Ontario government passed a bill to raise developmental charges for new projects. Developmental charges for non-residential projects & residential projects have been hiked by 40% & 46%, respectively. The new rates are being implemented over a two-year period – starting 1st May 2023.

Why Are Condos So Expensive In Toronto?


In the pre-construction condo market, once a benchmark price to build has been set it’s impossible for developers to sell their projects for less going forward. It’s irreversible and so each condo development will typically launch at a higher price point. It’s literally a cycle or as I like to call it – the price per square foot cycle.

If the price point is perceived as too high for buyers, the developer will wait to launch until they can attain the price they need to be profitable. And so the cycle goes as such: as developers hold back from building, the lack of new inventory forces buyers to turn to the resale market. As the resale market absorbs the demand for inventory, their prices will begin to increase and it’s at this point where pre-construction developers will choose to launch.

Price per square foot cycle explaining high cost to build in toronto

Why Is Rent So High In Toronto?


Toronto’s vacancy rate is still very low, hovering around 1%. As more would-be buyers are priced out of the market, they are forced to live longer as renters. The repercussions of the Rental Fairness Act of 2017, which had intended to protect renters from dramatic rent increases, actually led to more developers building condos over purpose-built rentals.

With fewer incentives for developers to build purpose-built rentals, the much-needed supply of affordable housing on the horizon started to dwindle. The lack of new rental supply during this period caused the vacancy rate to drop and the rents to rise. If it weren’t for condo investors buying pre-construction condos as rental properties, there’d be far fewer rental units available still.

Related: The [Actual] Truth About Rent Control and Rising Toronto Prices

Does Housing Become More Affordable Beyond GTA?


More buyers have started looking at houses outside the GTA area hoping to sacrifice convenience for a better price. The further you stray from downtown, the more affordable housing becomes. With that being said – don’t expect a big dip in prices anywhere in Ontario. As long as you’re searching within a 100km radius of Toronto, prices are always going to be on the higher side.

However, it’s up to you to weigh the pros and cons you desire for your lifestyle. if you want to live near work and save time commuting, you may need to pay more to do so. Or, if you’re okay with spending a quarter of each day commuting from the suburbs in exchange for homeownership, that’s a choice you need to make for yourself.

Related: Moore Park’s Most Expensive Home Sold for $7.25 million.

Our Verdict

It’s true, it’s expensive to live in Toronto. The city of Toronto has a lot to offer which is why it’s growing in popularity, population, and frankly, price. What do you value most? If you need any help, we’re just a call/text away!

Picture of Pierre Carapetian

Pierre Carapetian

Pierre Carapetian is the Broker Of Record for Pierre Carapetian Group Realty with over 12 years of experience in the real estate market. As a proud Torontonian and real estate broker, he prides himself on knowing this city inside out. He started investing at the age of 18 and has facilitated over half a billion dollars in real estate transactions.