Dreaming of becoming a homeowner in one of Canada’s biggest cities? If you live in Toronto or Vancouver, it looks like you’re going to need a higher-than-average salary to achieve that goal.
According to new housing affordability data from Ratehub.ca, a minimum income of $220,000 is required to buy a home in Toronto or Vancouver right now (with a 20 per cent down payment).
See also: This is the average net worth for Canadians — ranked by age.
An income of $220,000 is more than double the average salary in Canada. According to survey data from Average Salary Survey, the average salary in Canada is currently $93,181, with the average salary in Toronto coming in at $93,206 and Vancouver at $91,250.
For this analysis, Ratehub.ca used real estate data from March and June 2022 to calculate the minimum annual income necessary to buy a home in major Canadian cities. The data shows that the minimum annual income required to buy a home has gone up in all cities (specifically, by an average of $18,000) in the last four months. To afford a home in June 2022 (as compared to March 2022) — Toronto homebuyers would have to earn an additional $15,750 (or seven per cent) more to buy a home, and Vancouver homebuyers would need to earn an additional $31,730 (or 16 per cent) to buy a home.
You may also like: This is How She Does It: Vancouver millennial became a homeowner before 25.
Why do you need such a high income to buy a home right now?
If you’ve heard that home prices in larger Canadian cities are starting to go down, it may be surprising that the income required to purchase a home is on the rise — but, unfortunately, rising mortgage interest rates (the Bank of Canada recently starting increasing its target interest rates after years of historically low rates) also generate higher mortgage stress test rates.
“In every city, homebuyers require a lot more income to purchase the average home due to higher stress tests caused by increasing mortgage rates,” James Laird, Co-CEO of Ratehub.ca and President of Canwise mortgage lender, explains in the Ratehub.ca post. “Generally, for every 1 per cent that the stress test increases, a household qualifies for about 10 per cent less mortgage.”
Related: This is what $1 million dollar homes look like in big Canadian cities.
So, while the purchase price of a home may be less than it was a few months ago, that lower price may not be enough to offset the higher income required to pass the mortgage stress test in order to buy that home.
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