Are Toronto homeowners technically millionaires? Here’s what experts have to say

A West-end Toronto home for sale is shown in this July 15, 2023 file photo. THE CANADIAN PRESS/Graeme Roy

As the cost of living in Toronto continues to rise, the definition of wealth in the city has become increasingly blurred.

The average home across all property types in the City of Toronto sold for $1.04 million in January, according to Toronto Regional Real Estate Board data.

That is far off the peak of $1,334,062 reached in February 2022 prior to the beginning of an aggressive campaign by the Bank of Canada to hike interest rates. But it still means that Torontonians who own their homes outright are sitting on an asset worth in excess of $1 million while others who perhaps entered the market in 2022 could owe more on their mortgage than their home is actually worth.

So what actually makes someone wealthy in the City of Toronto?

“(Being) a millionaire and financially independent are two separate ideas,” said Jim Chuong, an investor and financial educator who has over one million followers across social media. “You could be a millionaire with a lot of equity in consumer products, like cars and houses, but you won’t be financially independent.”

The Wellesley Institute suggests the annual cost of “thriving” for a single working-age adult in Toronto now stands at $61,654 after taxes.

Yet despite soaring property values, the minimum wage in Ontario stands at just $17.20. Not to mention Mayor Olivia Chow’s 2025 budget, which includes a 6.9 per cent property tax hike, adding another layer of financial pressure.

Equity vs. actual wealth

Ron Butler, a seasoned mortgage broker and owner of Butler Mortgage, says the idea of being a millionaire based solely on home value is misleading.

“There’s a ton of people in Toronto who earn $1 million, but the old-fashioned way of looking at it is whether you’ve got $1 million in the bank,” Butler says. “We have a tremendous number of people in Toronto who have a house worth more than $1 million, but if you’ve got a $1 million house and a $900,000 mortgage, you’re definitely not a millionaire.”

The key, Butler says, is home equity.

“If you don’t have the income to support your lifestyle, either from investments or employment, then you’re eventually going to have to find some way to get money out of that house and that isn’t total financial freedom,” he said.

RBC previously said that the decline in home prices in the GTA in 2022 amounted to a “historic” housing correction, however the market has since stabilized and appears to be on the upswing once again.

The Toronto Regional Real Estate Board has predicted that home sales will increase by 12 per cent this year, with the average selling price reaching $1,147,000.

About 45 per cent of Canadian homeowners have fully paid off their mortgages, Butler notes.

So does that mean Toronto is a city of millionaires? Not exactly, experts say.

Monthly income and investments

To achieve financial independence, Chuong says, “The longer your investments cover your consumption, the more free you become.”

In Toronto, that threshold is high: “To be comfortable, a couple needs to make about $20,000 a month,” he estimates.

Chuong explains. “If you have a $1 million house with no debt, you’re a millionaire from an accounting perspective. But ideally, you want to be both a millionaire and financially free.”

The changing definition of luxury

Real estate agent and managing director of The Agency real estate brokerage James Milonas says being a millionaire in today’s market doesn’t necessarily equal wealth.

“Just because your house is worth $1 million doesn’t mean you are worth $1 million because you’re not sitting on a million in equity,” he says. “If you bought pre-pandemic, I’m talking 2016 to 2019 and you’re sitting on a million equity then maybe.”

Milonas says luxury in Toronto has shifted significantly.

“Five or 10 years ago, you could get a freehold for around a million, in Scarborough, Etobicoke, parts of North York, parts of Leslieville,” he said. “Right now, $1 million gets you a decent sized condo, a townhouse, or a fixer upper in the East or West End.”

True luxury, he says, starts at $4 million. Affluent neighbourhoods such as “Summerhill, Rosedale, Forest Hill, Yorkville, and The Annex are where you can find “actual luxury homes,” according to Milonas.

He adds those homes range from $4 million to $6 million.

‘The best time to buy was always yesterday’

With affordability at historic lows, entering the housing market can be tougher than ever, especially for young people.

Milonas notes that 70 per cent of the 8,500 properties currently for sale in Toronto are condos, reflecting the shift toward smaller, more affordable units.

“The best time to buy real estate was always yesterday,” he says. “Rates are high, prices are high, but eventually, it’s going to stable out. I would much rather buy with less competition at a higher interest rate than buying with a lower interest rate and more competition overpaying for what I should be buying.”

For younger buyers, renting out a property may be the best way to get a foot in the door, he says.

“If you are renting something where your rent is dirt cheap, and you can afford to buy. I say enter the market and rent out that place,” Milonas says.

Despite concerns about affordability, Milonas doesn’t foresee a market crash anytime soon.

Old money vs. new money

There’s a stark difference between those with generational wealth and those who have recently come into money, Milonas says, adding that the distinction often shows in spending habits.

“If you fall into that new money category, you tend to feel, act, and portray yourself as wealthier than you are for appearances,” he says.

Habits like taking on more than they you can afford, whether it’s a second property, luxury cars, or private school tuition are all things that can add up quicky, he noted.

That was especially true during the pandemic when cheap borrowing encouraged overleveraging.

“Those are the people who are going to be screwed when it comes to mortgage renewals and with the change in the market because they overleveraged when money was cheap during the pandemic.”

“I own my home. I don’t own it, but I have a mortgage. Yes, some months are harder than others. Yes, it’s a struggle to live in the city. But I’m not playing it bigger than I am.”

What’s the bottom line?

Owning a home worth $1 million in Toronto may technically make someone a millionaire, but financial experts agree that wealth is about more than just property value. Even more so when it comes to living in the GTA.

Without significant equity or additional investments, homeownership alone doesn’t guarantee financial freedom.

In today’s market, true wealth comes down to income, assets, and the ability to endure the city’s ever-rising costs.