Home prices might be down, but that doesn’t mean affordability has increased, and two BC cities topped a list for the most significant spikes in income required to buy a home in Canada.
Surprisingly, Vancouver didn’t see the most significant change in the income required to buy a home; that dubious honour goes to Victoria, with Vancouver following behind in second place.
That being said, Vancouver is still at the very top regarding how much income is required; it just didn’t see as significant an increase as Victoria did over the last year.
Home prices in the two BC cities fell between January 2022 and January 2023, but the income required to buy a home has increased a fair bit.
The data comes from RateHub.ca.
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Victoria
In January 2022, the average home price in Victoria was $878,500, dropping to $866,700 in 2023, a decent decrease of $11,800. However, the income required nearly doubled the amount that home prices fell. In 2022, the income necessary based on a stress test rate of 5.25% and a mortgage rate of 2.91% was $143,750. In 2023, that increased to $169,250, based on a stress test rate of 7.37% and a mortgage rate of 5.37%.
So even though home prices dropped by $11,800, the income required rose by $25,500.
Also of note is that Victoria saw the smallest drop in home prices compared to the other Canadian cities.
Vancouver
Last year, a study from Generation Squeeze said young people must give up 26 lattes every day for five years to afford a home in Vancouver.
Based on the new numbers from RateHub, that reality hasn’t changed much.
In January 2022, the average home price in Vancouver was $1,190,000. In January 2023, that dropped to $1,111,400, a drop of $78,600.
When it comes to income, in January 2022, based on a stress test rate of 5.25% and a mortgage rate of 2.91%, the income required to buy a home was $189,450. However, in January 2023, based on a stress test rate of 7.37% and a mortgage rate of 5.37%, that number jumped to $212,800, an increase of $23,350.
Vancouver does lead Canada for the average cost of a home as of January 2023, as well as the overall income required.
The rest of Canada
RateHub’s data shows that the income required to purchase property increased in nine of 10 major markets compared to January 2022.
“This is despite the reported deep year-over-year declines in home prices; the large increases to both fixed and variable mortgage rates outweigh any price relief buyers may otherwise enjoy,” RateHub states.
With current fixed rates, the stress test is currently around 7.37%, which is over 2% higher than a year ago. The increase in rates is more material than the decrease in home values so far, which means homes are less affordable in nine out of 10 of the cities we looked at compared to a year ago,” said RateHub Co-CEO James Laird in a statement.
Calgary was third on the list, following Vancouver, where the change in income required increased by $20,310, followed by Halifax and Montreal.
Halifax and Calgary were the only two major cities where home prices increased.
RateHub.ca
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