To afford a house in East York on the recently increased minimum wage, a prospective buyer would need to save for decades to purchase a property at current prices.
On Jan. 1, Ontario increased the minimum wage from CAD $14.35 per hour to $15 per hour.
But in February, Toronto dethroned Vancouver as the most expensive city to buy a house in, according to an analysis by RBC Economics.
Housing in Toronto, according to BNN Bloomberg, has increased 17.8 per cent as of 2021. The average price for a home in the city topped CAD $1.26 million, according to RBC. And according to the Toronto Regional Real Estate Board, there will be another increase of around 12 per cent in 2022.
Renting in the city is also a challenge. Rentals.ca released a rent report stating that the Toronto market will see an 11 per cent rate increase in 2022, which means the average Toronto renter would pay on average $2,495 monthly for a 1-bedroom unit.
Homeownership dream slips further out of reach
The average house price in East York is now about CAD $1.2 million, according to Zolo.ca, compared to the average price in 2015, which was approximately CAD $800,000.
Christina Sigalas, 19, is a part-time cake decorator at a local Dairy Queen in East York. She believes the minimum wage increase is “very fair with due to all the inflation.”
Sigalas said buying her own house in the East York area has always been a dream for her. Yet, due to the neighbourhood, to be paid $15 an hour is not enough to make it come true.
“In order for this to happen, the minimum wage would have to be way higher than it is now in an extremely unrealistic way,” Sigalas said. “It would probably have to be $30 an hour, and that might even be too low.”
The Globe and Mail recently published an analysis that estimated an individual would need to make CAD $90,000 a year to afford rent in Toronto. That works out to $45 hourly.
Buying a home with minimum wages: the math
Let’s say you work for $15 per hour and you work 40 hours a week. Without two weeks’ vacation, your income will be $600 weekly.
Multiply $600 by 52 weeks (the total amount of weeks in a year) and your gross annual income will be $31,200. When you divide $31,200 by 12 your gross monthly income will be $2,600.
That means to afford a house in East York with a gross annual income of $31,200, you must save up to 39 years’ worth of income, assuming the current $1.2 million price doesn’t go up.
“I could see myself owning a home in the future, but I would definitely need some help from my parents in order to make that happen unless I want to wait until I’m in my 40s,” Sigalas said.
East York: High demand, high desirability
Nasama Ali, a broker and realtor at One Group Real Estate said the high raise of prices is due to the high demand for houses, and not enough to supply.
“East York is so expensive,” Ali said. “But you know, for years and years, it’s just been growing and growing in terms of desirability in terms of prices going up.”
The reason for East York’s popularity with potential homeowners is because of the open, green spaces, such as parks, the picturesque residential streets, and the proximity to local schools.
Ali said a minimum wage increase to $15 is “great,” but the problem is that the wage is not increasing as fast as the prices for homes.
“The interest rates are extremely low and they’re only making people buy more and buy more expensive, right?” Ali said. “So, I think there are other things that need to be addressed. I wish I had the answers, but I just don’t think it’s the wages being an issue.”