If you’re in the market to buy a home in the pricey cities of Toronto or Vancouver, you’ll need to be making well over $200K.  

According to new data from RateHub.ca, you’ll need to earn a cool $220K to purchase a home in Toronto and Vancouver with a 20% down payment (that is, unless you’re among the lucky set with access to the bank of mom and dad). 

Ratehub.ca says it used March 2022 and June 2022 real estate data to make the calculations. 

The (sort of) good news for first-time homebuyers looking to get into the market in spots like Toronto, Vancouver, Winnipeg, Ottawa, and Hamilton is that prices have softened in recent months following a dramatic red-hot two-year run inspired by the pandemic. With that said, perpetually climbing interest rates and stress test rates in response to soaring inflation still make homeownership unattainable for many young Canadians. 

Fixed-rate mortgages increased by a tough-to-swallow 66% average between March to June 2022 alone.  

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As mortgage rates have increased, so has the stress test rate. Home prices have started trending downwards in some major cities in recent months. However, the annual income required to purchase a home has increased significantly across all cities -- by $18,000 on average, in just the last four months.

Victoria saw the biggest increase, says RateHub.ca, with $35,760 in additional income required, with Vancouver close behind, requiring an additional $31,730. Meanwhile, homebuyers in Toronto need to earn $15,750 (or 7%) more compared with March. 

“In every city, homebuyers require a lot more income to purchase the average home due to higher stress test rates caused by increasing mortgage rates. This is the case even for cities that saw home prices decline,” says James Laird, Co-CEO of Ratehub.ca and President of CanWise mortgage lender. “Generally, for every 1% that the stress test increases, a household qualifies for about 10% less mortgage.”

So, while there has been some relief on the price front, we’d need to see a lot more downward declines for houses to become grossly more attainable for first-time homebuyers -- especially given the fact that rising rents make it more difficult to save. “Home prices will need to drop significantly in order to neutralize the effects that higher mortgage rates have on the stress test,” says Laird. “Unless this happens, home affordability will continue to be impacted significantly by the current rising rate environment.” 

Real Estate News