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The Toronto Real Estate Board publishes the above affordability chart monthly, showing the share of average household income used for mortgage, taxes and utilities based on the average priced home in the GTA. Note the red line; we are firmly above 1/3 of a family’s income needed to support the averaged priced home in the GTA. East York is just about equal to that average. All Canadian Banks have lending policies that limit a person’s borrowing for a home at about 32% of income. So what does that mean for our Toronto Real Estate?
First consider that at the peak of the chart in early 1989, five year mortgage rates hit 11.5%. Today a 2.5% rate helps with affordability and a core factor to record prices. Rates are expected to remain low to help boost inflation and growth.
Pivotal fundamentals now in play:
Looking forward there will be fewer first time buyers competing in the low end of the market and a softening of intensity. The smaller detached market will continue to be buoyed by builders and developers. Those upstream of that segment of the spectrum are advised to proceed prudently. Look for prices to increase at a slower more sustainable pace over the next year in the 10% range.