Three Ways for Families to Get into GTA Real Estate

August 23, 2022 | Posted by: Simon Lyn

Three Ways for Families to Get into GTA Real Estate

The GTA real estate market is hotter than ever before. With prices soaring year-over-year, affordability is getting out of reach for many Canadians. The Bank of Canada’s recent decision to increase interest rates is expected to cool the red-hot market. However, with supply shortages and increasing demand, this cool-down period isn’t likely to last in the long run. So, how can families tap into this highly competitive market? 

In this article, we’ll take you through why housing prices are continually rising in the GTA, and options on how to get funds for purchasing a home.

Why do GTA housing prices keep rising?

A shortage in new home supply continues to be a major factor driving up home prices. This is largely due to restrictions that prevent homes from being constructed in Ontario’s Greenbelt—a protected area spanning from Niagara Falls in the west to Cobourg in the east. As a result, homes are being built in areas away from the Greenbelt, with building applications taking years to get approved. 

The Golden Horseshoe Greenbelt, image via Friends of the Greenbelt Foundation

As construction space in the GTA becomes scarce, developers are forced to build upwards. Toronto now has the largest number of high-rise projects under construction in North America. But despite the increase in high-rise supply, it’s still not high enough to meet current and future demands.

As applications for construction projects await approval, Ontario continues to see a yearly increase in population growth due to immigration. In the first quarter of 2022, approximately 114,000 new immigrants joined the province. Compare this to almost 200,000 immigrants in all of 2021 and we can predict a sharp increase in new immigrants over the coming years. This will further increase demand for new homes and cause prices to increase sharply despite measures in place to cool the market. 

Three ways to afford a home in the GTA

Competition for homes in the GTA is a constant source of worry for many families. With homes prices on the rise, the down payment required to qualify for a mortgage also continues to rise. Fortunately, there’s a number of ways Canadians can get into the real estate market before it’s too late.

1. Partner with family & friends

One way to get into the real estate market is to raise funds with family and friends. Remember, the goal is to capitalize on increasing home prices by purchasing as early as possible. By pooling together finances, families are able to have the required down payment for a home purchase. 

Additionally, its worth remembering that first time home buyers are only required a 5% down payment. Taking advantage of this greatly improves the chances of owning a property and building equity as your mortgage gets paid off.

2. Invest in rental properties

Another way to get into the GTA real estate market is through purchasing an affordable rental property. A rental property is any property that generates income through rentals. This could be a property that contains more than one dwelling unit, such as a basement apartment. 

You can live in one part of the property while renting out the other. Or you can purchase a smaller, more affordable property and rent it out. As your equity grows, you can take out another mortgage on the property and use that to purchase a primary home. We go through this in more depth in the next section.

3. Use existing equity

If you already own a home, one of the best things you can do is use your existing equity to purchase another property. One option is to take out a Home Equity Line of Credit (HELOC). It’s essentially a revolving source of funds, much like a credit card, that you can use any way you want, including as a down payment for another home. 

Or you can take out another mortgage on your existing home, which is based on the money you’ve already paid into your existing mortgage. 

These options allow you to purchase additional property without having to raise additional capital for the down payment. Certain conditions may apply depending on your circumstances, and additional stress-testing may be required, so the best way to understand your options would be to partner with a mortgage specialist.

You’re not alone

Competition for homes in the GTA is a constant source of worry for many families. With homes prices on the rise, the down payment required to qualify for a mortgage also continues to rise. Fortunately, there are a number of ways Canadians can get into the real estate market before it’s too late.

Many options can be customized based on your family’s situation. For any questions, or to discuss which strategy is best for you, contact us today for a chat. Our goal is to make sure you’re well informed of all your options so you can make the best real estate decisions for you and your family.

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