Salary needed to buy a home in the GTA: 2017

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Back in the early 90’s, 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.

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.

What you need to make to afford a Toronto home

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.

Brampton

Average Home Price: $723,028
Needed Household Income: $131,700
Avg. Monthly Mortgage: $2,734

Burlington

Average Home Price: $822,093
Needed Household Income: $144,413
Avg. Monthly Mortgage: $3,109

Milton

Average Home Price: $768,852
Needed Household Income: $132,788
Avg. Monthly Mortgage: $2,908

Oakville

Average Home Price: $1,203,598
Needed Household Income: $205,913
Avg. Monthly Mortgage: 4,552

Mississauga

Average Home Price: $748,952
Needed Household Income: $132,450
Avg. Monthly Mortgage: $2,832

Toronto

Average Home Price: $864,228
Needed Household Income: $147,750
Avg. Monthly Mortgage: $3,268

Aurora

Average Home Price: $1,131,787
Needed Household Income: $196,913
Avg. Monthly Mortgage: $4,280

Markham

Average Home Price: $1,117,546
Needed Household Income: $191,250
Avg. Monthly Mortgage: $4,226

Newmarket

Average Home Price: $965,636
Needed Household Income: $169,388
Avg. Monthly Mortgage: $3,652

Richmond Hill

Average Home Price: $1,246,153
Needed Household Income: $213,113
Avg. Monthly Mortgage: $4,713

Vaughan

Average Home Price: $1,142,227
Needed Household Income: $195,000
Avg. Monthly Mortgage: $4,320

Whitchurch-Stouffville

Average Home Price: $1,185,256
Needed Household Income: $202,200
Avg. Monthly Mortgage: $4,482

East Gwillimbury

Average Home Price: $1,015,760
Needed Household Income: $175,313
Avg. Monthly Mortgage: $3,841

King

Average Home Price: $1,555,634
Needed Household Income: $263,963
Avg. Monthly Mortgage: $5,883

Ajax

Average Home Price: $707,001
Needed Household Income: $132,188
Avg. Monthly Mortgage: $2,674

Pickering

Average Home Price: $766,863
Needed Household Income: $141,900
Avg. Monthly Mortgage: $2,900

Whitby

Average Home Price: $735,166
Needed Household Income: $136,800
Avg. Monthly Mortgage: $2,780

Oshawa

Average Home Price: $552,268
Needed Household Income: $108,713
Avg. Monthly Mortgage: $2,089

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

Originally posted on Theredpin.