Article created and published by Jon Jilani, Rate Hub CA.
According to data compiled by Ratehub.ca, homes across the country are becoming more affordable. We calculated the minimum annual income required to buy a home in Canada's major cities based on October 2022 real estate data. The report, seen below, illustrates how changing mortgage rates, stress test rates and real estate prices have impacted the income needed to purchase a home.
You need less income to qualify for the average home
Since the August 2022 Home Affordability Report, average home prices have decreased across all 10 cities that we looked at. While house prices have gone down noticeably, mortgage rates and the stress test are only slightly up from where they were just a few months ago. The result is that in all 10 cities, you need less income to qualify for the average home than you did over the summer.
"Homes are becoming more affordable across the country," says James Laird, Co-CEO of Ratehub.ca and President of Canwise mortgage lender. "With the Bank of Canada suggesting that rate hikes are nearing an end and the continued softening of home prices, affordability should continue to improve in the coming months. It is likely that June 2022 will prove to be the low point for affordability, since mortgage rates were up while home prices had not yet softened significantly." Laird added, "As affordability continues to improve, we will likely see homebuyers resume their search in the new year. We will have to see if sellers are interested in listing their homes at values that are significantly lower than their peak."
How much income do you need to afford a home in Canada?
Using October 2022 real estate data, Ratehub.ca has calculated the minimum annual income required to buy a home in Canada’s major cities. In the chart below, you can see how changes to mortgage rates, stress test rates and real estate prices have impacted how much income you need to afford a home.
Some key takeaways from our research include:
- Homebuyers in all 10 cities we examined need less income to afford a home in October than they did in August 2022.
- Although Vancouver remains the most expensive city in Canada to buy a house, it is also one of the cities where home prices have declined the most substantially over the last few months. Coming in at number 3 on our list, you now need $3,150 less income to afford a home there than you did back in August.
The bottom line
With the Bank of Canada signaling that the worst of the rate hikes may be behind us, there is room to be cautiously optimistic about the state of home affordability in Canada. Falling home prices combined with relatively stable (though high) mortgage rates mean that affordability is likely to continue to improve over the remainder of 2022 and into 2023. As always, if you're in the market to buy a home, the best approach is to shop around to ensure that you are getting the best mortgage rate in Canada.