Households now need six-figure incomes to afford homes in Toronto—report

According to the latest study a household will need an annual income of more than $200,000 to shoulder the cost of a Toronto detached home, the average price of which is now sitting at $1.15 million.

The analysis—which took the average of home prices between January and June 2017 and assumed 20-per-cent down payment with a 2.99-per-cent mortgage amortized over 25 years—found that prospective buyers would need $150,000 per year to live comfortably in half of 22 Toronto area municipalities.

The average home price in Toronto ($864,228) is affordable to buyers who earn $147,750 annually. Condos, which skew towards the lower end of the cost scale with an average price of $576,000, demand an annual income of $92,925.

However, while various quarters have cited housing scarcity as a central driver in the city’s long-running affordability issues, a Bloomberg analyst duo has argued that latest census data actually belies that notion.

Earlier this week, markets observers Erik Hertzberg and Theophilos Argitis wrote that “the most important question remains the extent to which speculation is driving demand.”

“Ideally, fundamentals such as demographics and employment are at play, and the price gains reflect natural household growth getting ahead of supply. If that’s true, the market should eventually stabilize once new supply kicks in,” Hertzberg and Argitis explained. “A situation where speculators are bidding up prices would be much more problematic.”

“Canada’s 2016 census, which the statistics agency is releasing piecemeal this year, is providing some insight into the debate. The results: supply may not be the big problem many people thought it was.”

The data revealed that between 2011 and 2016, the total number of Toronto households increased by 146,200 (up to 2.14 million). To compare, the number of newly completed homes stood at 175,825 projects.

“In other words, supply of new houses exceeded real household demand by almost 30,000 over those five years,” the duo stated. “That throws cold water on the argument — voiced particularly by the industry — that the city’s affordability crisis won’t be resolved unless the government introduces measures to help increase supply.”

MBN

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