Want to buy a Toronto condo? You now need an annual income of at least $100,000

First-time homebuyers now need a six-figure income to get a foothold in Toronto’s heated condominium market, a new analysis shows.

And those being priced out of home ownership are leasing apartments instead — driving up already soaring rents in the city, according to Urbanation, a market analysis firm.

“With the new lending rules now in place and the quick rise in prices we’ve seen, it’s difficult to make that leap as a first-time buyer,” said Shaun Hildebrand, senior vice president of the firm. “That’s pushed some out of the market at least temporarily, adding pressure to a rental market that’s already extremely tight.”

Amid low supply and soaring demand, the average price of a resale condominium in Toronto hit $558,000 in the first quarter of 2018, up from $510,000 during the same period last year. At those prices, homebuyers would need an income of at least $100,000 in order to satisfy the lending standards for gross debt service ratios as well as tougher mortgage qualification rules introduced by federal regulators in January, Hildebrand found.

Just a year ago, the average income necessary to meet those requirements was $77,000.

No surprise then that so many are opting to stay in the rental market a little longer, driving up average rents amid vacancy rates that are now below one per cent. Rents for an average unit of 740 square feet in the city of Toronto grew 10.7 per cent year-over-year in the first quarter, to $2,206.

Indeed, Urbanation found it was still less expensive to rent than to carry the ownership costs of the equivalent sized condominium. For the average 740 square foot unit rented in the first quarter of 2018, the cost of a mortgage plus condo fees (with a 20 per cent down payment) would be $170 a month higher than the average monthly rent of $2,206. Two years ago, the costs of owning and renting were roughly equal.

But some relief may be in sight as more supply comes on to the market, Hildebrand said. The number of purpose-built apartment buildings under construction ended the first quarter at 7,937 units, up from 5,832 units a year ago.