Global Courant
With house prices skyrocketing and mortgage rates rising, new data from Point2Homes shows that a significant number of renters in Canada’s major cities cannot afford to buy a starter home.
According to figures published on Tuesday, renters in 36 of Canada’s 50 largest cities earn 60 percent less than it takes to own a starter home. In 11 of these cities, the stock of starter homes is zero and in another 26 cities the share of starter homes is below 10 percent.
Starter homes, also known as starter homes, have traditionally been small in size and cost around $200,000, but the concept of a starter home has changed in today’s expensive housing markets.
Now, according to Point2Homes, a starter home simply refers to the first home a person owns, regardless of size or price – its definition is dictated by current market conditions.
For its report, the platform looked at the household income of renters in Canada’s 50 largest cities and designated starter homes to be valued at half the respective city’s reference price to determine where they could move into homeownership.
According to the report, 75 percent of renters in 36 of Canada’s largest cities can’t afford to buy a starter home.
As a result of the sharp price increases, the Point2Homes report shows that Canadian starter homes now cost more than $500,000, and in three cities more than $700,000.
Renters in 12 Ontario cities earn 42 to 59 percent less than the amount needed to buy a starter home.
For example, renters in Richmond Hill, Oakville, Markham and Vaughan earn an average of $70,000 a year, but they would need about $160,000 and nearly $170,000 to afford a starter home in their city.
These are the 36 Canadian cities where tenants cannot afford a starter home, according to Point2Homes:
1- Richmond Hill, ON
2-Oakville, ON
3- Markham, ON
4- Vaughan, ON
5-Richmond, BC
6- Vancouver, BC
7-Toronto, ON
8- Milton, ON
9- Whitby, ON
10- Coquitlam, BC
11- Burlington, ON
12- Brampton, ON
13- Mississauga, ON
14-Burnaby, BC
15- Ajax, ON
16- Surrey, BC
17- Langley, BC
18- Oshawa, ON
19- Saanich, BC
20- Kelowna, BC
21- Abbotsford, BC
22- Guelph, ON
23- Hamilton, ON
24- Waterloo, ON
25-Cambridge, ON
26- Barrie, ON
27- Kitchener, ON
28- Ottawa, ON
29- London, ON
30- St. Catharines, ON
31-Montreal, QC
32-Windsor, ON
33-Kingston, ON
34 Halifax, NS
35- Greater Sudbury, ON
36-Longueuil, QC
Although household incomes in cities where starter home prices are very similar, such as Windsor, Ont., and Calgary, Alta., there are large differences between municipalities. In Windsor, the average tenant household income is $40,241 per year, in Calgary it is nearly $69,000. Data from Point2Homes shows that renters in Calgary earn five percent more than they need to buy a starter home in their city, while renters in Windsor earn 48 percent less than they need to buy a starter home in their city.
Renters in 14 cities across Canada earn more than the income needed to buy a starter home in their city, according to the report.
In these cities, tenants earn 2 to 52 percent more than the minimum income needed to afford a starter home there.
Of the 10 cities in Canada where renters have the option to purchase a starter home for less than $200,000, Edmonton, Alta and St. John’s, NL stand out, according to the report. Renters in these cities not only have access to more affordable starter homes, but they also earn 52 percent and 50 percent more than the minimum income needed to buy one in their respective city.
Here are the 14 cities in Canada where renters in that city can afford to buy a starter home, according to Point2Homes:
1- Edmonton, AB
2- St. John’s, NL
3- Regina, SK
4- Saguenay, QC
5- Trois-Rivieres, QC
6-Quebec City, QC
7- Levis, QC
8- Winnipeg, MB
9- Saskatoon, SK
10- Gatineau, QC
11- Calgary, AB
12-Sherbrook, QC
13- Terrebonne, QC
14- Laval, QC
Methodology
§ For this study, calculations were made based on the median value of starter homes in Canada’s 50 largest cities, which means there may be cheaper/more affordable options on the market.
§ Starter homes were considered to be those valued at half the benchmark price in each of the 50 cities included in the analysis. Instead of a fixed price, Point2Homes chose this method because it better reflects the differences between markets in terms of housing costs, incomes and housing options.
§ Point2Homes also looked at the household income of renters in the 50 largest US cities, based on data from the Canada Mortgage and Housing Corporation, adjusted by Statistics Canada.
§ To calculate the income required to pay the monthly mortgage payments on the mid-priced starter home, Point2Homes believed that the monthly mortgage should represent no more than 30 percent of a tenant’s household income, assuming a down payment of 20 percent was already covered and the loan was provided on the basis of a mortgage with a fixed interest rate of 5.75 percent and a term of 25 years.
§ Point2Homes also factored in property taxes, based on various local sources and insurance costs.
Coverage for this story was paid for through the Meta-funded The Afghan Journalists in Residence Project.
