Although average home prices in most major cities have dropped over the last year, this doesn’t mean residential properties have become more affordable for Canadians, new data shows.
Statistics released by Ratehub.ca on April 17 reveal that more income is required to purchase a home in cities such as Toronto and Vancouver as of March 2023, compared to the same time last year. Ratehub.ca co-CEO James Laird says buying a home has become more expensive year-over-year due to rising mortgage and stress test rates.
“Even though home values are down in nine out of 10 cities we looked at, affordability has actually gotten worse because rates have increased so much that Canadians now qualify for less compared to a year ago,” Ratehub.ca co-CEO James Laird said in a press release.
While average mortgage rates in Canada have begun to creep downward, they remain higher than they were a year ago.
This is the result of an aggressive rate hike campaign implemented by the Bank of Canada throughout 2022, which drove up interest rates and, in turn, mortgage costs. Increasing its key interest rate has been part of the central bank’s attempt to tame inflation.
Canada’s annual inflation rate has since cooled to 4.3 per cent in March, down from 5.2 per cent in February. In its latest interest rate announcement on March 8, the Bank of Canada also decided to hold its policy rate steady at 4.5 per cent. Despite this apparent progress in bringing down inflation, a lack of affordable housing remains a concern among Canadians.
Based on MLS home price index benchmark prices released by the Canadian Real Estate Association on April 14, the average price of a home in the Greater Toronto Area, for example, was $1,118,500 in March 2023, compared to $1,335,000 in March 2022. Despite this drop, the minimum annual income required to buy an average home in the city has increased by $6,250 within the same amount of time, due to a rise in average mortgage rates.
The additional required income is calculated using a mortgage rate of 5.54 per cent in March 2023 and 3.14 per cent in March 2022. These figures represent an average of five-year fixed-rate mortgages offered by Canada’s five largest banks at the time, according to Ratehub.ca. They also take into account stress-test requirements that must be met before obtaining a mortgage.
The data is also based on a mortgage with a 20-per-cent down payment and amortization period of 25 years. Additionally, $4,000 in annual property taxes and a monthly heating bill of $150 are included in the final calculations.
Data compiled by Ratehub.ca shows homebuyers must make between $5,650 and $21,360 more per year to purchase a home in major Canadian cities in March 2023, compared to March 2022.
Residents of Vancouver are seeing the largest change in income required to purchase a home, while Hamilton was the only city in the report to see a drop in the minimum annual income required to purchase an average home year-over-year. As of March 2023, $165,940 was needed to buy a home in Hamilton. Exactly one year prior, an annual income of $170,400 was required to purchase a home.
According to Laird, a limited supply of new listings, combined with strong demand from homebuyers, means housing affordability is unlikely to improve in the months to come.
CTVNews.ca has compiled a list of homes currently on the market in major Canadian cities, as well as the minimum annual income needed to purchase a home in these areas.
VANCOUVER
Type: Apartment
Price: $1,099,000
Year Built: 1993
Property Size: 88.56 sq. m
Lot Size: N/A
Minimum annual income required (as of March 2023): $221,580
This renovated penthouse is situated in Vancouver’s Yaletown neighbourhood and offers panoramic views of the city. The open-concept floor plan includes a kitchen with an oversized island, wood cabinets and stainless steel appliances. The apartment building is located near stores, restaurants and public transit, offering quick access to the downtown core.
VICTORIA
Type: Apartment
Price: $875,000
Year Built: 2006
Property Size: 127.56 sq. m
Lot Size: N/A
Minimum annual income required: $168,750
On the main floor of this Victoria penthouse is a combined kitchen, dining and living area with three large picture windows. Also on the main level is a bedroom and four-piece bathroom. An additional bedroom and bathroom are located on the upper level and at the top of the unit is a rooftop deck.
CALGARY
Type: House
Price: $539,000
Year Built: 1966
Property Size: 92.90 sq. m
Lot Size: 536 sq. m
Minimum annual income required: $110,430
Recently renovated to include a suite on the lower level, this Calgary bungalow has a total of five bedrooms and two bathrooms. On the lot is a fully fenced backyard with a concrete patio and a separate two-car garage. The house is situated near schools and playgrounds, and remains a short drive away from downtown Calgary.
EDMONTON
Type: House
Price: $399,900
Year Built: 2020
Property Size: 150.66 sq. m
Lot Size: 222.12 sq. m
Minimum annual income required: $81,950
Built in 2020, this two-storey home in Edmonton has three bedrooms and three bathrooms across more than 150 square metres of space. Recent upgrades include new quartz countertops and vinyl plank flooring throughout. The main level offers access to the garage, and on the upper level, the primary bedroom leads to a five-piece bathroom with two sinks and a soaker tub.
WINNIPEG
Type: House
Price: $349,900
Year Built: 1911
Property Size: 104.05 sq. m
Lot Size: 457.18 sq. m
Minimum annual income required: $75,650
In addition to three bedrooms and two bathrooms, this Winnipeg home also includes a kitchen as well as dining, living and family rooms on the main level. In the finished basement is space for a recreation room or home office. Outside the home, the backyard is fully fenced and a detached garage has room for two cars.
TORONTO
Type: Apartment
Price: $1,100,000
Year Built: 2018
Property Size: 71.91 sq. m
Lot Size: N/A
Minimum annual income required: $217,000
Located in Toronto’s Annex neighbourhood, this one-bedroom, one-bathroom apartment also features a den that can double as a home office. Hardwood floors run throughout the unit, which also features a balcony with access from the living room and bedroom. Building amenities include rooftop gardens and the unit is situated near parks, schools and public transit.
OTTAWA
Type: Apartment
Price: $699,900
Year Built: 2012
Property Size: 92.9 sq. m
Lot Size: N/A
Minimum annual income required: $127,350
This two-bedroom, two-bathroom corner unit is approximately 93 square metres and located southeast of Ottawa’s downtown core. Attached to the main bedroom is a walk-in closet with custom built-ins, while the main bathroom has a walk-in glass shower. Building amenities include a fitness centre and courtyard.
HAMILTON
Type: House
Price: $899,999
Year Built: 1935
Property Size: 161.37 sq. m
Lot Size: under 0.2 hectares
Minimum annual income required: $165,940
Originally built in 1935, this single-detached home in Hamilton has since been updated with a new kitchen, staircases and flooring. Three bedrooms and three bathrooms are situated across more than 160 square metres of space. In the basement is space for a recreation room and in the backyard is a concrete patio overlooking Hamilton Harbour and Pier 4 Park.
MONTREAL
Type: Apartment
Price: $550,000
Year Built: 2006
Property Size: 80.2 sq. m
Lot Size: N/A
Minimum annual income required: $107,310
This corner apartment in Montreal includes two bedrooms and two bathrooms. Large floor-to-ceiling windows run throughout the unit, allowing sunlight into the combined living, dining and kitchen area, as well as the main bedroom. Located near the Old Port, this apartment unit is also situated near restaurants, shops, and other amenities.
HALIFAX
Type: Apartment
Price: $499,900
Year Built: 2010
Property Size: 96.15 sq. m
Lot Size: under 0.2 hectares
Minimum annual income required: $104,660
In this 96-square-metre apartment unit are two bedrooms and two bathrooms. Throughout most of the unit are new vinyl floors, and the kitchen has been upgraded to include new tile flooring, cabinetry and quartz countertops. The apartment overlooks Nova Scotia’s Long Lake Provincial Park and is a short drive away from downtown Halifax.
