Mortgages far out of reach for median income earners in Vancouver: report

A new report is highlighting the widening gap between the average price of Vancouver real estate and what the average earner can afford.

In the report published Thursday, comparison website rates.ca took the median after-tax household income in major cities and the mortgage a family earning that income could qualify for, and compared those numbers with the actual average home price in those cities.

And a surprise to no one, Vancouver fared the worst when it came to comparing income to housing costs.

According to the report, which used 2021 census data and 2022 income growth projections, the median after-tax household income in Vancouver is $86,988.

It says with that income, the most a family could afford is a $347,000 house with an insured mortgage of $329,650. (Mortgage rates were based on August’s five-year fixed mortgage rate of 5.29 per cent.)

However, the average price of a home is $1,211,700 in the city, according to MLS September figures. Therefore, the average Vancouver home costs 249 per cent more than what a median-earning household can afford, the report concludes.

Tom Davidoff, a professor at UBC's Sauder School of Business, has been studying the local real estate market for years and has watched the gap between wages and the price of homes grow as mortgage rates rise.

“In terms of affordability, I like to think of George Orwell’s line, ‘If you want a picture of the future, imagine a boot stomping on a human face – forever,'” said Davidoff.

“So affordability is not trending positively.”

Davidoff said several factors have contributed to the gap, including an influx of ultra-wealthy property owners, which might be affecting Vancouver more than comparable Canadian cities facing similar affordability issues.

“If you think about Toronto, that’s a great city to get rich. Vancouver is a great place to be rich,” said Davidoff. “A lot of people come here with money.” 

Now, the study notes that you can’t get an insured mortgage on a home over $1 million, “which increases interest rates and the required down payment, and decreases the amount a borrower can qualify for,” so it provided a second calculation.

If a Vancouverite earning $86,988 were to get an uninsured mortgage, the most expensive house they could get is $411,000. In real life, the average home price is 195 per cent higher than that.

Population growth, increased income and lower interest rates drew professionals to major cities over the past decade, Aled ab Iorwerth, deputy chief economist with CMHC said in the report.

“But now, as demand is going up, these cities are quite slow in increasing their housing supply,” he said.

“Faced with a housing crunch, young professionals have also started migrating out of Vancouver to Atlantic cities,” the report notes.

Unsurprisingly, Toronto is the second least affordable city, with average prices being 210 per cent and 162 per cent higher “than what a regular household can afford” for insured and uninsured mortgages, respectively.

The only city analyzed in the report that is affordable is Edmonton. There, the median after-tax household income is $91,912, and the average home price is only $370,100. On a median salary, the report says, one can buy a house for $370,000—just $100 short of the average, or an increase of zero per cent.

CMHC economist Taylor Pardy cites the decline in oil and gas prices from 2015 to 2019 as one of the factors in Edmonton’s affordability.

“Economic activity in Edmonton (and Calgary) moderated a fair bit,” Pardy said. “This has allowed housing supply to catch up and maintain that ample supply for much of the past decade, leading to flat or even declining prices in certain segments of the housing market.”