This is how much you need to make to buy a home in the GTA
This post was brought to you by TheRedPin.com, a challenger brand in Canadian real estate that carries the largest database of home listings in Toronto and Vancouver.
Back in the early 90s, the song “If I had a million dollars” hit the airwaves. In the four-minute single, musician Steven Page lists out the ways he’d splurge all that money to win over his sweetheart – from buying a house, car, outdoor fort and even a pet llama.
Fast forward to today and the song would be cut abruptly short. At least in Canada’s largest metropolis.
Across the Greater Toronto Area (GTA), one million dollars is the going rate for an average single-family detached home.
Even amid the recent blip in sales activity, that’s a full 21 per cent (or $199,000) jump in prices when compared to the same time last year.
See also
- The minimum amount you need to live alone in Toronto in your early 30s
- The average cost of rent in major Canadian cities in August (MAP)
- How much you need to make per hour to live alone in downtown Toronto
For nearly all house hunters, however, the process of buying a million-dollar detached home (or $500,000 condo) isn’t as clear cut as putting cash on the table and a mortgage and down payment will inevitably enter the equation. Which means working out what you can afford to buy can get pretty complicated.
For a simpler look into the market, TheRedPin broke down the salary you need to earn in order to buy an average home in the GTA.
Just to be clear, incomes in this situation don’t only factor an individual’s salary but that of the entire household, including your spouse as well as anyone else who lives in your home and contributes to monthly mortgage bills.
The salary you need to earn based on home type:
The figures above factor in average prices from January to July 2017 for the entire GTA and not one individual city or town (scroll down for a city-level analysis).
Six-figure household incomes were required for all home types, except for condo apartments, which edged just below that threshold. Detached homes obviously led the pack in terms of needed household income, as it was the only home type that demanded a collective salary over $200,000.
While condos may not be the most expensive property type, buyers needed to earn approximately 24 per cent (or $17,000) more this year than they did last year to afford a high-rise apartment. On the other hand, detached-home buyers needed around 21 per cent ($35,000) more compared to 2016.
How have things changed since May?
It’s no secret the GTA housing market has seen a recent slowdown. In May, the first full month the Liberal’s Fair Housing Plan was in effect, home sales declined 20.3 per cent and supply of properties on the market shot up a considerable 48.9 per cent.
So the big question here is – did the salary you need to buy an average property drop from May to July?
For everything from detached houses to townhomes, the answer was yes. The only exception was condo apartments, which saw prices increase collectively over the past three months.
How do things change by city?
While getting a big picture look at the GTA housing market is useful, like anything in real estate, location matters.
Below, we’ve broken down the income needed to buy a house across 18 major municipalities. This local analysis is based on prices for all home types (houses and condos combined) for the first seven months of the year.
- Average Home Price: $723,028
- Needed Household Income: $131,700
- Avg. Monthly Mortgage: $2,734
- Average Home Price: $822,093
- Needed Household Income: $144,413
- Avg. Monthly Mortgage: $3,109
- Average Home Price: $768,852
- Needed Household Income: $132,788
- Avg. Monthly Mortgage: $2,908
- Average Home Price: $1,203,598
- Needed Household Income: $205,913
- Avg. Monthly Mortgage: 4,552
- Average Home Price: $748,952
- Needed Household Income: $132,450
- Avg. Monthly Mortgage: $2,832
- Average Home Price: $864,228
- Needed Household Income: $147,750
- Avg. Monthly Mortgage: $3,268
- Average Home Price: $1,131,787
- Needed Household Income: $196,913
- Avg. Monthly Mortgage: $4,280
- Average Home Price: $1,117,546
- Needed Household Income: $191,250
- Avg. Monthly Mortgage: $4,226
- Average Home Price: $965,636
- Needed Household Income: $169,388
- Avg. Monthly Mortgage: $3,652
- Average Home Price: $1,246,153
- Needed Household Income: $213,113
- Avg. Monthly Mortgage: $4,713
- Average Home Price: $1,142,227
- Needed Household Income: $195,000
- Avg. Monthly Mortgage: $4,320
- Average Home Price: $1,185,256
- Needed Household Income: $202,200
- Avg. Monthly Mortgage: $4,482
- Average Home Price: $707,001
- Needed Household Income: $132,188
- Avg. Monthly Mortgage: $2,674
- Average Home Price: $766,863
- Needed Household Income: $ 141,900
- Avg. Monthly Mortgage: $2,900
- Average Home Price: $735,166
- Needed Household Income: $136,800
- Avg. Monthly Mortgage: $2,780
- Average Home Price: $552,268
- Needed Household Income: $108,713
- Avg. Monthly Mortgage: $2,089
- Average Home Price: $1,015,760
- Needed Household Income: $175,313
- Avg. Monthly Mortgage: $3,841
The Methodology
“How much can I afford?”
Whether you’re a first-time buyer or moving up the property ladder, it’s a question worth asking.
The approach used by nearly all mortgage professionals involves calculating your Gross Debt Service Ratio (or GDS). This ratio measures all your home ownership costs against your total household income. If your GDS Ratio is 32 per cent (or less), you can afford the property.
For this piece, we applied the 32 per cent GDS Ratio rule to average home prices. Moreover, our calculations factored in a down payment of 20 per cent to reflect repeat buyers who have built up equity as well as first-time buyers who received help from the bank of mom and dad.
Assumptions:
Stats based on 2017 year-to-date figures from the Toronto Real Estate Board (TREB)
Amortization 25 years
2.99% Fixed interest rate
Assumed monthly utility costs included
Down payment of 20%
Condo fees estimated for at $0.59 per square foot and $400 for condo apartments and townhomes respectively
Property tax calculated on a per-city basis
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