The price of the average home in Vancouver has fallen by more than $100,000 over the last year, but thanks to soaring interest rates, the amount of money needed to afford such a home has risen, according to Ratehub.ca.
In a new study, the online mortgage brokerage and interest rate comparison website calculated the minimum annual income required to buy an average home in cities across Canada in March, and compared that data to the same calculation for March 2022.
“While home prices are down significantly in the majority of the cities we looked at, the income required to purchase a home still remains inflated due to higher mortgage and stress test rates,” said James Laird, the company’s co-CEO, in a news release Monday.
This dynamic is most extreme in Vancouver, where real estate prices have long been disconnected from local wages.
According to Ratehub.ca, the average home price in Vancouver declined from $1,263,500 in March 2022 to $1,143,900 last month.
That’s a decrease of nearly $120,000, but the study finds that this decrease is more than offset by the increased cost of borrowing caused by the Bank of Canada’s dramatic hiking of interest rates throughout 2022.
In March 2022, Ratehub.ca’s average of the big five banks’ five-year fixed mortgage rates stood at 3.14 per cent, meaning the “stress test” rate that buyers had to prove they could handle was 5.25 per cent.
Last month, the average rate had risen to 5.54 per cent, with a 7.54 per cent stress test rate.
According to Ratehub.ca, that change means people looking to buy an average home in Vancouver today must earn an annual income of $221,580, up from an already astronomical $200,220 as of March 2022.
Ratehub.ca assumed a mortgage with a 20-per-cent down payment, 25-year amortization, $4,000 in annual property taxes and $150 in monthly heating bills for its analysis.
Vancouver is not alone in seeing the cost of buying an average home increase.
The study found real estate prices had dropped in nine of the 10 cities covered in the study, but the amount of income required to buy an average home rose in nine of 10 cities as well.
Calgary was the lone exception to the price-drop trend. The average home there costs about $5,600 more than it did in March 2022, according to Ratehub.ca.
Meanwhile, Hamilton, Ont., was the only city out of the 10 where the annual income required to buy an average home decreased, dropping by about $4,460.
Vancouver had the highest overall income required to afford an average home in March 2023, but Toronto was close behind at $217,000.
Hamilton and Victoria, B.C., were the only other cities where an income higher than $150,000 was required to afford an average home, with Victoria requiring $168,750 and Hamilton requiring $165,940.
The most affordable cities included in the study were Winnipeg and Edmonton, each of which required an income below $100,000 to afford an average home, according to Ratehub.ca’s calculations.
In Edmonton, the requisite income was $81,950, while in Winnipeg it was $75,650.
The full comparison of cities follows.
A comparison of real estate affordability in 10 cities across Canada is shown. (Ratehub.ca)
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
