Toronto has a Real Estate Problem

imageIt is a common family tradition for my father and me to head down to the St. Lawrence market in Toronto for a bacon sandwich and then grab a coffee before heading off to the bookstore. As my family has grown it now frequently includes our significant others, especially my daughter Sophie who with her own limited chomping power continues to devour an ever growing portion of my breakfast!

However our trips to the bookstore have been dwindling in recent months. Nicholas Hoare, a staple on Front Street closed it’s doors in early 2013. The next nicest bookstore to head to is Ben McNally’s, up on Bay by Adelaide. But this year’s inclement weather has meant we frequently didn’t bother to make the trek.

Bookstores in general in Toronto aren’t doing so well. Last month we lost 3 bookstores; the Cookbook store, the Annex location of Book City, and The World’s Biggest Bookstore. Even Indigo/Chapters are feeling the pinch. This loss has been noted in several newspapers, but nobody is sure what to do.

Ben McNally, when I stopped by his store last week, told me that we don’t have a book problem in Toronto, we have a real estate problem. Inflation in Canada is around 1%, but every year rents go up on retailers. Small businesses, whether they be local grocers, tailors or bookstores operate with fairly fixed margins, but find that their rent is frequently the source of where they are being squeezed. They do consistent business with loyal customers, but can’t increase their sales fast enough to keep up with their rents.

This is an experience mirrored in residential property as well. A new report found that 50.6% of young Canadians in Ontario between the ages of 20-29 are still living at home. What’s keeping these young Canadians at home? There are many factors, but the most common is cost. The cost of living is simply out-pacing what you can earn.

There are two lessons here:
1. It pays to get kids saving and planning their savings early. Not just RESPs, which are savings parents put away on behalf of their kids, but getting kids to save and invest their money once they start working, especially if they can’t afford to move out yet. A solid financial plan will give them a better shot of keeping up with rising costs.

2. There is only so much financial planning can do. At some point cities and councilors and neighborhood associations are going to have to wrestle with the fact we need lots more building to go on within cities to keep living standards affordable and attainable. Maybe that can be an election issue.

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