Canadians looking for a home in major cities will likely have to look elsewhere, unless they count themselves among the country’s richest.
New analysis from RateSupermarket.ca shows that only those in the top income bracket can afford to buy homes in many of Canada’s major cities like Toronto, Vancouver and Montreal.
It cites a recent study from Zoocasa, a Canadian real estate website, which places the benchmark prices for Toronto at $873,100 and Vancouver at $1,441,000. Only the top 10 per cent can afford to live in Toronto and only the top 1 per cent can live in Vancouver.
Jacob Black, managing editor of RateSupermarket.ca, had this advice for potential homeowners: “Step one is to have a realistic idea of what you can spend. Step two is look outside the box that you might have looked in before,” said Black. “We’ve seen a trend develop in terms of cohabitation, multi-family homes, looking at options like condos, smaller apartments outside of the major city area.”
The RateSupermarket analysis compares these benchmark prices against the household income needed in order to afford a home in 12 Canadian cities, including Victoria, Hamilton, Kitchener-Waterloo, Calgary, Ottawa-Gatineau, London, Edmonton, Saskatoon and Regina.
RateSupermarket’s criteria for determining household income was to assume a 3.25 per cent five-year fixed mortgage rate, $10,000 in debt, a monthly lease vehicle payment of $300, a down payment of 20 per cent, and amortization of 25 years.
Using these figures, one’s household income in Vancouver would need to be above $240,000 in order to afford a home. In Toronto, a household would need more than $160,000.
A surprising result for Black was the difference between Toronto and Hamilton — a city that’s 70 kilometres away, which requires a more ‘reasonable’ $120,000 household income for a $630,000 home.
“I think that really highlights that there are opportunities in thriving vibrant areas,” said Black. “It’s just not necessarily in the same traditional areas you’ve been looking in or that you’d be expecting.”
This seemingly insurmountable unaffordability applies to starter homes as well. With these homes in Vancouver, only income earners in the top 25 per cent can afford them. The benchmark unit price is $656,900. Toronto is not far behind at $522,300.
Above all else, Black stresses a wise use of resources when it comes to the property market.
“I don’t see (the market) reversing. I don’t see a correction, but I think it’s important people do what they can with the resources they’ve got,” said Black.
Regina emerged as the most affordable city in the study, with a benchmark price of a home of $275,900 and a minimum household income of $70,000.
Here’s the full list:
- Vancouver: House price: $1,441,000. Household income needed: $240,000
- Toronto: House price: $873,100. Household income needed: $160,000
- Victoria: House price: $741,000. Household income needed: $140,000
- Hamilton: House price: $630,000. Household income needed: $120,000
- Kitchener-Waterloo: House price: $523,720. Household income needed: $110,000
- Calgary: House price: $467,600. Household income needed: $100,000.
- Ottawa-Gatineau: House price: $444,500. Household income needed: $90,000
- London: House price: $426,236. Household income needed: $90,000
- Montreal: House price: $375,000. Household income needed: $80,000
- Edmonton: House price: $372,100. Household income needed: $80,000
- Saskatoon: House price: $301,900. Household income needed: $70,000
- Regina: House price: $275,900. Household income needed: $70,000