Welcome to this month’s installment of Dear Urbaneer where we address the real estate concerns that have been troubling our clients. This time,we field a question from a couple who currently own a condo and are looking to transition up the property ladder in anticipation of having a family. But as they have come to realize after some house hunting, their path up the property ladder isn’t as clear as they had thought it would be.
When I think back to my childhood, I see myself in a comfortable home with a yard enmeshed in a community that was a great place to grow up. I’d always imagined the same for my children. However, now that we are ready to start a family and are looking for a home to accommodate our changing space and lifestyle needs, we are discovering that a single family home is out of our price range. Originally, we had thought that we’d trade in our current condo for a slightly larger one, and eventually leapfrog our way up the property ladder into a house. But, given prices, this inevitably means moving to the suburbs where it's more affordable, but that doesn't really appeal to us. Which prompts the question, is it ok to raise a kid in a downtown condo?
Puzzled Over The Property Ladder
Here's our reply:
Thanks for this question; this is a challenge that a myriad of Toronto Buyers are facing.
Traditionally, as homebuyers move up the property ladder, their stage in life moves along accordingly. The second move up the property ladder often comes at a time when homebuyers have combined households through cohabitation and now want their next home to accommodate a family. Historically, this perception of “extra space” and “family-friendly” meant buying a house, often in the suburbs. However, due to a number of factors in the City of Toronto, this concept is being tested and a new phenomenon is being created as a result, where many second-time homebuyers are eschewing the concept that family friendly equals 'a house'. They're also rethinking geography as it suits their personal and professional needs.
Is It Time To Rethink Your Next Move On The Property Ladder?
The current economic climate and the state of supply and demand in the Toronto real estate market are a challenge for a number of home buying segments, but extremely challenging for first and second time buyers. Because of the intensity of the market - and sky-rocketing values - it's fueled a paradigm shift in perception around family-friendly housing in Toronto.
Yes, there's no question a house can offer more space than other housing types to accommodate a family. But does that much needed space have to be within the walls of a house? And who says that the correct path up the property ladder means jumping one rung at a time, with jumps parallel to housing type?
Let’s say that you’ve charted your course up the property ladder, given momentum by plans for you and your partner to start a family. You are looking at selling your current condo to make a modest move up into a larger condo or townhouse to accommodate your intended family, with the ultimate goal of buying a freehold house with a yard with more square footage and green space within a few years.
When you are determining your strategy up the property ladder, it's worthwhile playing out different scenarios, including tangibles like detailed costs (i.e. moving costs, commuting costs, childcare, closing costs) and intangibles (like quality of life, ability to live in an appealing neighbourhood, commute time and more) to see what route you are best served with. As with so many things real estate, strategy is never one size fits all.
They say that necessity is the mother of all invention; this can certainly be said for the current wave of family-to-be homeowners, who are driving a housing phenomenon that could redefine paths on the property ladder for a generation. Eroding affordability, lack of available stock, a rising cost of living in general and a growing self-awareness of the value of time and quality of life are causing millennials to re-think their idea of “home” to raise a family, along with what their journey up the property ladder ultimately should look like.
Click here to read an interesting story from the Globe and Mail “Priced Out Of Downtown Vancouver, Millennials Are Building ‘Hipsturbia’” which talks about how the pressures of affordability have caused home buying millennials to essentially recreate their sense of “home”. They have relocated to outlying areas where their dollars go further, establishing their own communities according to their own desires, beliefs etc., including changing their jobs to eliminate their commute to the city core.
That's suitable for some people, but what if your career path requires you work downtown? Does one have to move to the suburbs and endure a longer commute, or is it better to compromise on space and stay in the central core to have more time to be present? Here's one of my most popular posts I consider an essential read titled What are the Real Financial, Emotional and Health Costs of Commuting?
Shifting Expectations Around A Challenging Market
As a baseline, it is essential to keep sight of is that housing is meant to support your family life, not the other way around.
This incredibly perceptive article from MacLean’s addresses the plight of homebuyers who are being priced out of the single family home market: “For Many Young Canadians, A Home Won’t Be A House,” . As this article says, “The Canadian dream no longer comes with a lawn”.
The reality is, in Toronto land is scarce and development of low-rise housing is famously being hampered by government red tape, which creates an extra squeeze on supply. This article also talks about how government measures have been aimed at cooling the market (interest rate increases, Ontario’s Fair Housing Plan, mortgage lending restrictions). Unfortunately, these measures have done little to increase supply, which would be of particular interest to those contemplating selling their first or second home to move up the property ladder into family-friendly housing.
And so we are at a cultural cross roads! The article closes with a particularly astute quote "A generation of Canadians that took space for granted is now discovering that their future will be measured in 900 square feet or less. That needn’t be a big deal, ….[but] it is a big deal for a lot of people. Will those people adapt and make the most of their lawn-less futures?" - Macleans
Benefits Of Family-Friendly Condos
When you envision family-friendly housing, what do you see? Historically, you would probably envision a home with ample space and a yard. But delve a little deeper into the fabric that actually constructs a family-friendly living environment. Is a yard necessary if you can walk out your door into a dynamic, culturally diverse urban centre that offers plenty of public green space?
