How much you need to earn to afford a home in Toronto and the GTA
You'll need around $115K in annual household income for a condo.
Should I sell and rent or get a reverse mortgage?
What to consider before selling your home or getting...
Photo by Super Straho on Unsplash
Looking at the Greater Toronto Area (GTA) housing market through an analytical 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 can I afford?”
First, let’s calculate the income levels someone (or a household) in the GTA would need to purchase a home, based on average house, townhouse and condo prices in 2021.
You’re 2 minutes away from getting the best mortgage rates in CanadaAnswer a few quick questions to get a personalized rate quote*You will be leaving MoneySense. Just close the tab to return.
Income needed by property type
What kind of a home can you afford? That depends on your income. Here we looked at prices for the entire GTA (both the 416 and suburban 905 area codes) by property type, based on Toronto Regional Real Estate Board (TRREB) data for the first 10 months of 2021.
There’s no denying that these numbers are high compared to previous years, thanks to a housing shortage and rising home prices during the pandemic (in fact, many Torontonians have moved outside of the city even though some are moving back). Also, these are “averages,” so it is possible to find a single-detached home for less—and, yes, even more—than what is listed here.
| Across the GTA | Average home price | Household income needed | Monthly mortgage payment |
|---|---|---|---|
| Single-family detached | $1,408,500 | $237,000 | $5,160 |
| Single-family attached | $1,098,900 | $186,000 | $4,030 |
| Townhouse | $784,000 | $134,000 | $2,870 |
| Apartment/Condo | $669,000 | $115,000 | $2,450 |
How much income you need, based on municipality
Along with providing a broad overview of the region’s market, we also dug up TRREB numbers on a per-city basis, looking into prices for all property types—pooling together attached and detached houses, townhouses and condos. Here’s what we found for the 25 municipalities that make up the GTA.
| Municipality | Average home price | Household income needed | Monthly mortgage payment |
|---|---|---|---|
| Ajax | $944,300 | $160,000 | $3,460 |
| Aurora | $1,180,100 | $199,000 | $4,320 |
| Brampton | $969,900 | $164,000 | $3,550 |
| Brock | $629,300 | $108,000 | $2,300 |
| Burlington | $1,186,400 | $200,000 | $4,350 |
| Caledon | $1,245,400 | $210,000 | $4,560 |
| Clarington | $857,900 | $146,000 | $3,140 |
| East Gwillimbury | $1,238,700 | $209,000 | $4,540 |
| Georgina | $777,000 | $132,000 | $2,850 |
| Halton Hills | $1,191,300 | $201,000 | $4,360 |
| King | $1,730,000 | $291,000 | $6,340 |
| Markham | $1,304,400 | $220,000 | $4,780 |
| Milton | $1,255,300 | $212,000 | $4,600 |
| Mississauga | $1,051,300 | $178,000 | $3,850 |
| Newmarket | $1,019,500 | $173,000 | $3,740 |
| Oakville | $1,388,600 | $234,000 | $5,082 |
| Oshawa | $784,200 | $134,000 | $2,870 |
| Pickering | $1,023,700 | $173,000 | $3,750 |
| Richmond Hill | $1,359,600 | $229,000 | $5,000 |
| Scugog | $942,700 | $160,000 | $3,450 |
| Toronto | $1,151,000 | $195,000 | $4,220 |
| Uxbridge | $1,182,500 | $200,000 | $4,330 |
| Vaughan | $1,283,000 | $216,000 | $4,700 |
| Whitby | $1,005,400 | $170,000 | $3,680 |
| Whitchurch-Stouffville | $1,361,100 | $229,000 | $4,990 |
What you need to earn to buy a home in Toronto—how it’s calculated
If you’ve secured a pre-approval before, it’s likely a mortgage professional has already put your finances to the test using the gross debt service (GDS) ratio. If so, then this is a reminder, and if not, this is a good explainer.
The GDS is calculated by adding up all your expenses (mortgage payments, utilities and taxes) and dividing that number by your entire household income. If your GDS works out to be 39% or less, a property officially falls within your price range, according to the Canada Housing and Mortgage Corporation. That said, some lenders may limit you to a lower GDS ratio, depending on your credit score.
Then there is GDS ratio’s cousin: The total debt service (TDS) ratio. TDS is similar to GDS, but it has one key difference: It adds any other debt obligations you may have to your housing expenses, before dividing it by your entire household income. It is an important calculation because it can impact how much you qualify for to spend on a home. Most mortgage lenders let you have a TDS ratio of up to 44%.
For the above chart, to identify the salary you need to buy an average home, we did a reverse calculation and applied the 39% rule to average home prices. The TDS ratio was not included, because we cannot take a borrower’s other debt obligations into account since it can vary from person to person. It’s important to note that these numbers may be different for you, if you are currently carrying a lot of debt.
The calculations also factored in down payments of 20%, which is more reflective of repeat buyers who’ve already built up equity from a previous property and first-time home buyers with sizeable down payments. We also factored in a benchmark rate of 5.25% for the mortgage stress test, a 25-year amortization, estimated annual property taxes of 0.75% of the purchase price and $100 per month for heating. A 5-year fixed mortgage rate of 2.69% was used.
The bottom line
It’s important to note, our data is meant to provide a broad look into the market and factored in average sold prices. There are still some properties out in the market that sell for below the market average, and of course, some that sell above the market average.
Simply put, there are generally options out there for a variety of home buyers and incomes. If you’re wondering about average home prices and the level of income you generally need to make them fit within your budget, these numbers can serve as a useful guide. Bear in mind that sound financial planning can go a long way in helping you achieve your goals. In other cases, you may need to make some compromises if you expect to keep to your budget.
MORE ON REAL ESTATE:
- 7 smart strategies for first-time home buyers
- We made money on the Toronto housing market. Now what?
- Why are homes selling for so much higher than the list price?
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
Related Articles
The best five-year fixed mortgage rates in Canada 2022
With so many options, finding the best mortgage rate...
What are the taxes on transferring real estate to your kids?
Joan and her partner own the condo her son...
Want to become a first-time home buyer in B.C.? These three steps can help
Buying your first home in B.C. requires careful planning...
Capital gains, taxes and more: The implications of inheriting real estate
There are tax, estate and other implications when inheriting...
Read this before applying for the First-Time Home Buyer Incentive
The FTHBI promises to help make real estate more...
Can young people afford to live in the city anymore?
Here’s what to know before deciding to move to...
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.