Edmonton home prices remain in reach of single-income buyer

Home prices in many Canadian cities have outstripped a single person’s income to qualify for a mortgage on an average home.

Article content

Edmonton may no longer be a best-kept secret when it comes to housing affordability. Yet a new study further underscores the affordability factor that is now attracting an increasing number of out-of-province buyers.

“People are definitely reacting to affordable markets in Canada — like Edmonton — and moving to those places,” says James Laird, co-chief executive officer of Ratehub.ca.

Advertisement 2

Article content

The mortgage marketplace website recently produced a report examining affordability in major Canadian cities, measuring the amount of income required to purchase the average-priced home based on the federal stress test.

Edmonton fares among the most affordable cities in Canada with an average price of $390,200, requiring an income of $85,150 based on a 5.5 per cent mortgage with 20 per cent as a down payment.

The income required would be even lower except that buyers must pass the stress test. Under those rules, they must be able to afford payments at a 7.5 per cent interest rate.

Put in place in 2016 by the Office of the Superintendent of Financial Institutions, the stress test aims to help borrowers avoid taking on too much mortgage if interest rates increase substantially.

To qualify, borrowers had to be able to afford the higher of the two following criteria: the Bank of Canada benchmark interest rate for a five-year, fixed-rate mortgage at 5.25 per cent, or the offered rate plus two percentage points (200 basis points).

Prior to interest rates rising in March 2022, most borrowers had to qualify at 5.25 per cent. Today, however, with mortgage rates being much higher, borrowers must qualify at their offered interest rate plus two percentage points.

Article content

Advertisement 3

Article content

Edmonton remains an affordable market compared with larger centres like Toronto, where the average price is nearly $1.13 million, requiring buyers to have an annual income of $218,050. It’s likely few single-income buyers are purchasing homes around the average price in Canada’s largest city.

Even Edmonton prices have been on the march upward recently, increasing about five per cent year over year for the average price for all homes, according to data from the Realtors Association of Edmonton.

“There is huge demand, and a lot of activity with many homes selling above asking price right now,” says Dave Ozubko, realtor with Re/Max River City.

Most first-time buyers are purchasing townhomes or semi-detached homes, which are more likely priced at close to the average price for all types in the city, he adds.

RAE statistics from April show the average price of a semi-detached home (duplex) $399,900, up 6.9 per cent year over year. The average price for a row home was more than $294,000, up nearly 13 per cent, while the average price for an apartment was about $201,000.

Advertisement 4

Article content

The year-over-year increase for the average price of an apartment was about four per cent.

In contrast, the average price of a single-family detached home was nearly $530,000, up about six per cent from April 2023.

“That price for a single-family home is probably not your dream home,” Ozubko adds.

What’s more, “if you wanted a $500,000 mortgage with five per cent as the down payment, you would probably need a $125,000 combined income” with no additional debt.

That said, first-time buyers can still find affordable options, and are often choosing townhomes. “A really nice row house will cost about $400,000 with nice finishings and features.” The challenge, he adds, is those homes are in low supply.

Still, Edmonton remains significantly more affordable than even Calgary. The study revealed that for the average price of $587,300 in Calgary, buyers required an annual income of about $120,650.

Yet that price differential between the two cities is closing, Ozubko adds.

“Edmonton is on the same trajectory.”

Article content