Vancouver home affordability improves, but income threshold remains steep

Vancouver saw the largest month-to-month improvement in homeownership affordability among 13 Canadian cities examined by Ratehub.ca in July, according to the mortgage-comparison company’s latest report.

The analysis attributed most of the improvement to a $10,300 drop in the city’s average home price. It estimated that a buyer needed $2,540 less annual income to purchase the average home than in June, while the monthly mortgage payment in its scenario fell by $70, or $840 annually.

Ratehub.ca based its calculations on a 10 per cent down payment, a 25-year amortization, $4,000 in annual property taxes and $150 a month for heating. The average five-year fixed rate offered by Canada’s five largest banks dipped only slightly, from 4.57 per cent in June to 4.54 per cent in July.

Despite the improvement, the report estimated an income of $223,860 was needed to afford Vancouver’s average home, by far the highest threshold in the group. Toronto ranked next at just over $195,000, followed by Victoria at just over $185,000. Vancouver’s median annual salary is about $69,000.

Greater Vancouver Realtors reported a July benchmark home price of $1,088,800 across Greater Vancouver, down one per cent from June and 6.2 per cent from a year earlier. Ratehub.ca vice-president of mortgages Jamie David said prospective buyers should compare available mortgage rates and consider how borrowing costs affect their budget, down payment and monthly payments.