Income of nearly $209,000 needed to buy average Hamilton home: report

A new report from National Bank of Canada has found that a Hamilton household would need to earn nearly $209,000 a year in order to buy - and afford - an average-priced home in the city.

The latest study, released by the institution earlier this month, analyzed the real estate markets of 10 major cities across Canada, including Steeltown, for the first quarter of 2023.

Kyle Dahmes, an economist with the commercial bank, told The Spectator that while the report showed some improvement in affordability, the city's housing market continues to be very difficult" for first-time buyers.

The report showed that a Hamilton household would need to earn $208,540 a year in order to afford a home listed at $885,384, which is considered the average price for the city.

However, the average household income in Hamilton is around $88,109, according to the commercial bank.

With those earnings, the report found that it would take around 86.5 months - or more than seven years - to save for a down payment of $63,538 on an average-priced home.

That makes it a pretty significant hurdle," said Dahmes. And as home prices increase, it will take longer and longer to acquire that down payment, especially if they increase at a faster pace than your income."

The average monthly mortgage payment - calculated using a benchmark interest rate and assuming a 25-year amortization period on a five-year term - for an average home was $4,933, according to the report.

Dahmes said the cost of housing at that rate would consume more than 67 per cent of the income of an average household.

In the eyes of the Canada Mortgage and Housing Corporation (CMHC), housing can only be considered affordable if it costs less than 30 per cent of a household's pre-tax income.

It's unaffordable," said Dahmes. It just goes to show that your average person is not capable of servicing the mortgage on the average home."

Dahmes also said renting continues to be relatively more affordable" than owning in the city, and specifically noted the portion of the report that looked at the condominium market.

It found the average price for a condo unit in the city was $671,694, which is a slight drop from last year. However, a buyer would need a $42,169 down payment, which would take the average earner 57.4 months - or nearly five years - to save.

Meanwhile, the average monthly mortgage payment for a condo was $3,742, which is significantly higher than the average monthly rent ($2,095) and would account for 51 per cent of an average household's income. For the average condo to be affordable in Hamilton, a household would need to earn an annual income of $159,739, the report added.

There is quite a bit of a premium for buying," said Dahmes. It makes for quite a gap between those two figures."

Yet, Dahmes said the report did show that some affordability has been restored for the local housing market, as home prices have cooled with the raising of interest rates.

Year-over-year, the commercial bank found that the average price for a home in the city had come down by nearly 10 per cent.

But it may not last, said Dahmes, pointing to the continued demand for housing, lack of supply in the region and the continued increase on key interest rates from the Bank of Canada.

I'm not sure there is much room for improvement," said Dahmes. We'll have to see how it plays out."

Fallon Hewitt is a reporter at The Spectator. fhewitt@thespec.com