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Income needed to buy a home rises in most major markets



A recent study revealed that the amount of money required to purchase a home has increased in most major cities across Canada. According to a report released by Ratehub.ca, a financial services company, 12 out of 13 key markets experienced a surge in the minimum annual income needed to afford a house between January and February.


The analysis conducted by Ratehub.ca considered real estate data to calculate the minimum income levels necessary to buy a home in various major Canadian cities. Despite slight declines in mortgage rates, home prices have continued to rise, creating a challenging scenario for prospective homebuyers.


James Laird, the co-CEO of Ratehub.ca and president of CanWise mortgage lender, highlighted the opposing movements of two critical factors affecting home affordability: home values and interest rates. He noted that while interest rates have decreased, home values have escalated in 12 out of 13 cities, resulting in decreased affordability in 11 of them, despite the rate drop.


Toronto emerged as one of the cities witnessing the most significant increase in the income required to purchase a home. The income threshold in Toronto rose by $3,800 from January to February, reaching $214,100, reflecting the growing challenge of entering the housing market in the city.


Interestingly, Victoria and St. John’s were the exceptions, with decreases observed in the income needed to buy a home. In St. John’s, the required income dropped by $1,000 to $74,750, while in Victoria, it decreased by $1,060 to $169,300.


The methodology employed for this analysis involved utilizing average home price data from the CREA MLS Home Price Index and mortgage rates from the average of the Big Five Bank’s five-year fixed rates in January and February. The analysis assumed a mortgage with a 20 percent down payment, a 25-year amortization period, and accounted for annual property taxes amounting to $4,000, along with $150 in yearly heating costs.


These findings underscore the ongoing challenges faced by individuals and families aspiring to own a home in Canada's major urban centers. As home prices continue to climb, even modest reductions in mortgage rates may not be sufficient to offset the affordability gap, placing homeownership further out of reach for many Canadians.


In summary, the latest analysis reveals a concerning trend of increasing income requirements to purchase a home across most major Canadian cities, highlighting the pressing need for innovative solutions to address housing affordability issues in the country.


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