Photo: Tyler Kieft/Flickr
Earlier this year, RBC Economics released their housing affordability report for the last quarter of 2013. Affordability saw a modest improvement in the last days of the year, but the financial institution warned that conditions in 2014 could worsen.
It looks like their prediction is already coming true.
We covered the new Q1 2014 report from RBC, which pointed to a picture of eroding affordability in Canada. But we wanted to look at little bit closer at how qualifying income has changed in major cities. It’s where the affordability issue is felt the most, especially for would-be buyers dreaming of a single-family home in Toronto, Vancouver or Calgary, markets that have seen recent momentum.
RBC defines qualifying income as the minimum annual income used by lenders to measure the ability of a borrower to make mortgage payments. Typically, that amounts to no more than 32 per cent of a borrower’s gross annual income.
In Vancouver, Canada’s most expensive real estate market, the qualifying income for a standard two-storey house was $162,900, the second-highest amount recorded for the city over the past 11 quarters. Toronto and Calgary both reached new heights, rising to $139,400 and $98,300 respectively. In the last quarter, Calgary also overtook Ottawa for the first time, with the nation’s capital seeing a slight decrease in qualifying income to $93,500.
On the other side of the spectrum, the income requirement didn’t exactly ease for condos in major cities either. In Toronto, the qualifying income for a condo reached its highest point, rising to $73,000. The closest its ever come to this new height was in the second quarter of 2012, when it hit $72,600. Calgary saw a steep increase, rising every quarter since the fourth quarter of 2012 and reaching the peak height of $57,200.
The story in Vancouver was nearly the opposite, with the qualifying income for a condo sitting at $80,500 in the third quarter of 2011, it’s highest peak in the past 11 quarters, while it dropped to $75,100 this past quarter.
The gulf in the income needed for standard two-storey home and condo is particularly pronounced in Vancouver and Toronto. Nation-wide, the difference sits at $39,800, but in Vancouver, you would need to earn about $87,800 more to qualify for a two-storey house than you would to purchase a condo. In Toronto, your qualifying income would require a $66,400 upgrade.
Want to learn more about how affordability and qualifying income has changed over the years? Check out the interactive charts below: