September shows revival in Canadian housing sales but numbers still down from year ago

TORONTO – The Canadian Real Estate Association reported Monday that although there was a slight improvement in the resale housing market in September it’s still slower than in previous years, which some observers say is due to new mortgage rules brought in by Ottawa.

The new rules make it harder for first-time home buyers to qualify for mortgages.

However, other observers have noted that reduced affordability after years of rapid price increases – particularly in some markets such as Vancouver and Toronto – and an uncertain world economy have also dissuaded buyers.

“While sales have been lower due to stricter mortgage lending guidelines, we continue to see substantial competition between buyers. The months of inventory trend remains low from a historic perspective, which explains the strong price increases we are experiencing,” said Toronto Real Estate Board President Ann Hannah in a press release.

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But can the average Torontonian afford a home?

According to the Toronto Real Estate Board the average price of a home in Toronto in September 2012 was $547,901.

“Assuming a 20 per cent down payment on the home, the average monthly mortgage payment worked out to be $2011.67 per month,” said senior manager of market analysis for the Toronto Real Estate Board Jason Mercer.

Based on an estimate by the Toronto Real Estate Board of average household income, covering households that both own and rent, the average household income in the GTA was $103,411 in 2012.

“When you look at the percentage of income that goes to the monthly mortgage payments, you are looking at around 30 per cent,” said Mercer. “That’s well within the general lending standards.”

However, according to Statistics Canada the median total income for all family types in Toronto averaged $68,110 in 2010.

“Someone at this income level, taking on a mortgage that high, would have to be very good at managing their money,” said Sunlife financial advisor Melanie Adams. “That eats up a pretty big chunk of income.”

Adams also cautioned against a monthly mortgage payment of $2011.67 for someone with an income of around $103,000 such as the one estimated by TREB.

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“The key issues still remain the same – it still comes down to having their budgeting be very tight,” said Adams.

– With files from The Canadian Press