Housing affordability is becoming a top priority for voters in the upcoming federal election, says Penelope Graham, managing editor at Zoocasa.
“However, given the vast geographical size of Canada and its many market nuances, buyers’ ability to purchase a home varies widely depending on local prices and incomes,” says Graham. “The Canadian Real Estate Association has noted a growing gap between price growth in Eastern and Western Canada, with improved affordability concentrated in the Prairie markets, as well as parts of the Maritimes.”
Zoocasa conducted a study to find out how feasible it would be for households on a median income to purchase real estate in Canada, finding median-income households would be able to afford the local benchmark-priced home in eight markets of the 15 markets studied.
“In the remaining seven, a median-income earner wouldn’t qualify for a mortgage large enough to fund their home purchase and would need to supplement it with a hefty downpayment, which, in some urban centres, would require a savings timeline that spans decades, assuming they set aside 20 percent of their total income each year,” says Graham.
In determining the extent of affordability for median-income households, Zoocasa calculated the maximum mortgage they’d qualify for in each region, assuming a three-percent interest rate, 25-year amortization and that the equivalent of one percent of the total home purchase price would be put toward annual property taxes. An additional $100 per month for heating costs was also factored into the calculation.
“Similar to CREA’s observations, Zoocasa’s calculations reveal housing affordability is most prevalent in the Prairies, accounting for five of the most affordable markets,” says Graham. “In these cities, home buyers with a median income would qualify for a large enough mortgage to purchase the average or benchmark priced home, so long as they have the required minimum downpayment of five percent.”
A median income wouldn’t get far in the British Columbia and Ontario real estate markets, says Graham..
“In Greater Vancouver, where the benchmark home price is $993,300, a median-income household earning $72,662 would qualify for a mortgage of only $241,994, leaving a shortfall of $751,306, 76 percent of the total purchase price. That would take a household setting aside 20 percent of their income annually a total of 52 years to save the required funds,” she says. “Fraser Valley and the Greater Toronto real estate markets round out the steepest three, requiring median-income households to come up with 70 percent and 63 percent of purchase prices of $823,300 and $802,400, respectively, requiring prospective buyers to save for 42 and 32 years, respectively.”
Top 5 Most Affordable Cities for Median Income Households
Source: The calgary Sun – Myke ThomasPublished: