While almost everyone knows housing is expensive–home prices have been headline news in Toronto and GTA publications for years now–not everyone knows exactly how much they need to earn to afford a home in two of the 905’s most populous cities: Brampton and Mississauga.
Now, a new report from real estate website and brokerage Zoocasa sheds some much-needed light on what a buyer needs to earn to afford a home in the Region of Peel.
“Great news for Brampton and Mississauga homeowners: Over the first 10 months of 2018, average home values have improved from last year in all 29 neighbourhoods, boosting equity and reflecting strong demand,” says Penelope Graham, managing editor, Zoocasa, in a recent blog post.
That said, the market remains a challenging one for prospective buyers.
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“Higher home prices, combined with a steeper interest rate environment, have effectively squeezed the affordability of Brampton and Mississauga real estate,” Graham says.
“Those looking to break into these markets will now need to earn a larger income to qualify for the required mortgage, especially as borrowing costs continue to rise.”
While this likely comes as no surprise to those looking to enter the market, it’s still discouraging.
Overall, buyer conditions have become tighter in these markets, according to October data from the Toronto Real Estate Board.
In Mississauga, while sales have remained relatively flat year over year, a 12.5-per-cent decline in new inventory has reduced buyer choice, resulting in 57 per cent of newly listed homes sold and nudging the market closer to sellers’ territory.
The picture is a little brighter in Brampton.
According to Zoocasa, sales activity has been more robust, with 5.3 per cent more homes changing hands, and new listings declining 10 per cent. That’s resulted in more balanced buyer conditions.
How Much More Buyers Need to Earn
Just how much more cash will aspiring buyers need to earn? To find out, Zoocasa says it calculated the difference in minimum income required to purchase an average home in each neighbourhood from 2017 to 2018, assuming the buyer makes a 20 per-cent down payment, takes out a 30-year mortgage, and qualifies for their lender’s Prime Rate, which has increased from an average of 2.85 per cent last year, to an average of 3.58 per cent in 2018, according to the Bank of Canada.
The findings reveal that in the priciest locations such as Lorne Park, Mineola, Sheridan, Castlemore, and Applewood, today’s buyer would need to earn between $20,000 – $37,000 more than last year to purchase the same average-priced home.
However, while all neighbourhoods experienced appreciation, there are areas where the increase in required minimum income is relatively more manageable.
Zoocasa says that buyers zeroing in on Alloa, Snelgrove, Deerfield, Madoc, and Lakeview would need to earn between $6,500 to just over $10,000 more this year than in 2017.
“These neighbourhoods can provide a more affordable starting point for buyers exploring their options, for example, condos for sale in Mississauga or Brampton,” Graham says.
You can get a better idea from the infographic below:
Top 5 Neighbourhoods Where You’ll Need to Earn More to Purchase the Average Home
1 – L5H (Glen Leven, Lorne Park, Lorne Park Estates)
Average Home Price: $1,490,831 (+19% y-o-y)
Additional Required Earnings: $37,245 (+22%)
2 – L5G (Mineola, Port Credit)
Average Home Price: $1,212,109 (+13% y-o-y)
Additional Required Earnings: $23,956 (+16%)
3 – L5K (Sheridan Homelands, Sheridan Park, Sherwood Forest)
Average Home Price: $852,448 (+21% y-o-y)
Additional Required Earnings: $22,904 (+24%)
4 – L6P (Castelmore, Valley Creek, Ebenezer, Brampton North)
Average Home Price: $954,699 (+17% y-o-y)
Additional Required Earnings: $22,292 (+20%)
5 – L4& (Dixie, Applewood)
Average Home Price: $648,459 (+27% y-o-y)
Additional Required Earnings: $21,272 (+31%)