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The Canadian Real Estate Association (CREA) reports that house prices were up 12.9 per cent in April compared to last year. The average home sold in Canada through the MLS system cost $280,740 in April.
After prices increased by 10.2 per cent in 2005, CREA is predicting a further 6.1 per cent increase this year and another 4.7 per cent hike in 2007. Meanwhile, Canada Mortgage and Housing Corp (CMHC) says prices will go up 11.2 this year, recording their strongest growth in 17 years. It says more balanced conditions next year will slow prices to an increase of 4.8 per cent.
RBC Economics, which has compiled a Housing Affordability Index since 1985, says rising interest rates and higher prices means the cost of home ownership rose at a faster pace than incomes for the last two quarters. British Columbia is the least affordable province. The home ownership costs of a detached bungalow in Vancouver was 64.4 per cent, which means that mortgage payments, utility costs and property taxes would take up 64.4 per cent of a typical household's monthly pre-tax income. In Toronto, the index was 41.7 per cent; in Montreal, 34.9 per cent; and in Calgary, 32.7 per cent.
CMHC recently published a study that used average hourly earnings data for different centres across Canada, and calculated the number of hours a person would need to work in order to bring the mortgage payment on an average house down to 30 per cent of monthly income. The 30 per cent benchmark is generally recommended to determine if you can afford to buy a house, but the CMHC study included only mortgage payments and not utilities or taxes.
It found that to own a house in Vancouver, with mortgage payments at 30 per cent of income, someone would have to work 331 hours a month. There are only 162.5 hours available in a typical work month, says CMHC.
Toronto required 257 hours, Calgary 186, Montreal 168, St. John's 125, and Saguenay, Que. 82.
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