The cost of housing is stretching Canadians’ finances thin, and a new survey proves it.
A sizable 44 per cent of Canadians admit to spending more than one-third of their income on housing, and 15 per cent spend more than half of it on rent, according to a study by RateSupermarket.ca.
These are significant numbers considering the Canadian Mortgage and Housing Corporation’s definition of affordable. Housing is only deemed affordable when it costs less than 30 per cent of household income, CMHC reports.
“This survey highlights the need for Canadians to be well armed and well informed in this heated market,” Jacob Black, RateSupermarket.ca’s managing editor, told Toronto Storeys. “Demand is high, and it takes a little more effort and planning to stick within budget. These stats prove the value of setting a clear budget, and using online tools to set reasonable spending limits.”
However, that can be tough when a five-year forecast predicts Canadian house prices will only continue to rise in all but two cities.
Toronto is where the biggest percentage of Canadians are overspending on housing at 34 per cent. This is unsurprising considering the affordability issues in Ontario’s capital. For the past five months, Toronto has topped a national rent report by Rentals.ca with one-bed units costing $2,242 and two-bed units costing $2,731.
Montreal and Vancouver came in a close second and third for the biggest portion of Canadians overspending on rent at 33 and 30 per cent, respectively. A one bedroom in Montreal goes for $1,076, while it costs $1,828 in Vancouver, according to Rentals.ca's report.
Edmonton (29 per cent), Calgary (27 per cent), and Ottawa (22 per cent) are where fewer Canadians reported spending one-third of their income on rent.
Younger Canadians feel the impact of high prices more than those of the older generation (over age 55). The study found that Canadians under 55 are more likely to pay more than 30 per cent of their income to landlords.
“A lot of older Canadians are established in their homes. They may also earn more than younger people just starting out,” Black explained.“As housing costs have risen, wages have remained more flat and that's changed how much of their income younger Canadians need to use for housing.”
Although renters spend a good portion of their paycheques on housing, that doesn’t mean they’re losing hope of becoming homeowners one day. Sixty-five per cent of renters surveyed said they plan to buy a home in the near future.
Renters are also more willing to stretch their finances to afford property when compared to current homeowners. Forty per cent of renters compared to 27 per cent of homeowners said they would spend over one-third of monthly income on a new home.