I know when purchasing houses in the past the rule of thumb was one’s PIT (principal, interest and ALL taxes including annual municipal) should not be more than 33% of one’s income.
BUT as others have mentioned, that wouldn’t cover all of the Living Expenses that come with owning a house, or maintaining a property (even a rental). There would be Utilities to add into the mix… the necessary ones like… Gas / Heat – Hydro – Water & Sewar. As well as optional ones that people tend to count into the mix as well… Phone – Tv – Internet.
If you own a house, they say you should count on a MINIUM of 10% of your Mortagage Payment (or aprox 1 month equivalent out of the year) for Other Expenses to maintain the property… be that to hire out help, or purchase things to do it… Lawn Maintenance (Lawnmower, fertilizing, flowers) – Snow Removal – and Painting & Repairs.
So ya I could see where someone who is paying close to the 33% mark to JUST BUY a home, might find their TOTAL HOME EXPENSES to be up around 40 or 50% at the end of month.
Then you add in the fact that the largest amount of Ontarians live in the Golden Horseshoe… Niagara thru to Oshawa (7 Million) OR for the Extended Horseshoe from the Tri-City Area (CKW) north to Barrie and East to Belleville / Peterborough (8 Million) and that is more than 50% of the population of the entire Province (13.5 Million)
The Golden Horseshoe (either definition) where the highest cost of housing is in all of Ontario.
And if we are just talking RENT… well lets face it rent is ridiculous in Toronto, and most renters are going to be doing so because they cannot afford to buy… and they cannot afford to buy because they don’t make a lot of money. And if you don’t make a lot of money, then rent is going to be even more ridiculous !!
It is a vicious circle for sure.
Here is a contrast of examples for you…
A suburbian regular single family dwelling in the GTA / Golden Horseshoe now is going for about $ 1 Million… in Eastern Ontario, we still consider the market here to be steep (Ottawa & the NCR) but the same house here is about 50% at $ 500 K. One can get into a townhouse here for still under $ 300 K ($ 200 K if you are in a smaller city or town). NONE OF THAT IS DO-ABLE in Southern Ontario.
Southern Ontario is more and more beginning to look like the large metro areas of the USA in terms of costing… NY, LA, Chicago etc.