How much money do you need to make to afford a home in Toronto in 2023?

A for sale is sign is displayed in front of a house in the Riverdale area of Toronto on September 29, 2021. THE CANADIAN PRESS/Evan Buhler

House hunters looking to buy a home in Toronto need to make over $200,000 per year to crack into the market, according to new housing data.

Ratehub.ca, an online mortgage brokerage service, looked at data reported by the Canadian Real Estate Association (CREA) and compared the required income needed to buy a property in 10 major cities across the country – including Toronto and Hamilton – from January of 2022 to January 2023.

“Home prices are down, but affordability is worse than 12 months ago,” James Laird, Co-CEO of Ratehub.ca and President of CanWise mortgage lender said in a release.

The report notes that while Toronto is known for having one of the priciest housing markets in the country, the city came seventh in terms of worsening affordability.

Even though average home prices plummeted by over $178,000 since last January, those looking to buy property in Toronto need to make at least $207,000 a year to crack into the market – a $7,620 rise in required annual income.

The Bank of Canada has been steadily raising key interest rates since March 2022, causing strain on prospective homebuyers in qualifying for a mortgage given how high borrowing and stress test rates are, the report notes.

“With current fixed rates, the stress test is currently around 7.37 [per cent], which is over 2 [per cent] higher than a year ago. The increase in rates is more material than the decrease in home values so far, which means homes are less affordable in nine out of 10 of the cities we looked at compared to a year ago,” Laird said.

Hamilton is the only city to see an improvement in housing affordability over the last year.

On a year-over-year basis, average home prices dropped by over $200,000 in Hamilton, going from $1,012,700 to $809,800 in 2023 – the largest decline of all cities, the report notes.

As a result, the minimum income required to buy a home in the city – based on a 20 per cent down payment for a mortgage with a 25-year amortization period – decreased by $4,350, with prospective homebuyers needing to make at least $159,100 per year in 2023.

As per the report, until the Bank of Canada’s next policy rate announcement on March 8, real estate market analysts are unsure of how everything will play out in the coming months, given how unaffordable housing is.

“Early 2023 feels a lot like 2019, where after a year in which it became much harder to qualify for a mortgage, everyone was wondering if the market would pick up in the spring,” Shaun Cathcart, CREA’s Senior Economist, wrote in the report.

“In 2019 the market started off slow, as there wasn’t much to buy. It took off once spring listings started to come out. With the Bank of Canada increasingly signaling that rates are now at the top, it’s possible the spring market this year could also surprise, particularly in areas where prices have been stable or are now stabilizing.”