November 14, 2018

What You’ll Need to Earn to Afford a Brampton or Mississauga Home

Great news for Brampton and Mississauga homeowners: Over the first 10 months of 2018, average home values have improved from last year in all 29 neighbourhoods, boosting equity and reflecting strong demand.

For prospective buyers, however, the picture is less rosy – higher home prices, combined with a steeper interest rate environment, have effectively squeezed the affordability of Brampton and Mississauga real estate. Those looking to break into these markets will now need to earn a larger income to qualify for the required mortgage, especially as borrowing costs continue to rise.

Overall, buyer conditions have become tighter in these markets, according to October data from the Toronto Real Estate Board. In Mississauga, while sales have remained relatively flat year over year, a 12.5-per-cent decline in new inventory has reduced buyer choice, resulting in 57 per cent of newly listed homes sold and nudging the market closer to sellers’ territory.

Sales activity has been more robust in the City of Brampton, with 5.3 per cent more homes changing hands, and new listings declining 10 per cent. That’s resulted in 45 of all homes newly listed sold and slightly firmer, though still balanced, buyer conditions.

How Much More Buyers Need to Earn

Just how much more cash will aspiring buyers need to earn? To find out, Zoocasa calculated the difference in minimum income required to purchase an average home in each neighbourhood from 2017 to 2018, assuming the buyer makes a 20-per-cent down payment, takes out a 30-year mortgage, and qualifies for their lender’s Prime Rate, which has increased from an average of 2.85 per cent last year, to an average of 3.58 per cent in 2018, according to the Bank of Canada.

The findings reveal that in the priciest locations such as Lorne Park, Mineola, Sheridan, Castlemore, and Applewood, today’s buyer would need to earn between $20,000 – $37,000 more than last year to purchase the same average-priced home.

However, while all neighbourhoods experienced appreciation, there are areas where the increase in required minimum income is relatively more manageable; those perusing their options in Alloa, Snelgrove, Deerfield, Madoc, and Lakeview would need to earn between $6,500 to just over $10,000 more this year than in 2017. These neighbourhoods can provide a more affordable starting point for buyers exploring their options, for example, condos for sale in Mississauga or Brampton.

Check out how the required incomes, and home prices, have increased in each Brampton and Mississauga neighbourhoods between this year and last, in the infographic below*:

Top 5 Neighbourhoods Where You’ll Need to Earn More to Purchase the Average Home

1 – L5H (Glen Leven, Lorne Park, Lorne Park Estates)

Average Home Price: $1,490,831 (+19% y-o-y)

Additional Required Earnings: $37,245 (+22%)

2 – L5G (Mineola, Port Credit)

Average Home Price: $1,212,109 (+13% y-o-y)

Additional Required Earnings: $23,956 (+16%)

3 – L5K (Sheridan Homelands, Sheridan Park, Sherwood Forest)

Average Home Price: $852,448 (+21% y-o-y)

Additional Required Earnings: $22,904 (+24%)

4 – L6P (Castelmore, Valley Creek, Ebenezer, Brampton North)

Average Home Price: $954,699 (+17% y-o-y)

Additional Required Earnings: $22,292 (+20%)

5 – L4& (Dixie, Applewood)

Average Home Price: $648,459 (+27% y-o-y)

Additional Required Earnings: $21,272 (+31%)

*Sold data for properties were sourced from the Toronto Real Estate Board (TREB). Calculations are by Zoocasa. Properties included in the average home price calculation are detached houses, semi-detached houses, condo apartments and condo townhouses.

The income required for the average 2017 home price is based on a 20% down payment and a mortgage amortization of 30 years at the January to October 2017 average prime rate of 2.85%. The income required for the average 2018 home price is based on a 20% down payment and a mortgage amortization of 30 years at the January to October 2018 average prime rate of 3.58%.

The average prime rates were sourced from the Bank of Canada (www.bankofcanada.ca/rates/interest-rates/canadian-interest-rates).

Carrying costs such as property taxes and heating were not factored into the calculation.

Mortgage affordability calculations were based on the Ratehub mortgage affordability calculator (www.ratehub.ca/mortgage-affordability-calculator).

*A previous version of this infographic labelled L5S erroneously as a residential neighbourhood, when it is zoned for commercial use.