Can You Afford The Average Home in Canada?

The average home in Canada is worth $474,590 today, according to the Canadian Real Estate Association’s National Average Price Map.

That’s expensive considering If you earned $55,000 in personal income this year you would have a tough time buying the hypothetical average home in Canada, with most of BC and Ontario out of the picture, without substantial savings. Although your dream of homeownership would be alive in well if you moved east and considered purchasing a property in the Maritimes.

For example, buying the average home in Saint John, New Brunswick — which would cost you just $179,633 — would allow you to keep at least $27,000 of your salary after income taxes, property taxes and mortgage payments have been deducted.

To see just how far your income will go toward affording the average priced home in select Canadian cities, take a look at our interactive map below.

What this data tells us

This map is great for prospective first time home buyers who are beginning to research when they can afford a house and what their price range should be in order to live comfortably. It also highlights the stark differences across the country when it comes to housing affordability, cost of living and ultimately, consumer debt.

Many of these issues have recently been addressed by governments at the provincial and federal level. Most notably when the BC government implemented a 15 per cent foreign buyer tax, and the federal government’s recent new mortgage rules. The new federal mortgage rules are particularly important for new buyers as they significantly reduce their purchasing power. A move made in an effort to protect consumers and reduce debt.

If you want to know more about these new mortgage rules check out: Canada’s New Mortgage Rules – A Case of Unintended Consequences

How This TABLEAU Works

After choosing a gross income on the sliding scale, hover over any of the stars in the map to see a snapshot of that city’s average home price and what the mortgage would cost you, including various deductions.

This map shows Canadian Real Estate Association (CREA) average housing price statistics from June 2016, net incomes based on your selected gross income by province, gross income required to buy the average priced home in the selected city (ten percent down payment, 2.99 percent interest rate, 25 year amortization) and discretionary income left over after taxes and mortgage have been paid.

The Canadian Mortgage and Corporation (CMHC) uses a 42 per cent gross debt service (GDS) ratio to qualify prospective home buyers for a mortgage. GDS ratio is the total amount of principal, interest and property tax divided by gross income.

If the GDS ratio is below 42 per cent, the gross income selected will not be able to afford the average priced home and the corresponding star will appear red.

Bringing everything together, we were able to determine what one would have left over after paying their mortgage, interest, property taxes, income taxes and general payroll deductions — we called this value a discretionary income.

How We Built It

To build data visualization, we copied average home prices and year over year price changes from the Canadian Real Estate Association’s National Average Price Map and Property tax or mill rates from the selected municipalities’ websites to a Google Sheet.

Next, using Google’s PMT function, we calculated mortgage payments on the total price of each home minus a ten percent down payment. We used a 2.99 percent interest rate and a 25 year amortization for these calculations.

We calculated the total property taxes owing for 2016, divided it by 12 and added it to the monthly mortgage payments, giving us a value known as PIT payments, or principal, interest and tax payments.

To determine the gross income required, we took the monthly PIT payments and divided them by 12 before multiplying them by 30 percent. Although the “Canadian Mortgage and Housing Corporation (CMHC) normally restricts debt service ratios to 35% (GDS) and 42% (TDS)” we used 30 percent instead. We did this because the 30 percent GDS ratio is a recognized benchmark and the the CMHC calculates the cost of heating when determining the income required — heating needs are very subjective and therefore too imprecise to estimate.

Finally, we calculated federal and provincial income taxes, Employment Insurance benefits and Canadian Pension Plan payroll withholdings for any of the gross incomes the user can select relative to the province in which any of the map’s stars are located — disregarding all non-refundable income taxes with the exception of the Quebec federal abatement.

For a detailed look at an income tax map which uses the same calculations as this affordability map, click here.