Presented By
National Bank of Canada
Affording a home in Canada’s most populous region requires having a high household income. We break down the numbers by property type and city in the GTA.
Photo by Super Straho on Unsplash
Looking at the Toronto housing market through a lens of percentages, shifting sales numbers and interest rates may be the go-to method for industry insiders, but for many run-of-the-mill buyers, there’s really one thing that matters: “What kind of home can I afford?”
To help answer that question, let’s look at the level of income you or your household are going to need to purchase a home in Toronto and the Greater Toronto Area (GTA), based on the benchmark home prices reported by the Toronto Regional Real Estate Board (TRREB) in August 2022.
First, let’s look at the income required for home buyers across the entire GTA (both the 416 and suburban 905) by property type.
| Across the GTA | Benchmark home price | Household income needed | Monthly mortgage payment |
|---|---|---|---|
| Single-family detached | $1,414,000 | $280,000 | $6,741 |
| Single-family attached | $1,079,000 | $214,000 | $5,144 |
| Townhouse | $838,300 | $167,000 | $3,996 |
| Apartment/condo | $739,000 | $148,000 | $3,523 |
There’s no debating that you will require a significant household income to afford any home in the GTA. In 2020, Canadians earned $51,300 in income on average, and the median net income of Canadian families and individuals living alone was $66,800—you would need more than four times that income to qualify for a mortgage on a detached home in the GTA.
In addition to providing a broad overview of the region’s real estate market, we dug up the incomes required for the average property in each city in the GTA (the benchmark home price includes detached and attached houses, townhouses, and apartments/condos).
| City | Benchmark home price | Household income needed | Monthly mortgage payment |
|---|---|---|---|
| Ajax | $1,042,900 | $207,000 | $4,972 |
| Aurora | $1,346,700 | $267,000 | $6,420 |
| Brampton | $1,051,900 | $209,000 | $5,015 |
| Brock | $727,400 | $146,000 | $3,468 |
| Burlington | $994,400 | $198,000 | $4,741 |
| Caledon | $1,400,000 | $277,000 | $6,674 |
| Clarington | $877,100 | $175,000 | $4,181 |
| East Gwillimbury | $1,273,800 | $253,000 | $6,073 |
| Georgina | $801,600 | $160,000 | $3,822 |
| Halton Hills | $1,120,800 | $223,000 | $5,343 |
| King | $1,837,300 | $363,000 | $8,759 |
| Markham | $1,341,300 | $266,000 | $6,394 |
| Milton | $1,029,700 | $205,000 | $4,909 |
| Mississauga | $1,093,800 | $217,000 | $5,215 |
| Newmarket | $1,198,100 | $238,000 | $5,712 |
| Oakville | $1,347,900 | $267,000 | $6,426 |
| Oshawa | $840,800 | $168,000 | $4,008 |
| Pickering | $1,058,200 | $210,000 | $5,045 |
| Richmond Hill | $1,435,700 | $284,000 | $6,844 |
| Scugog | $979,900 | $195,000 | $4,672 |
| Stouffville | $1,394,200 | $276,000 | $6,647 |
| Toronto | $1,118,300 | $222,000 | $5,331 |
| Uxbridge | $1,296,600 | $257,000 | $6,181 |
| Vaughan | $1,388,000 | $275,000 | $6,617 |
| Whitby | $1,060,700 | $211,000 | $5,057 |
Mortgage rates have risen sharply since March 2022, when the Bank of Canada started increasing its benchmark interest rate. In turn, Canadian real estate prices have been on a steady decline since the rate hikes began. However, this hasn’t resulted in any substantial improvement to mortgage affordability.
The drop in home prices has been offset by higher interest rates, which reduce the amount new home buyers can borrow for their mortgage. For there to be a significant drop in the income needed to buy a home in Toronto or the GTA, home prices will have to fall even further.
If you’re borrowing funds to buy a home, a mortgage professional will put your finances to the test.
First, they will look at your gross debt service (GDS) ratio. Your GDS ratio is calculated by adding up all your monthly housing expenses (mortgage payments, utilities and taxes), dividing that number by your household income, and multiplying by 100. If your GDS works out to be 39% or less, you should be able to afford the home, according to the Canada Housing and Mortgage Corporation. That said, some lenders may limit you to a lower GDS ratio. The Financial Consumer Agency of Canada uses a GDS of 32% as a guideline.
Then there is GDS ratio’s cousin: The total debt service (TDS) ratio. TDS is similar to GDS, but it also accounts for any other debt obligations you may in addition to housing expenses. TDS is calculated by adding up all those expenses, dividing that number by your household income, and multiplying by 100. Most mortgage lenders let you have a TDS ratio of up to 44%.
To identify the income you need to buy an average home, we did a reverse calculation and applied the 39% GDS ratio guideline to August 2022 benchmark home prices. The TDS ratio was not factored in, because that would require knowing a borrower’s non-mortgage debt obligations. That said, the income requirements may be different for you, if you are currently carrying a lot of non-mortgage debt (such as a car loan or a balance on your credit card or line of credit).
Our calculations are based on a down payment of 20%, annual property taxes of 0.75% of the purchase price, and estimated heating costs of $100 per month.
We used a mortgage amortized over 25 years, and a five-year fixed mortgage rate of 5.25%—which reflects some of the best mortgage rates available nationally in August 2022. We also factored in the mortgage stress test, giving us a mortgage qualifying rate of 7.25%. Under the rules of the stress test, borrowers must qualify for their mortgage at a set rate of 5.25% or their contract rate plus 2%, whichever is higher.
Our calculations are meant to provide a broad overview of the income requirements for home buyers in Toronto and the GTA. They are based on averages and not intended to serve as financial advice to individual buyers. There are many properties that sell for less—and for a lot more—than the average, but if you are committed to buying a home in Toronto or in the GTA, know that you will generally require a high household income.
What you can personally afford to spend on a home is based on your financial profile and your ability to make mortgage payments. Before buying a home, consider speaking to a mortgage broker or provider who can take these factors into account.
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Some of these numbers “Household income needed” are not even close to being realistic. The statistic in this chart is showing the average single annual income would have to be $100,000 a year. There is no way whoever listed these numbers is going to say this these “average” people are getting these type of salaries or should be. I can guarantee over 60% of home buyers in 2022 are not making these salaries. “Needed” yes, “Getting” no. Which mean the problem in this Country are the banks just handing out loans where they shouldnt be.