Canadian Real Estate Is Pricey, Here’s How Much You Have To Earn To Buy A Home

Canadian Real Estate Is Pricey, Here’s How Much You Have To Earn To Buy A Home

Vancouver and Toronto real estate is well out of the reach of many, but is that the case around the country? Numbers from the Canadian Real Estate Association (CREA) show a huge variance on the cost of a typical home across Canada. We wanted to see what this variance means for incomes. So we crunched some numbers, like we always do. Here’s how much you need to earn in order to carry a mortgage in Canada’s largest cities.

About The Calculations

The terms you’re going to need to understand are benchmark composite homes, gross incomes, conventional mortgages, and stress tested rates. A composite home is the price of a typical home using all home types, for the specified city. Gross income is the before tax income required to carry the payments on a mortgage for these homes. The mortgages we’re going to use are conventional, which means there’s at least 20% down. We did use a 30 year amortization, which means your payments are spread over 30 years. The mortgage rate we’re using is the stress tested mortgage rate, which is 4.99%. The last one seems high for what you’ll pay today, but you’ll have to qualify at that rate starting January 1, 2018 – so let’s just get used to it today. We’re also going to assume that you have decent credit, and few other bills in your life.

You Need A Household Income of Up To $157,000

Buying a house isn’t easy anywhere in Canada, but Toronto and most of Lower Mainland, BC is even harder. To buy a home in the CREA aggregate of urban centres, your household will now need to earn at least $95,000 to afford the payments on a typical home. Vancouver is the king of unaffordability, requiring a household income of $157,000 to carry the payments. Fraser Valley (BC), and Toronto both require a household income of $115,000. Yes, it’s just as expensive to buy in a relatively suburban area of BC, as it is to buy in Canada’s largest city.

Source: CREA, Statistics Canada, Better Dwelling.

Saving For That Downpayment

Note we used conventional mortgages, which means buyers need a 20% down payment. Some people might be lucky enough to have it gifted. Most of us aren’t however, and will have to do some good ole’ fashioned saving. We were curious how long it would have taken to save a downpayment, at 10% of the gross income required to service these mortgages.

Source: CREA, Statistics Canada, Better Dwelling.

As you might have expected, the most expensive places now take over a decade if you made enough to carry a mortgage. In Vancouver, it would have taken 14 years saving 10% of the salary required to carry a mortgage, in order to save for a downpayment on a typical home. Fraser Valley and Toronto, you’re looking at 13 years. Montreal is only 12 years, at the required salary. Moncton is the shortest length, and but you’re still looking at 10 years. It’s not easy to save, even in the cheapest cities.

Good thing the cheapest cities have incomes higher than needed to carry a mortgage on a typical home. In cities like Toronto and Vancouver, the median household won’t be able to buy a typical home in the near future. Whether home prices will come down, or ownership levels have peaked is anyone’s guess.

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  • Van Millennial 7 years ago

    That Vancouver bar shows you everything you need to know. The city is rapidly deteriorating into a cesspool of poverty, while the government defends absentee owners and selfish Boomers that aren’t even working anymore.

    • Michael Z. 7 years ago

      Vancouver has and never will be affordable to everyone. My advice to young people that aren’t making enough to live in the city is to move. You’ll lose a whole decade of workplace experience by attempting to struggle for affordability. That 10 years you’re spending way more on housing than you can afford, will severely set you back in your ability to actually make any money.

  • Trader Jim 7 years ago

    All I need to do is look around my office to see how unaffordable things are these days. Many of the younger guys that are making pretty close to what I make are never going to be able to buy, and they’re very candid about this. If some of the banking industry’s best paid gigs aren’t able to afford a home, you should be careful about whether you can “afford” to buy. Yes, you can handle the payments, but at what cost to the rest of your asset diversification plan?

    It’s important to note that a typical homeowner has 80% or more of their networth in their home. The typical high net-worth investor has less than 10% of their net worth in real estate. If they’re young, their real estate ownership is often not the home they live in.

    • J 7 years ago

      if you are trader and your co-workers are trader, what’s the issue? my friend freshly graduated from school works at TD, she made 120k+ the first. I think this year she is about to make a quarter mil.

      • Trader Jim 7 years ago

        The issue is if you’re a trader, you’re smart enough to understand that homes aren’t a good investment.

        If you take a $4 million dollar mortgage, the interest at an average of 4% works out to $2.7 million after 25 years. That’s $300 dollars a day in interest. If you spend less than $8,800 per month, you come out on top. Especially after considering maintenance, and taxes are someone else’s problem.

        Plus you can invest the principal in something else that is actually making money. Your house may make 8% annually, but if you’re paying 4% + taxes and fees on your home, you’re looking at a return of less than 4%. If you get less than 4%, you’re better off with an index fund, or hedge fund. You would average 8% *after fees*

        It’s cute that your friend works at TD though, so you’re an expert at investments and returns. So adorable!

        • J 7 years ago

          Who says anything about return? It’s just a house. It’s a necessity. Plus she isn’t a big shot. 1.5mil is fine. No need to get 4mil mortgage

  • Nimbus 7 years ago

    Just got back from Calgary , been wasting my time in Vancouver for real , at those prices i can afford to own multiple homes there . Cheaper houses , less traffic , its only logical to move.

  • Bodie777 7 years ago

    Vancouver will always be a world class city and prices will only go up. Get used to it, or move. No one cares.

    • BB 7 years ago

      LOL … world class city. Yeah, on the same level as LA, NY, Paris or London.

      • Roger Troutman 7 years ago

        I lol at people who lol at Vancouver being called a world class city.

        We may not have the Louvre, but we have air and water quality that’s better than 99% of the world. Take a guess what people will care about more when it comes to where they want to live..

        • BB 7 years ago

          LOL … special air and water … can you provide a link to that scientific study … please!

          • Roger Troutman 7 years ago

            I found the above info utilizing this crazy new technology called travel, ever heard of it?

          • Haris Muzaffar 7 years ago


          • BB 7 years ago

            I travel to Vancity at least once a month for the past 12 years … next time I’m there I’ll pay close attention to that awesome air and water. It’s easy to make childish keyboard produced claims when you haven’t been anywhere … judging by you, 99% of the world is a dirty and unhealthy little place.

          • Dan Duran 7 years ago

            The air in Paris, LA etc.. can definitely get filthy at times. But that’s not even their biggest problem.

          • J 7 years ago

            Don’t know about other culture. But chinese sure love Vancouver.. only the very top echelon live in Paris London and New York. Most ppl who go to Vancouver are second tier… plus 2-3mil a detached is still cheaper than condos in Beijing… don’t ask me.. I was shocked too when I went back last year

  • Neo 7 years ago

    Hmmmmm. So Oakville/Milton has the highest median income in Canada by a considerable margin. Interesting.

  • Anne Hamilton 7 years ago

    The final chart should be added to with a realistic savings rate.

    As we’ve heard, with the high rents in the GVRD and GTA, most people are lucky to save 10%….

    • Prenume 7 years ago

      Most renters are not in the market to buy (definitelly not those who can’t save)

  • Phillip 7 years ago

    What loan amount/property price was used to calculate the income needed to carry the mortgage payments?

Comments are closed.