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So Much for Middle-Class Housing in Toronto

July 24, 2020
5 mins
Couple in modern living room at home

Owning a home is a life aspiration for most middle-class Canadians. It’s as important to some as getting married, having kids and saving for retirement.

But that aspiration is no longer realistic in Canada’s priciest housing markets. That’s because “middle class” in your average city is lower class in Toronto and Vancouver.

Consider that, as of June 2020, the average price of a detached home in the Greater Toronto Area was $1,127,419 ($631,704 for a condominium). And, as with any average, a large number of properties are far above these prices.

“The traditional middle-class lifestyle…that was commonplace 30 years ago is now only available to the upper-middle class, that is, the top 10%,” concludes a report by Fong and Partners Inc.

“Conversely, today’s middle class – i.e., employed but with no assets or savings, would have been classified as ‘working poor’ 30 years ago.”

The typical monthly mortgage payment on a detached home in the GTA is approximately $3,908, and $4,400+ if you factor in property taxes. (Assuming a down payment of 20%, a 25-year amortization and an interest rate of 2.09%, the lowest nationally available uninsured mortgage rate).

That, plus all of life’s other expenses, requires an average annual net income of $123,300, according to the Fong & Partners report. That technically exceeds the definition of a middle-class income, which in Canada is anywhere between $45,000 and $120,000, based on the OECD’s definition of middle class being anyone who earns between 75-200% of median household income after tax.

It helps explain, as we recently explored, why more homebuyers are fleeing to the burbs, or even as far as cottage country, for a shot at middle-class housing affordability.

The Right Place at the Right Time

Most first-time buyers in the GTA don’t have $213,975 laying around to make a 20% down payment on a detached home. Today’s first-time buyers aren’t as lucky as their parents or grandparents who profited handsomely from rapidly rising real estate prices.

“If you were one of the Fortunate Few (let’s say ‘the [top] 10%’) who owned real estate and financial assets during the last decade, then you probably made out like a bandit. Your net worth probably likely increased significantly,” the Fong & Partners writes.

“However, if you were one of the less fortunate many (let’s say “the 90%”) who didn’t own real estate or financial assets and didn’t see a significant rise in your income during this past decade, then you probably feel like you got robbed by the bandits in the 10%.”

Despite homeownership’s historically important role in defining the middle class, it is “increasingly out of reach” for a growing number of would-be buyers.

Rob McLister

Rob McLister has been informing mortgage consumers and professionals since 2007. In that time, he’s written more than 2,500 mortgage stories for publications ranging from the Globe and Mail — where he presently serves as mortgage columnist — to the National Post, Maclean’s, Canadian Mortgage Trends and Regularly quoted throughout the media, Rob is a committed advocate of greater transparency in the mortgage industry. He’s also been a vocal consumer advocate for more sensible mortgage regulation. In 2011, he launched two mortgage fintechs: mortgage comparison website and digital mortgage broker intelliMortgage Inc. The former is the go-to source of Canadian mortgage news and the only site comparing all publicly advertised prime mortgage rates. The latter is Canada's leading online mortgage provider for self-directed borrowers. Both companies were acquired in 2019 by RATESDOTCA Group Ltd.

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