Six-figure Income Needed to Buy a GTA Home

Published on 13th November 2017

The headline is as blinding as staring directly at the sun during this week’s solar eclipse. But yes, no need to blink twice – you read the headline correctly! You need six figures to buy almost any GTA home. This headline has been widespread as of late and is grabbing a lot of attention. However, this has actually been the reality since last year. Ironically, it has only started to finally sink in recently despite the declining prices in the market right now. Buyers waiting for a more significant decline may keep waiting, but I wouldn’t recommend holding your breath for too much longer. Sellers looking for the prices to increase before listing again may have to wait a bit longer. It’s a giant game of chicken right now, and when you add that to one of the slowest times for real estate, you have media members writing about random things to stay relevant. That said, this headline does serve as a good wake-up call to many because this is indeed our reality.

Here are some numbers that may or may not shock you.

Home Price: $511,000

This will get you a 1-bedroom or 1+1 bedroom condo in Downtown Toronto, depending on the area. Alternatively, this price point will get you a 2-bedroom condo in the “downtown” suburbs of Vaughan, Markham, Mississauga (this is nice alternative if you do not have to commute downtown for work or can tolerate the hour-long commutes).

This type of property will require a $92K income to support it. The average Ontario income is $50K. The average starting university graduate income is $45K. These stats explain exactly why the rental market is insanely hot right now. This is also why a 1-bedroom condo downtown has become the new entry-level home that only the “above-average” Torontonian can afford. This cohort is your millennial who is contemplating whether to rent for life or stay at home so that they can save money in the hopes of buying a condo later (hoping and praying that prices won’t increase too much). I have clients on both sides of the fence. There is no right or wrong answer as it really just depends on your affinity to own a home.

Home Price: $864,228

This is the cost of the average freehold home (includes condos, which technically skews the prices down a bit). This price point will get you a townhouse in the suburbs or a 2-bedroom condo downtown. In order to support this property type, you’re at the upper limits of a $150K salary. That income really puts you in the top 5% of Ontario income. You’re at the top 5% – you made it! That is, until you realize that you can only afford an average home in GTA.

It may seem bleak, but keep in mind that when two people come together in marriage or cohabitation, they often also have the ability to pool their income. When you split the income required to buy an average home in the GTA between two people, the cost of a home comes significantly more into reach. You’re looking at $75K salary for each partner, which is a little bit less than buying an entry-level condo on your own. Time to seek out your better half if you don’t already have one?

Home Price: $1.15 Million

This is the cost of the average detached home in the GTA. In order to own a detached home (which a lot of people still want to own), you’ll need a $200K salary. That’s two people making $100K each, which is not as rare as you may think as these “power couples” are quite common. Usually, two engineers, accountants, MBA grads, or software developers get together and can afford this property type.

The “entry” level detached home is between 20-30′ wide (note that this is not that big, even though it is a detached home). In the midtown area, that translates to about 1200-1500 square feet above ground. In the suburbs, that is about 2000 square feet above ground. The caveat is that these detached homes tend to not be very modern in design. As a result, there is a shift to people buying condo townhouses instead around this price point in order to get that “modern and contemporary” look. Comparatively, upgrading your “want” to a modern detached home, you’ll need to adjust your starting budget to $1.3 million.

The wrap – Keep in mind, all of the above scenarios are to support the home (i.e., the mortgage), and does not factor in cash needed to purchase the home. In other words, you’ll still need to come up with the down-payment for that home. As an experienced realtor, the most common ways around these challenges tend to be:

– Bank of MaD (that is, Mommy and Daddy – who hopefully won’t be mad that they have to lend you money)

– Extra cash from owning investment properties

– Intense savings habits

– Business exponentially grows

– Get a promotion at work

– Money saved up from living at home

– Marrying rich…

– Lottery…

So how will you fund your home? There is lots to consider, but the decision is ultimately yours to make.

Until next time, Happy Real Estate-ing!

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