Home costs would gobble up every cent of income for most in Vancouver

A detached home in the Point Grey neighbourhood of Vancouver, listed for $2.4 million in January. It sold above asking price.
A detached home in the Point Grey neighbourhood of Vancouver, listed for $2.4 million in January. It sold above asking price. THE CANADIAN PRESS/Darryl Dyck

New numbers from the economics department at Royal Bank of Canada on Monday morning show just how painfully expensive home prices are getting to be for potential buyers in Vancouver and Toronto.

“Rapid price increases” in the last year have “further exacerbated already poor affordability conditions,” the bank’s report says. Though the price of all housing types, including condos and townhouses, is spiralling to uncomfortable heights, the evidence is most glaring among single-detached properties.

Owning a detached home is out of reach for the vast majority of local buyers in the Vancouver area, RBC says. “Similarly… Toronto continues to slip deeper into stressful territory for homebuyers.”

The bank’s affordability measure, which compares home prices against local median income levels, suggests the average household in Vancouver would have to spend an “astounding” 109 per cent of monthly income on housing costs to own a single-family home, up 4.3 percentage points from mid-2015. In Toronto, that metric rose to 71.4 per cent.

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Record low borrowing rates coupled with stronger economic and employment conditions have propelled home prices higher in both centres in recent years. Industry experts also cite an increasing level of activity from foreign buyers, though there remains a dearth of meaningful data on the subject.

Outside of those two red-hot centres, the situation is dramatically different (see chart below). Sluggish to downright cooling economies across many if not most other regions, thanks to the lengthening slump in resource prices, has made home ownership far more affordable.

“There are few signs that housing affordability is problematic elsewhere,” the bank report said.

Here’s a look at how much a middle-income household would be required to spend each month to own a detached home across some Canadian centres, as a percentage.

As a rule of thumb, experts suggest no more than third (33.3 per cent) of monthly income should be spent on home carrying costs, which include a mortgage, utilities and property taxes (and condo fees, if applicable):

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Have rising real estate prices changed your plans to own a home, or scrapped them altogether? It’s a reality confronting more buyers in the Toronto and Vancouver areas.

If you’re in this situation, we want to hear from you for an upcoming story.

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