What Salary Do You Need For Home Buying in Toronto?
It’s a great question to ask in this seemingly bearish real estate market climate right now. If you’re looking to buy a home in Toronto, and are wondering how much you need to make, you might want to start saving up. According to a new report from RBC Economics, home ownership costs in the city have skyrocketed, driven by soaring interest rates. The bank’s aggregate affordability measure is now at its lowest point in history, at 62.7 percent.
Affordability Still An Issue For Most Home Buying
This means that even though home prices may have fallen a bit since the Bank of Canada started raising interest rates in March, purchasing property is no more affordable than it was last year. And with six consecutive rate hikes in just nine months, many buyers are finding it difficult, if not impossible, to secure the funds to buy a home.
You Need A Household Income of $240,000 Per Year To Buy A Home
To qualify for a mortgage on the purchase of a typical Toronto home at the benchmark price (about $1,074,300 across all property types), you’ll now need to make a household income of at least $240,000 per year. That’s a 29 percent increase over the previous year, and it’s one of the reasons why home sales have dropped so drastically in Ontario (sales are down by 41 percent year over year).
And it’s not just Toronto that’s experiencing this problem. According to the report, it’s never been so unaffordable to buy a home in this country. The report also states that skyrocketing home prices earlier in the pandemic raised the bar by several notches for Canadian buyers. But the spike in interest rates since March, 2022 served a crushing blow in parts of the country.
Home Buying Prices Are Falling
The good news is that RBC economist Robert Hogue predicts that the market will eventually absorb the rise in mortgage rates. He predicts that “the market correction’s silver lining is it’s setting the stage for some affordability improvement in the year ahead. We expect the national benchmark price to fall 14 percent from its early 2022 peak, providing significant scope to lower ownership costs once interest rates stabilize.” Hogue predicts that this could start in the early part of 2023, though he notes that the timing is likely to vary by market.
In conclusion, buying a home in Toronto, and other parts of Canada, is becoming increasingly unaffordable. With interest rates on the rise, many buyers are finding it difficult, if not impossible, to secure the funds to purchase a home. However, there is some hope on the horizon, as RBC economist Robert Hogue predicts that the market will eventually absorb the rise in mortgage rates and that affordability will improve in the year ahead.
