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Salary needed to buy a home in the GTA

In Canada by TheRedPin13 Comments

Salary needed to buy a home in the GTAImage source: Joey Gannon/Flickr

The old real estate tenet “don’t buy a house more than three times your income” has little merit in today’s market.

Between the trifecta of record low borrowing costs, monumental price gains and a dire lack of supply across the Greater Toronto Area, working out how much you can afford to spend on your dream home isn’t exactly clear. 

The almost universal approach used by mortgage experts to identify affordability is Gross Debt Service Ratio, or GDS for short. Finding your GDS involves adding up all your expenses (mortgage, utilities, property taxes etc.) and dividing them by your household income.

32 per cent is the magic number and serves as a rough guideline of what you can buy on the assumption no more than ⅓ of your salary is spent toward your property.

TheRedPin analyzed average real estate prices across the GTA and the incomes needed to afford them using the 32 per cent rule. Before we get started, it’s key to remember we’re highlighting the entire household income not just that of an individual.

House vs condo: what your salary needs to be to buy real estate in the GTA

Salary needed to buy a home in the GTA

When looking at the overall GTA housing market, it’s with little surprise that detached homes demanded the highest incomes.

Based on region-wide average prices, you need an income of $165,109 to afford a detached family house across Toronto and the suburban 905. That’s 17 per cent higher than needed salaries from last year.

On the other end of the spectrum, condominium apartments were the most affordable, with the minimum salary needed to afford an average GTA high rise jumping by a more modest 6 per cent compared to 2015.

Real estate is highly local however, and trends can vary drastically from city to city.

With that in mind, we also broke down how much you need to earn to buy a house across every major city and town in the GTA based on average prices for all home types.

Outside of a handful of cities further east in the Durham region, we found a six figure household income is almost a must for home buyers.

The prices highlighted in this analysis cover all home types—detached, semis, towns and condos combined. With that information in mind, and the fact the figures are more reflective of single family homes, we considered a down payment of 20% was made, which is more in-line with repeat buyers who have built up equity. Our calculations factored in an interest rate of 2.49 per cent, municipal property taxes and utility costs.

How much you need to earn to buy a house across the GTA

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Brampton

  • Average Home Price: $570,380
  • Needed Household Income: $105,743
  • Avg. Monthly Mortgage: $2,041
  • Property Tax Rate: 1.11%

Burlington

  • Average Home Price: $678,401
  • Needed Household Income: $118,893
  • Avg. Monthly Mortgage: $2,428
  • Property Tax Rate: 0.87%

Milton

  • Average Home Price: $629,536
  • Needed Household Income: $108,246
  • Avg. Monthly Mortgage: $2,253
  • Property Tax Rate: 0.73

Oakville

  • Average Home Price: $995,666
  • Needed Household Income: $168,871
  • Avg. Monthly Mortgage: $3,564
  • Property Tax Rate: 0.83%

Mississauga

  • Average Home Price: $620,606
  • Needed Household Income: $109,560
  • Avg. Monthly Mortgage: $2,221
  • Property Tax Rate: 0.87%

Toronto

  • Average Home Price: $736,932
  • Needed Household Income: $124,126
  • Avg. Monthly Mortgage: $2,638
  • Property Tax Rate: 0.67%

Aurora

  • Average Home Price: $941,068
  • Needed Household Income: $162,741
  • Avg. Monthly Mortgage: $3,368
  • Property Tax Rate: 0.92%

Markham

  • Average Home Price: $960,118
  • Needed Household Income: $161,662
  • Avg. Monthly Mortgage: $3,436
  • Property Tax Rate: 0.78%

Newmarket

  • Average Home Price: $761,080
  • Needed Household Income: $134,605
  • Avg. Monthly Mortgage: $2,724
  • Property Tax Rate: 0.97%

Richmond Hill

  • Average Home Price: $1,066,569
  • Needed Household Income: $179,551
  • Avg. Monthly Mortgage: $3,818
  • Property Tax Rate: 0.81%

Vaughan

  • Average Home Price: $921,714
  • Needed Household Income: $156,731
  • Avg. Monthly Mortgage: $3,299
  • Property Tax Rate: 0.82%

Whitchurch-Stouffville

  • Average Home Price: $920,463
  • Needed Household Income: $157,688
  • Avg. Monthly Mortgage: $3,295
  • Property Tax Rate: 0.86%

Ajax

  • Average Home Price: $568,342
  • Needed Household Income: $108,207
  • Avg. Monthly Mortgage: $2,034
  • Property Tax Rate: 1.27%

Pickering

  • Average Home Price: $599,267
  • Needed Household Income: $113,595
  • Avg. Monthly Mortgage: $2,145
  • Property Tax Rate: 1.27%

Whitby

  • Average Home Price: $574,506
  • Needed Household Income: $109,671
  • Avg. Monthly Mortgage: $2,056
  • Property Tax Rate: 1.29%

