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Housing affordability worst in Vancouver among major Canadian cities

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The median income in Vancouver is barely a third of what is required to buy the average home in Vancouver, far and away the worst affordability differential among Canada’s big cities.

The report this week from Ratesdotca.com doesn’t come as a surprise, as house prices have soared over the past decade and continued their surge through the lean years of the pandemic.

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But the numbers are scary. The median household income in Vancouver is $86,988, which translates to being able to afford a purchase price of $347,000 with an insured mortgage or $411,000 with an uninsured mortgage.

Meanwhile, the average price of a Vancouver home is $1,211,700. Ratesdotca calculates that the average home price is 249 per cent more than an average household can afford, or 195 per cent more if uninsured. Mortgage insurers won’t insure a home valued at over $1 million.

Things are nearly as bleak in Toronto. Median household income is $93,006 while the average home is $1,163,700. That’s 162 per cent more than the maximum affordable home price with an uninsured mortgage.

Ratesdotca house price affordability map

Compare that with Edmonton, Canada’s most affordable large city for housing.

There, the median household income is $91,912, roughly $5,000 higher than Vancouver and barely less than Toronto. But the average home price is $370,100. That means the maximum insured purchase price is $370,000, virtually identical to what the average Edmonton household can afford.

Overall, housing is unaffordable in Canada’s big cities. Across 13 cities, the average median household income is $79,876, translating to a maximum purchase price of $315,000. But the average Canadian urban home is $757,600, or 141 per cent of what the average household can afford to buy.

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Canada Mortgage and Housing Corporation economist Taylor Pardy told Ratesdotca that Edmonton, and to a lesser extent Calgary, saw economic downturns due to the drop in oil and gas prices from 2015 to 2019, which allowed homebuilders to catch up to demand.

By contrast, high demand and low supply in Vancouver and Toronto have driven a steady increase in prices without any significant rise in household incomes. And increasing supply will be difficult because builders, just like homeowners, are facing higher interest rates for construction financing.

With the cost of living soaring and no affordable housing, young professionals in Vancouver and Toronto are fleeing to places like the Maritimes and Prairies. The Conference Board of Canada said 24,000 residents left Toronto last year alone for other parts of Canada.

Many of those same people had flocked to big cities over the past decade for better incomes, when interest rates were low. But as demand went up, the cities couldn’t keep up with housing supply, sparking an exodus of those hoping to buy a home.

How affordability was calculated

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The report used a five-year insured fixed mortgage rate of 5.29 per cent, which was the rate when the data was collected in August, based on a five-per-cent down payment, $3,000 a year in property taxes, $100 a month for heating and no condo fees. The amounts don’t include default insurance premiums.

The calculations were similar for uninsured mortgages but were based on a 20-per-cent down payment.

Median incomes are from Statistics Canada’s latest data on household after-tax income, while median house prices are from the Canadian Real Estate Association’s MLS composite index.

Ratesdotca compares rates by top mortgage brokers, banks and smaller competitors across Canada to help potential homeowners find the best deals.

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