A new report from LowestRates.ca revealed just how much Toronto renters have to earn a year to live in the city.
“The average cost of a one-bedroom unit in Toronto was $1,866 a month last November,” said the report. “This represents a 19% year-over-year decrease. The average cost of a two-bedroom was $2,468, representing a 17% year-over-year decrease.”
According to the report, that means renters who commute would have to earn at least $45,500 per annum to afford a one-bedroom, which would amount to $36,104.88 after taxes, or $3,008.74 a month.
Renters who drive, on the other hand, would need to earn $51,500 annually, which, after taxes, is $39,884.76, or $3,323.73 a month.
According to Tom Storey, a real estate broker and investor, he rents out a one-bedroom unit to a couple, but noted credit score is more important than income—“A Credit score about 700 is ideal, and a credit score below 600 is not ideal,” he said. However, while every investor is different, he does have an income cutoff.
“Let’s say the rent is $2,500 a month, I figure out what it would be per year and hope it wouldn’t be more than 40% of their salary,” Storey told CREW. “For a two-bedroom, it would be fairly similar with the 40%, but with two bedrooms you typically have roommates, so it would be less of an issue and also ends up being below 40% because it’s a dual-income scenario. Every investor has a different metric, but that’s what I use.”
For homeowners in Toronto proper, where the average price a home is $894,576—it was $929,699 in the GTA at the end of 2020—assuming a mortgage down payment of 15%, which would involve CMHC insurance, the total mortgage amount would be $781,681 on a 25-year amortization, and that would necessitate $78,500 in annual income. After taxes, the homeowner would be left with $58,638.84, or $4,886.57 a month, and with five-year fixed rate mortgage at 1.68%, their monthly mortgage payment would be $3,191.
“There’s also property tax to take into account, which is based on the following factors: Toronto’s municipal tax rate, the educate tax, the city building fund, and the value of your property,” said LowestRates.ca’s report. “Using the City of Toronto’s Property Tax Calculator, on an $894,576 home, you’d be paying $5,364.80 a year in property tax, which works out to about $447 a month.”
Neil Sharma is the Editor-In-Chief of Canadian Real Estate Wealth and Real Estate Professional. As a journalist, he has covered Canada’s housing market for the Toronto Star, Toronto Sun, National Post, and other publications, specializing in everything from market trends to mortgage and investment advice. He can be reached at neil@crewmedia.ca.
