P.E.I. real estate agent Thamara Paparoni says the price of a starter home on P.E.I. is much higher than it was when she started selling in 2015. (Nicole Fairweather/Nicole Fairweather Photography)
House prices rising faster than wages
So what kind of money do you need to buy a starter home on P.E.I. right now?
Mortgage broker Christine Milley said if you want to get approved for a $350,000 mortgage, you will probably have to make a household income of about $90,000 before taxes — assuming you don’t have significant debt.
Here’s the problem: Many households on P.E.I. make much less than that $90,000. The price of housing has greatly outpaced the average household income.
According to the P.E.I. Real Estate Association, the benchmark house price on P.E.I. in 2013 was $150,025 — rising to $298,600 by 2021. In contrast, Statistics Canada said the median household income on the Island rose from $64,400 to $72,000 during that time.
Put simply, incomes on P.E.I. rose by 11.9 per cent over that time span, while the cost of housing rose by 99 per cent.
Milley said that’s created a big challenge for people trying to buy their first home.
“The income has not increased [along] with the cost of housing and it’s created a huge affordability crisis here in line with the fact that, you know, rents are still just as expensive as the mortgage payment,” she said.
“So I get extremely frustrated when I have to tell people, ‘Sorry, you know, you can’t afford this $1,500 a month mortgage payment, but you can continue paying $1,800 a month in rent.'”
Milley said first-time buyers are facing even more of a disadvantage right now because they often can’t pay more than five per cent of the purchase price as the down payment, so lenders won’t give them the option to pay off their mortgage over 30 years instead of 25.
“Personally, I feel very strongly that they need to be making some changes to help first-time homebuyers,” she said.