Was residential property market of Toronto affordable ever?
While home buyers in Toronto are labouring now under climate of rising interest rates and inflamed prices, long-term observers of real estate of city segment argue that affordability has never been feature of Toronto real estate market that took into account of double-digit interest rates in the last decades.
To determine accuracy of all of these positions, Zoocasa , an online property platform looked at current and historical average home cost of city and median household income, along with inflation rates and interest rates.
Zoocasa stated in its reports that borrowing was much more expensive in 1980’s and 1990’s due to high inflation and interest rates, buying home was much affordable while looking at relationship between average home prices and median incomes.
“In its decades since, borrowing gotten too cheaper, but property is less affordable as average home prices of Toronto skyrocket as income of median household grew at very slower pace.”
Zoocasa also explained that since year 1983, median income in Toronto Real estate market increased by 33% from around $58,700 to $78,280 in year 2015. Comparatively, average home price in Toronto real estate increased an astounding of 693% from $101,626 to around $806,071 in year 2017.
Real estate platform also culled a data for its monthly payments using mortgage calculator by Ratehub.ca. Zoocasa also found that monthly mortgage payments for “average Toronto home would be $1,698 in 1980’s, $1,777 in 1990’s, $2,156 in 2000’s and $3,615 in 2010’s to till date.”
Meanwhile, debt-to-income ratios of Toronto for mortgages stood at around 32% in 1980’s, a steady trend of price growth to 35% in 1990’s and 39% in 2000’s.
This ratio spiked to 60% in 2010’s to till date, which shows that “with double-digit interest rates in 1980’s and mortgage payments made a smaller portion of expenses of household as compared to today.