This is how much money you need to make to afford a house in Toronto
Published Thursday, July 21, 2022 6:34PM EDT
Last Updated Thursday, July 21, 2022 6:34PM EDT
New data is revealing how much money Toronto residents need to make in order to afford to purchase a home in the city.
According to the new data, released by Ratehub.ca, those looking to buy in Toronto will need to make more than $220,000 to buy a home in the city with a 20 per cent down payment.
While Ratehub.ca says the housing market has started to cool, higher stress test rates caused by rising mortgage rates have significantly increased the annual income required to purchase a home.
“In every city, homebuyers require a lot more income to purchase the average home due to higher stress test rates caused by increasing mortgage rates,” co-CEO James Laird said in a statement.
“This is the case even for cities that saw home prices decline.”
Ratehub.ca said it used March 2022 and June 2022 real estate data to make the calculations.
With an average home price of $1,204,900 and a mortgage amount of $963,920 in Toronto, the data showed that anyone looking to buy a home in the city currently would need an income of $226,500.
Stress rates have increased from 5.25 per cent in March to 7.21 per cent in June. The hike follows a mortgage rate hike of 3.14 per cent in March to 5.21 per cent in June.
The data found that compared to March, the income homebuyers need to buy a home in Toronto increased by $15,750 or seven per cent.
Rapidly rising interest rates have pushed Canadian home prices down in recent months, including in Toronto, with the average price of a home falling 1.9 per cent in June compared to May, according to the Canadian Real Estate Association.
“Home prices will need to drop significantly in order to neutralize the effects that higher mortgage rates have on the stress test,” Laird said.
“Unless this happens, home affordability will continue to be impacted significantly by the current rising rate environment.”