To put a data point on it, Royal Bank of Canada (RBC) put out a study in Nov 2013 that rated the affordability of housing in Canadian major cities.
For Vancouver, it takes 84-88% of your pre-tax income to afford a detached house (page 7 of the report). "Afford" means mortgage (principal+interest), property taxes, utilities, etc.
Okay, so 88% is high right? Well "pre-tax" means before the government gets their cut. In Canada, a high income earner gets taxed roughly 40% of their income and we all pay our mortgages/rent/utilities with post-tax money, so the affordability figure goes up over 100%. That means your entire paycheque is going towards paying for detached housing [2].
IIRC, in the US, you are allowed to deduct your mortgage interest from your income, meaning you get to pay with pre-tax income. But in Canada that is not allowed and you must pay the piper first.
Small correction: in the US you can deduct mortgage interest. At the beginning of a mortgage, and probably for most people the entirety of their time in any given house, that will be the majority of your payment.
For Vancouver, it takes 84-88% of your pre-tax income to afford a detached house (page 7 of the report). "Afford" means mortgage (principal+interest), property taxes, utilities, etc.
Okay, so 88% is high right? Well "pre-tax" means before the government gets their cut. In Canada, a high income earner gets taxed roughly 40% of their income and we all pay our mortgages/rent/utilities with post-tax money, so the affordability figure goes up over 100%. That means your entire paycheque is going towards paying for detached housing [2].
IIRC, in the US, you are allowed to deduct your mortgage interest from your income, meaning you get to pay with pre-tax income. But in Canada that is not allowed and you must pay the piper first.
[1] http://www.rbc.com/newsroom/pdf/HA-1127-2013.pdf
[2] Condos are at 42% affordability in Vancouver, which is still disastrously high since it is also using pre-tax income.
edit: 42% for condos, not 47%.
edit 2: corrected to say mortgage interest is deductible from income, based on reply. Thx!