Home prices in many Canadian cities, including Vancouver and Toronto, remain out of reach for average-income earners, according to a newly released report.
Mortgage comparison website Rates.ca has found homes in Vancouver cost 249 percent more than most people can afford while homes in Toronto are 210 percent higher.
The nationwide median income for Canadians comes in at $79,876. That means most households qualify for a mortgage of $299,500 allowing them to purchase a home worth $315,000 with a down payment included.
With the average price of a home in Canada coming in at $757,600, however, most homes cost 141 percent more than what a family can afford. The gap gets bigger, depending on where you live, and can go up even more based on what type of mortgage you opt for: insured or uninsured.
“Mortgage insurers won’t insure a home of over $1 million, which increases interest rates and the required down payment, and decreases the amount a borrower can qualify for,” the report reads.
Vancouver was the worst offender of Canada’s largest cities. The average income in British Columbia is $86,988, qualifying most households for an insured mortgage of $329,650 and an uninsured mortgage of $328,800. With the down payment considered, the average Vancouver family can afford a home worth $347,000 (insured) or $411,000 (uninsured).
With an average house price of $1.2 million, however, homes in Vancouver cost 249 percent more than what most people can afford for insured mortgages and 195 percent more for an uninsured home.
The story wasn’t much different in Toronto. The gap dropped, but only slightly, due to a higher median income of $93,006. Most households in the city qualify for a $356,250 (insured) mortgage or $356,000 (uninsured). However, with average house prices of $1.1 million, that is 210 percent higher than most people can afford. Average Toronto households can only afford homes worth $375,000 for an insured mortgage and $445,000 for an uninsured mortgage.
“It will come as no surprise that Canada’s largest city is becoming woefully unaffordable for many of its residents,” the report authors said.
In Halifax, a supply-demand challenge has pushed home prices higher, the report says. Average income earners bring home $76,046, qualifying households for a $280,250 mortgage. With the down payment included, the most an average household in this Maritime city can pay for a home is $295,000. However, the average home price is $540,500, 83 percent higher than most can afford.
In Calgary, the gap narrows even further as the average household income is $95,194, allowing families to qualify for a mortgage of $365,750. That means they could buy a home worth $385,000 when the down payment is included. However, the average cost of a home in Calgary is $550,700, meaning most workers make 43 percent less than they need to afford a home.
“Stampede City has seen heavier interprovincial and international migration in the past few months, resulting in a rise in the cost of housing,” the report says.
Edmonton was the only city on the list where average-income earners could afford to buy a house.
“Following the significant decline in oil and gas prices in 2015-2019, economic activity in Edmonton (and Calgary) moderated a fair bit,” said Taylor Pardy, an economist with the Canadian Mortgage and Housing Corporation.
“This has allowed housing supply to catch up and maintain that ample supply for much of the past decade, leading to flat or even declining prices in certain segments of the housing market.”
The median income in Edmonton was $91,912, qualifying families for a mortgage of $351,500, which means they can purchase a home worth $370,000, just $100 less than the average home price in the city.
CMHC deputy chief economist Aled ab Iorwerth said an “all-hands-on-deck” approach is needed to remedy the affordability problems in Canada’s real estate market. He said all levels of government and private parties needed to work together to tackle the issue.
