VANCOUVER -- A recently released report confirms homeownership remains a distant dream for many living in one of Canada's priciest markets.
The latest Housing Affordability Monitor, a report issued by the National Bank of Canada, estimated just how much a perspective homebuyer would need to earn to be able to afford the typical home currently on the market in the Metro Vancouver area.
The report looks to benchmarks, a metric different than averages, as an indicator for how much a would-be buyer can expect to pay.
The bank estimates the price of the representative condo in the Vancouver area – meaning a condo that is typical of what's been available recently – at $633,030.
When it comes to other types of residential properties, a category the report simply calls "non-condo," homeowners could expect to pay $1,342,184, according to the NBC report.
Unsurprisingly to most, Vancouver's housing supply is the most expensive in the report, followed by the Greater Toronto Area.
In addition to the price itself, the report points out, buyers are expected to provide a higher down payment.
"At a national level, there has never been a worse time to accumulate the minimum down payment," Kyle Dahms and Camille Baillargeon wrote in the report.
To get a better idea of affordability with this initial payment in mind, the report's authors assume the house hunter is able to save 10 per cent of their pre-tax total household income.
Based on the median income, on a national level, it will take 60 months, or five years, for a buyer to save enough to put six per cent down on the representative home.
Down payments and mortgages
In Vancouver – a city where the report's authors say things have actually improved a bit, thanks to a higher median annual income and low interest rates – the monthly mortgage payment as a percentage of household income was the highest in Canada.
The NBC report estimated an earner of the area's median household income of $78,849, according to Statistics Canada, would have to save for 58 months to be able to put enough down on a condo, if they were able to save 10 per cent for the purchase. That's nearly five years.
However, if they wanted to buy a residential property that was a bit larger, they could expect to have to save for 409 months – or 34 years – to put enough money down.
Then, based on that median income, condo buyers could expect to have to spend 38.7 per cent of their income toward their mortgage.
With a down payment of six per cent, buyers of "non-condos" would have put a whopping 82.1 per cent of their salary towards their mortgage.
As a comparison, a buyer earning Toronto's median income could expect to have to save for 51 months (4.25 years) and put 34.5 per cent of their salary toward a mortgage.
Someone looking for a larger space in the city with the same salary would have to save for about 289 months (or 24 years), and fork over 58 per cent of their income for mortgage payments.
The mortgage calculation was based on the assumption of a 25-year amortization period and a five-year term.
Qualifying income
The report also looked at also provided what it called a "qualifying income" – which is a metric based on the salary needed to buy a median property, assuming that household puts 32 per cent of its pre-tax income into the mortgage payment, with adjustments for a down payment.
It's likely a frustrating story for many Vancouverites.
The National Bank of Canada estimates a buyer would need a household income of $127,663 to comfortably afford a condo. This is more than 1.6 times the median income of the region.
Those looking for a house or semi-detached house would need, according to the report, to bring home nearly $230,500 a year, or almost three times what the median household income.
And the report predicts things may get worse soon. With the vaccine rollout will come a return to normal market conditions, the authors forecast.
"As a result, affordability is likely to deteriorate on both a mortgage payment and as a percentage of income and down payment basis going forward," Dahms and Baillargeon said.
