Canadians are Spending 63.5% of Their Income on Homeownership: RBC

Canadians are Spending 63.5% of Their Income on Homeownership: RBC
April 8, 2024

Affordability Challenges in the Canadian Housing Market

The Royal Bank of Canada (RBC) recently released a report highlighting the current difficulties facing prospective homebuyers in Canada. The report emphasizes the significant impact of rising interest rates on affordability.

Key Findings

  • A household earning the median income now needs to dedicate a staggering 63.5% of their pre-tax income to cover the costs of owning an average-priced home.
  • High interest rates have shrunk the maximum budget for a typical household by 22% since early 2022.
  • While home prices have dipped slightly, soaring interest rates have more than offset this decrease.

What it Means for Homebuyers?

These affordability challenges have significantly cooled buyer demand across the country. Many potential buyers are finding themselves priced out of the market.

Impact on Affordability

The RBC report uses pre-tax income because it provides a standardized measure of household financial resources. However, it's important to remember that after taxes, the amount of income available for housing costs is lower.

For example, consider someone in Kelowna, BC, making a pre-tax income of $100,000 in 2024. After accounting for estimated federal and provincial taxes, their after-tax income would be around $79,300.

Putting it in Perspective

If this individual were to spend 63.5% of their pre-tax income on mortgage payments (as outlined in the RBC report), it would translate to roughly $63,500 annually.

The Challenge

With an estimated after-tax income of $79,300, this would leave approximately $15,800 for all other expenses. It's important to remember that this remaining amount would also be subject to taxes when spent.

RBC's Outlook

The report predicts some relief for homebuyers by the middle of 2024, with an anticipated decrease in interest rates. This could improve affordability modestly and help restore some buying power.

The Road to Recovery

RBC acknowledges that a full recovery to pre-pandemic affordability levels will likely take several years in many major markets. The expectation is for a slow and gradual improvement.

Coldwell Banker Horizon Realty Can Help

The housing market is still active despite the current challenges. If you are considering buying a home, a qualified real estate agent can be a valuable resource.  They can guide you through the process, help you find a home that meets your needs and budget, and advocate for you during negotiations.

Contact Coldwell Banker Horizon Realty today to connect with an experienced agent who can help you navigate the Canadian housing market.

Disclaimer: This article is for informational purposes only and should not be considered financial advice.


Subscribe to our email newsletter!

Thanks for joining our newsletter
Oops! Something went wrong while submitting the form.

Related posts

Left Arrow
Left Arrow
Right Arrow
Right Arrow