You now need to make $100,000 a year to afford an average-priced condo in the Greater Toronto Area, according to a report released Wednesday by Urbanation, a condo market analysis firm.
That’s compared to a required income of $77,000 last year, and $64,000 in 2016.
Why is the increase between 2017 and 2018 so drastic? Rising prices are partly to blame: as more homebuyers turn to condos and away from detached homes — which remain financially out of reach for most — condos are the only housing type in the GTA that has increased in price since last year. In March, the average price of a condo stood at $551,003 — a 6.1% increase from March 2017.
The OSFI “stress test” rules that went into effect Jan. 1 have also had an impact. The rules, which make it harder for prospective homebuyers to qualify for a mortgage loan, were introduced to reduce mortgage risk — e.g., to make sure that people weren’t buying homes that they could not actually afford.
The rules require mortgage applicants to prove that they can afford to pay higher interest rates — either at two percentage points above the rate that they qualify for, or at the five-year Bank of Canada average mortgage rate (whichever is higher). According to Urbanation, if the OSFI rules weren’t in place, homebuyers would only need an income of $86,000 to afford a GTA condo, whose resale prices stood at an average of $558,000 from January through April.
The increase means that the median household income in Toronto — $78,280 — is no longer enough to buy even an average-priced condo in the city
The increase means that the median household income in Toronto — $78,280 — is no longer enough to buy even an average-priced condo in the city.
With the new OSFI rules, the required income required to buy a condo has increased by a staggering $14,000 in the past year.
The OSFI rules haven’t only affected homebuyers. By making homes more expensive to buy, the rules have also indirectly pushed up rental prices, as condo landlords charge more to cover their mortgage payments. Average monthly rents have increased by $214 in the past 12 months to $2,206. Over the past two years, rent prices went up by a total of $314.
“Renters in the GTA are facing very strong market forces that are pushing hard on demand while new supply remains stubbornly low,” said Shaun Hildebrand, senior vice president at Urbanation.
“The situation should improve at least somewhat starting in the second half of the year as more condo projects under construction reach completion and buyers begin to adjust to the new mortgage rules.”