Prices and mortgage rates have slightly increased year over year, but new condominiums are still quite affordable in Toronto, according to Urbanation, which tracks high-rise condominium data.

To determine affordability, Urbanation tracks changes in the required income to purchase a 700-square-foot condominium in Toronto. Urbanation uses the overall average index price and the current five-year posted mortgage rate to determine the end selling price and the associated carrying costs.

Urbanation also assumes a conventional mortgage (25% down payment), $0.43 per square foot in maintenance fees, $100 in hydro per month and 1.25% in annual property taxes. Finally, the required income is calculated using a 32% gross-debt-service ratio.

For nearly four years from 2001 to the end of 2005, the qualifying income to purchase this hypothetical 700-sq.-ft. unit remained virtually unchanged at just $54,000 to $57,000 per year as falling interest rates generally offset rising prices.

However, starting at the end of 2005, both prices and mortgage rates started to trend upward in tandem, and qualifying incomes finally started to rise.

At the end of 2006, the overall average index price for a new condominium apartment in Toronto was $345 per square foot, and the average posted five-year mortgage rate was 6.6%.

Based on this scenario, the qualifying income to purchase this hypothetical unit was $65,000 per year, however, the required income to purchase the same unit at the end of 2005 was $59,000 per annum, which was about 10% less.