Wealth is more important than income in Vancouver home sales, new study finds

Homes and townhouses are seen in an aerial view in Langley, British Columbia, in 2018. The gap between home prices and local wages is glaring in the province.

DARRYL DYCK / The Canadian Press

Wealth, not annual income, drives expensive home purchases by some of British Columbia’s lowest-paid workers, a new study suggests.

The gap between home prices and local wages is glaring in the province, where homes have sold well above $ 1 million in the Vancouver area for years.

Now new data shows that a The lowest income quintile buyer, with a median annual income of $ 29,800, spent a median of $ 499,000 on a home in 2018, according to the Canada Housing Statistics Program (PSHC) report. .

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In comparison, a person in the middle quintile with a median income of $ 97,600 spent a median of $ 490,000 on a house, according to the study, which analyzed property assessments, cadastral data and tax returns.

“The divergence between house prices and income in some areas has shown that sources other than income can play an important role in home ownership,” the report said. Annik Gougeon, senior analyst at CHSP, said the data suggests that many homebuyers are taking very large mortgages or using their savings and wealth to make purchases.

The study attempts to provide a measure of housing affordability by analyzing the purchase price of a property relative to the buyer’s income. The more the price / income ratio, the greater the financial burden borne by the buyer.

As the CHSP relies on cooperation of provinces for the data, he analyzed only three provincial real estate markets: British Columbia, Nova Scotia and New Brunswick. The study is not a comprehensive look at the country, especially since it does not include the two largest markets: Ontario and Quebec.

The study found that British Columbia’s median price-to-income ratio of 5.4 was more than double the ratios in Nova Scotia and New Brunswick.

The highest median price-to-income ratio was found in West Vancouver, followed by Richmond. There, buyers spent 17 times and 12 times their income, respectively.

What is surprising about the CHSP data is what buyers in the lowest income quintiles could afford in British Columbia. In contrast, in the top quintile, a home buyer with a median income of $ 223,000 spent median $ 673,000 on a home.

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For the bottom quintile, Elan Weintraub, a Toronto-area mortgage broker, said a buyer with a median income couldn’t afford a home unless they had a very large down payment. Corn he said people who earn $ 30,000 a year usually don’t have significant savings.

“Even if they could borrow $ 300,000, how could they make their monthly payments plus food and utilities, given their gross income is $ 2,500 a month? Said Mr. Weintraub, director of Mortgage Outlet Inc.

The CHSP study said its measure of income did not take into account the wealth accumulated through previous home ownership, savings or financial support from people without title to the property, such as a parent.

Laura Martin, chief operating officer of mortgage brokerage firm Matrix Mortgage Global, said that often the biggest barrier to entry for hopeful homebuyers is having enough accumulated wealth to pay the mortgage. ‘advance payment.

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