Looking at the Toronto 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 average customers, there’s really one thing that matters:
“What can I buy?”
To help answer that question, let’s calculate what level of family income you or your household are going to need to induce in order to purchase a home, based on average prices in 2017 so far.
First, we looked at prices for the entire Greater Toronto Area (both the 416 and suburban 905) by property type.
There’s no debating the numbers are overwhelming. But it’s important to note, the income represent entire household incomes and not just that of a single person.
Along with showing a broad overview of the Toronto region’s marketplace, we likewise delved up numbers on a per-city basis, looking into prices for all property types (pooling together detached houses, semis and condos).
How the numbers were 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 GDS Ratio. Short for Gross Debt Service Ratio, this calculation adds up all your expenditures (mortgage pays, utilities and taxes) and subdivides that number by your entire household salary.
If your GDS works out to be 32 per cent of the members or anything below) a property officially falls in your price range.
We did a reverse calculation and applied the 32 per cent rule to average home prices in the first seven months of 2017 in order to identify the income you need to buy an average home.
The study factored in a down payment of 20 per cent, which is more reflective of 2nd time or 3rd time buyers who’ve already built up equity from a previous property and first-timers who likely got some financial support from their parents. A five-year fixed mortgage rate of 2.99 per cent was used.
Note: In today’s marketplace, GDS ratio up to 39% has been utilized by lenders to determine mortgages.
Remember, the buying journey is different for everyone
It’s important to note, this study is meant to provide a broad-spectrum look into the market and factored in average sold prices. There are still plenty of properties out in Toronto market that sell for below the market median.
Simply set, there are generally alternatives out there for a variety of home buyers and incomes. Just be prepared to induce some compromises if you expect to keep to your budget.
That is, based on your income and budget, you may need to be flexible related to the neighborhoods, type of housing, living area, renting out the basement apartment (if legally possible), monthly Condo maintenance cost (if applicable) etc.
Thinking to sell your house or Condo in Central Toronto areas and/or in downtown Toronto areas? Please call, text or email Max Seal, Broker at 647-294-1177. Please visit http://www.TorontoHomesMax.com for a FREE Home Evaluation“.
Thinking to buy a House or Condo in Central Toronto areas and/or in Downtown Toronto areas? please call or text Max Seal, Broker at 647-294-1177 to buy your dream home or Condo. I offer you a 30-min “FREE buyer’s consultation” with NO obligation.
Please visit my website http://www.centraltorontorealestate.com/ to find out available homes and Condos for sale in Central Toronto areas and/or in downtown Toronto areas.