The first signs of the fallout to the economy from Toronto’s soaring real estate prices are starting to appear. Numbers released by Statistics Canada show that job vacancies are increasing at a rapid pace. If analyzed in a vacuum, this can be misread as booming job growth. Unfortunately, when you consider wage growth and the cost of living, it might have more to do with a lack of financial opportunity for people moving to the region.
Job Vacancy Growth
Job vacancy growth is exploding across Toronto. In the first quarter of 2016, there were 76,340 vacancies. By the first quarter of 2017 that number exploded to 97,930, a 20.56% increase in just one year. As a ratio, job vacancies in the first quarter of 2016 was 2.5%. By the first quarter of 2017, the ratio jumped to 3.1%. This sounds like a great opportunity, why aren’t even more people moving to the Greater Toronto Area to take advantage of this job growth?
Source: Statistics Canada.
Wages Being Offered
A quick look at pay, and we can see why. The average job being offered in the first quarter of 2016 paid $21.75 per hour. By 2017, that number increased to $22.60. Inflation adjusted using the Bank of Canada’s CPI, this works out to a 2.5% increase in pay. While the growth is higher than the rate of inflation, it’s far below the increasing cost of shelter in the city.
Source: Statistics Canada.
Home Price Growth
It’s no surprise that the cost of shelter rose across the city, but just how much did it rise? The benchmark price of buying a home in the first quarter of 2017 was $705,900, 22.61% higher from the year prior. So if you were barely squeezing by on the first set of wages, homeownership is pretty much out of the picture by 2017.
Sure, you just moved to Toronto. You probably won’t be buying for the next 20 years, so let’s look at rental prices. According to the Toronto Real Estate Board, a one-bedroom rental in the city costs an average of $1,791, a 7.8% increase from the year prior. At the average hourly wage being offered for these jobs, someone filling the vacancy will have to dedicate 57% of their gross income towards rent in the city. This is a lot higher than people are suppose to dedicate to shelter. So not a lot of wiggle room to save, and hopefully you don’t have any post-secondary debt.
Either wages need to move dramatically higher across the city, or the price of shelter needs to drop. If companies can’t fill the job vacancies with qualified employees for the wages they can afford, expect a decline in business activity. Not something anyone really wants, considering Toronto is the economic engine of the country. Although historically the only way wage and housing disparities get resolved is through a recession.
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