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How Much of Your Salary Goes to Your Mortgage?

Aspiring homebuyers across the country are feeling the squeeze, with home prices in several Canadian markets seemingly out of reach for the average Canadian household. Still, many are scrimping and saving with the hopes of one day securing their place on the property ladder.

Seventy-one per cent of Canadians who don’t currently own a home plan to purchase one in the near future, according to a survey of 2,000 people.

Young Canadians, in particular, are aspiring homeowners; 81% of Millennials and 87% of Gen Z say they would like to buy a home.

Despite this desire, Canadians are having a tough time affording a home in some markets. Of those currently planning on getting onto the property ladder, 44% identify a lack of funds for a down payment as the primary barrier in their way.

According to the Canada Mortgage and Housing Corporation (CMHC), housing is considered affordable if it costs less than 30% of a household’s pre-tax income – that includes mortgage payments, utilities, and property taxes. And, according to a recent RBC poll, 39% of Canadians have struggled with affordability by spending 30-40% of their income on homeownership costs.

We crunched the numbers to determine what percentage of pre-tax household income goes towards mortgage payments in 10 of Canada’s major housing markets. For our purposes, we used the average home price as of March 2019 (according to the Canada Real Estate Association) and median monthly pre-tax income (according to Statistics Canada). We also assumed a mortgage with a 3.3% five-year fixed rate, amortized over 25 years, with a 20% down payment.

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The most affordable housing markets

Regina, Saskatchewan, is Canada’s most affordable major housing market, with an average home price of $264,100 . A mortgage in Regina, according to our model, costs $1,033 per month and the median household income is $6,819.33. That means a mere 15% of household income goes towards mortgage payments.

Saskatoon, Saskatchewan, is similarly affordable. The average home price is $283,700, for a monthly mortgage cost of $1,109. The median household income is $6,583.42, so 17% of household income is required to afford a mortgage there.

Housing is affordable in oil country as well.

Edmonton’s average home price of $319,000 requires a monthly mortgage of $1,247. And with the median household income at $7,870.58, only 16% needs to be allocated to mortgage payments.

Calgary, meanwhile, is home to the highest monthly median household income in Canada at $8,298.58. However, its average home price is higher than Edmonton’s – at $409,400 and costing $1,601 per month – so the percentage of household income required to pay for a mortgage is also higher, at 19%.

Rounding out the list of Canada’s most affordable real estate markets is Winnipeg, which requires 20% of the median household income to pay for mortgage payments. Winnipeg’s average home price is $302,631 (which would cost $1,183 per month) and the median household income is $5,899.58.

Pricey, but still affordable housing markets

The average home price in the nation’s capital is $405,500, which would cost $1,586 per month, with a median income of $6,837.75. Halifax, meanwhile, has an average price of $339,397 and a monthly mortgage cost of $1,327. The median household income is $5,793.50. The percentage of household income required to afford a mortgage in both of these cities is 23%.

Montreal real estate is comparatively cheaper, with the average home price costing $357,600. However, Montrealers also have the lowest monthly median income in the country at $5,149.17. So, at a monthly cost of $1,398, homeowners are forced to dedicate 27% of their income to their mortgage.

Canada’s least affordable housing markets

To the surprise of no one, Vancouver and Toronto top the list of least affordable markets in Canada. They’re the only two cities that require more than 40% of the median income to pay for a typical mortgage.

Vancouver’s average home price is $1,011,200, which would cost $3,954 per month and 65% of a household’s median monthly income ($6,055.17).

Toronto fares slightly better than Vancouver. The average Toronto home costs $779,100 ($3,046 per month on mortgage payments) while the median income in Toronto is higher than in Vancouver at $6,531.08. A typical Torontonian therefore allots 47% of their income to their mortgage.

How has affordability changed over the past year?

We took a look back at home prices a year ago to see how affordability has changed in the 10 major markets.

It looks like affordability has improved almost everywhere except Montreal and Halifax. This is due to the decrease in home prices compared to the same time last year in most of Canada’s major housing markets.