Home ownership in Montreal is affordable... if your household earns over $200K a year, says analyst

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MONTREAL -- There’s more evidence that home ownership in Montreal is not just becoming out of reach for the middle class, but the upper middle class as well.

Daniel Laverdière, a senior advisor at the National Bank, has crunched the numbers and, if you’re in the market, you might find them troubling.

According to the Quebec Professional Association of Real Estate Brokers, last month the median sales price for a single-family home on the island hit $720,000, more than $200,000 higher than it was in May 2019.

Financial planners suggest you shouldn’t spend more than a third of your take-home pay on mortgage payments and taxes.

Using the new mortgage rules introduced earlier this year by the federal government, which say you have to qualify for a rate of 5.25 per cent, Laverdière calculates you would need a gross household income of about $212,000.

“Going above a third of your net salary, it’s not easy,” says Laverdière. “If too much of your income is going towards the payment of your house and you don’t have anything left for retirement planning and going to a restaurant or doing all kinds of other exciting activities.”

Using the same metrics, he also calculates that a single person buying a median priced condo in Montreal would require a salary of about $130,000. The average salary of Montrealers is approximately $60,000.

Laverdière says these aren’t rules, but rather recommendations, and he knows many people will spend considerably more than one third of their pay on a home, but he cautions that’s imprudent.

Financial planner Caroline Nalbantoglu warns home ownership can come with unexpected expenses and encourages buyers to stick to a budget that makes sense.

“Unless your home is going to be your retirement plan, you have to have a retirement plan, otherwise what are you going to retire on? You have to have some type of savings to retire on,” she said.

“I usually tell them either to wait it out or I tell them to lower their expectations.”

But, many buyers want their dream house now, especially due to the pandemic, and that’s helping push prices higher. Laverdière says home prices may continue to skyrocket or maybe interest rates will rise.

“If, at one point in time, you’re not able to make the payment, then you have to make a fire sale of your house and you may be losing a lot of money at that time,” he said.

The situation in Morin-Heights, in the Laurentians, is also raising concerns, as higher sales prices are pushing up property evaluations of all homes in the area, which is also pushing property taxes higher.

“People’s property value could double without them having anything to do about it,” said the town’s mayor, Tim Watchorn.

“A lot of people are on a fixed income and they can’t absorb that kind of increase. There are increases in everything. There’s increases in food, gas, electricity.”

The good news is there are still some areas of the province that are relative bargains, such as Quebec City, where if each person in a couple is making just over $40,000, they can easily afford a home.