Oshawa

  • Average Home Price: $427,790
  • Needed Household Income: $87,801
  • Avg. Monthly Mortgage: $1,531
  • Property Tax Rate: 1.57%

East Gwillimbury

  • Average Home Price: $753,054
  • Needed Household Income: $132,365
  • Avg. Monthly Mortgage: $2,695
  • Property Tax Rate: 1.42%

Want to get started on your home buying and selling journey? Give us a call at 416.800.0812 and check out TheRedPin’s listings page

Assumptions:
Stats based on 2016 year-to-date figures from the Toronto Real Estate Board (TREB)
2.49% Interest rate
Amortization 25 years
Assumed monthly utility costs included
Down payment of 20%
Condo fees estimated for 900 and 750 sq.ft condo town and apartment respectively.
Property tax calculated on a per-city basis

Comments

  1. JJ

    32% of pre-tax income is more like 40-50% of after tax income. A household spending 50% of their take home pay on housing will have little ability to save for their retirement or kids’ education. They will also have no margin or error when interest rates rise, in case of job loss or unexpected expenses. A much more prudent, but increasingly unrealistic rule of thumb would be 25% of take home pay.

    1. Author
      TheRedPin

      Hi JJ,

      Thanks for contributing to the discussion!

      When looking at the figures, we chose to stick with the 32 per cent ratio for gross income as that’s the general yardstick to determine affordability in the industry. This study was meant to be a broad and generalized look into the market and homebuyers. We agree when it comes to determining what you can afford – every individual buyer needs to take a different approach that accounts for their unique employment situation, family expenditure and overall financial goals. 25 per cent sounds like an ideal goal and there are still pockets of affordability depending on where and what type of home you’re looking for.

      Thank you for the feedback!

      Best,

      TheRedPin

  2. elizabeth hopkins

    Minto Longbranch development and/or other minto existing developments … $260 – $300,000 deposit Income (for housing) approx. $25,000 (retired) possible?

    1. Author
      TheRedPin

      Hi Elizabeth,

      Thank you for reaching out. One of our in-office realtors will be in contact with you soon. They’re experts in their field and can help provide some free guidance at no obligation.

      Best,

      TheRedPin

  3. Gloria Braymore

    I heard this big news story on the radio yesterday.
    This is not news nor is it accurate.
    Some people purchase a home with 10% down
    some buyer have 50% or more to put down on their new purchase.
    This story is flawed and not worth repeating.

    1. Author
      TheRedPin

      Hi Gloria,

      Hope you’re having a great start to your weekend and thank you for contributing to the discussion.

      We agree with you that the home buying journey is unique for everyone – whether it relates to your down payment, property taxes or overall home ownership goals. Our calculations were based on an industry practice of using a gross debt service ratio of 32% to determine affordability based on averages. Scenarios are different from person-to-person; yet the numbers provided are intended to paint a general picture of how much prices have changed in terms of real incomes and the direction of where the market’s been heading.

      If you’d like to discuss the topic in more detail please feel free to reach out to us at inquiry@theredpin.com.

      Best,

      TheRedPin

  4. Mohamed Akil Walji

    Nice read. Would your statisticians be able to include data of ACTUAL household income as well? This would give the reader a better perspective of Income Needed against Income Available in the geographic area you have highlighted. Thanks

    1. Author
      TheRedPin

      Hi Mohamed,

      Thank you for the kind words. The idea of comparing home prices to actual household incomes (rather than needed incomes) is an interesting idea and something we may pursue in the near future.

      We really appreciate your input.

      Best,

      TheRedPin

  5. Aly

    Just wait till you add two kids in full time daycare in the GTA to the equation and see how tight your monthly finances get with these figures! It’s unfortunate, but if you want to own a house to raise your family, and you don’t get a fat cheque from the bank of mom and dad, you’re left with little choice!

    1. Author
      TheRedPin

      Hi Aly,

      We totally agree, the task of finding an affordable house in the GTA is nothing to scoff at. There are affordable pockets dotted around the region (e.g. Durham); and if you’re willing to go for a semi over a detached, or a high rise condo, there’s still several options that demand incomes below the six figure mark – but we agree, it’s a competitive market.

      If you’re ever interested in chatting about housing and how to find affordable options, please don’t hesitate to reach out to us at inquiry@theredpin.com or by phone at 416.800.0812.

      Best,

      TheRedPin

  6. ChubbyChecker

    Aly, best advice is to be a big DINK – Double Income No Kids – to get a start in the market (assuming you don’t have access to a bank of mom and dad, and you earn an average wage).

  7. H/H

    Toronto Average Home Price seems to be understated! would be ideal if you could breakdown by home type i.e. Condo, Town, Semi etc etc to clarify better for readers.

    1. Author
      TheRedPin

      You make a great point. We wanted to provide an overall look into the market so we stuck with all home types. We did highlight needed incomes by house type based on GTA wide averages which I hope you found useful.

      If you have a specific home type and city in mind, we could work out needed income for you. Just let us know in the comments section.

      Best,

      TheRedPin

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