Despite rising interest rates, properties for sale are starting to get a little more affordable again across Canada, according to the latest data compiled by Ratehub.
Based on October 2022 real estate data, mortgage brokerage Ratehub.ca has calculated the minimum annual income required to buy property in major cities across Canada.
Thus, a household wishing to settle in the greater Montreal area, which includes Longueuil and Laval, must have an annual family income of $105,330, says Philippe Simard, mortgage director for Quebec at Ratehub. This income calculated for the month of October takes into account the stress test at 7.44% and a mortgage rate of 5.44%.
In June, the same household was expected to earn $110,900.
“It’s directly linked to the price drops we’ve seen in recent weeks,” observes Philippe Simard. Compared to June, accessibility has improved a little. As prices have fallen slightly, people have easier access to a purchase even though rates have gone up. »
Despite this glimmer of hope, the situation is far from the same as in 2021, he specifies.
Of course, it takes a higher income than in 2021 to buy the same property at $500,000. At equal incomes in 2022 and 2021, households can no longer afford the same property.
Philippe Simard, Mortgage Director for Quebec at Ratehub
According to his calculations, a couple earning a gross annual salary of about $53,000 each can buy a property for $500,000 if they put down 20%. The mortgage loan would then be between $380,000 and $400,000.
“The household income should be roughly multiplied by 3.5,” he argues.
The data in the table is based on a mortgage with a 20% down payment, 25-year amortization, annual property taxes of $4,000 and monthly heating of $150, Ratehub says. Mortgage rates are the average of the Big Five Banks’ 5-year fixed rates in March, June and August and the average property price is taken from CREA’s Home Price Index (MLS® PPI).
The average price of a property in the greater Montreal area has fallen since June by $18,900.
The city of Ottawa is more expensive than Montreal. The income requirement for a property with an average price of $630,800 is $127,900.
The most expensive Canadian city on the list is still Vancouver, where a household needs to earn $220,700 to buy a property at an average price of $915,000, while Winnipeg comes in at 10e rank with a required family income of $75,320 for a purchase of $337,400.
“People are ready to buy properties, but are not ready to take action now,” notes Philippe Simard. Yes, it’s still quiet mortgage-wise, but people are pre-qualifying for mortgages right now because they want to buy in the next few months. The market should pick up in the spring. »
Philippe Simard recalls that the peak of the Bank of Canada’s rate hikes will soon be reached with that of half a point scheduled for December. “We then expect some stability and even declines in late 2023, early 2024.”