For Buyers exploring their priorities for family life, it's that critical you explore what factors will ultimately support your personal and professional life. Sure, you require sufficient space to accommodate a child(ren), with a thoughtful layout that enhances your family’s life. But how does that criteria balance against the distance - and more specifically your commute time - between your employment and home? Would you trade off a house with a yard to live downtown in a condominium if it meant you could spend more time with your family?
For any parent, and parent-to-be, you have to look at how you can best serve your offspring, which means becoming part of a like-minded community with resources geared to fostering friendships and playtime. Should you prioritize the opportunity for exercise and outdoor play? Choose a location where there are other kids to play with - both in structured and unstructured activities? How critical is it to connect with neighbours with kids in similar life stages? And let’s not forget the necessity of being close to good schools.
To achieve these, you don’t necessarily need a house. You need a home with amenities that fulfills those objectives.
Over the past few years, the notion that condominiums are dwellings only for professional singles and mingles, or downsizing boomers or zoomers has been challenged. In fact, they're quickly becoming a veritable hub of family-friendly housing bliss. What’s more is that developers are increasingly catering to this market, not just by focusing development, but are also including amenities that provide a family-friendly lifestyle.
Read more about how condominiums are appealing en masse now to millennials, where buildings not only have family-friendly amenities, but that are communities unto themselves, with organized activities and opportunities for kids to be kids and parents to connect: Four Kid-Friendly Toronto Condos, And The Families Who Live In Them ; Why We’re Raising Our Kids In A Condo ; Is It Bad Parenting To Raise Children In A Condo? and The Top Five Reasons To Raise Kids In A Condo.
What’s more is that choosing the condominium lifestyle not only provides families with space and amenities at a more affordable price point, it also supports that quality of life that millennials place so much value on. Think of it, instead of cutting the grass, you and the fam-jam are strolling around your hood, hitting the local park, followed by snacks at your favourite café. With a number of well-located condo buildings located close to public transit, there is the opportunity to reduce commute times as well (or even cycle to work which has amazing health benefits) which will only improve your family time as well. We have plenty of clients who finish work, pick the kids up from day care, pop by the grocer and then head home with ample time to cook dinner and spend time as a family before the wee ones go to bed. Isn't that better than a long ride on the Go Train, arriving home closer to when your kids have to tuck into bed?
I also reccomend taking a look at this blog: 5 Kids, 1 Condo. It surrounds the daily trials and joys of a single father raising 5 kids (olderst is 11) in a 3 bedroom condominium. It's a pretty great read!
Leap Or Climb Up The Property Ladder?
Given the reality of the Toronto housing market, condo living might appeal to your needs and wants list, as well as your budget. If that's the case, it might be worthwhile forgoing a shorter term condo purchase and leap up the ladder with a high ratio mortgage to a larger condo property - like a townhouse - that supports your longer term objectives.
The first step to see if a leap up the ladder is even an option for you, you need to check in with your lender to see what your financials would support if you elected to take out a high ratio mortgage or secondary financing so that you could get into your forever (or near forever) home today. Then you’ve got to adjust your search criteria to address family-friendly amenities, even if the arrival (or expansion) of family is still some time away.
Extra costs of taking out a high ratio mortgage aside (click here for Dear Urbaneer: Should I Max Out My House Hunting Budget With CMHC Mortgage Loan Insurance?), there are benefits to bumping up your budget and deciding to leap up the ladder into a property which will serve your needs longer. First, you diminish the costs of multiple moves, and you extend your tenure so your kids can stay in one school district longer. Don't forget, proximity to good schools is important to maintain and grow your asset value no matter what, but as a parent this criteria is essential. You also have the opportunity to establish roots for the long-term in a community as your family grows, which is of benefit for family life. And, if you can purchase a larger place that you can grow into over time, even if it's at the top of your budget, you're likely going to build equity faster. Why? Because the fewer moves you make the higher the sum that stays in your pocket. Here's a sobering lesson in Dear Urbaneer: How Much Profit Should I Expect Climbing The Property Ladder?
Remember All The Costs
When you are considering the costs of raising a family, don’t forget how your household budget will be impacted down the road by additional costs that aren’t related to real estate. There is the cost of childcare (which in Toronto is notoriously prohibitively expensive); there is also the potential income reduction or interruption during parental leave. If you can budget today with a home purchase that will factor in these future expenses, even if it means taking out a higher ratio mortgage, you’ll be able to project your longer term finances more accurately, which relieves some of the financial stress of raising a family.
I touched on this recently in Dear Toronto Real Estate: Where Are The Property Listings?. The Maclean’s article that I referenced above also addressed how these other costs will need to be addressed by the Government in order to really bring affordability in line; it’s not enough to target hefty real estate prices, as that’s only a portion of a family’s household costs.
Are you looking to sell your first home, intending to embark on a journey up the property ladder? Here's some of our recent blogs which may be helpful:
With all the complicated factors in Toronto real estate, it is essential to have a smart strategy that addresses in detail your short and long term plans. As a Top Producing Toronto real estate team who navigate this type of market daily, please know we’re here to help!
~ Steven and the Urbaneer Team
Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage - (416) 322-8000
- we're here to earn your trust, then your business -
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