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Houses and townhouses are seen in an aerial view in Langley, B.C., in 2018. The gap between home prices and local wages is stark in the province.DARRYL DYCK/The Canadian Press

Wealth, not annual income, is driving purchases of costly homes by some of the lowest-paid workers in British Columbia, a new study suggests.

The gap between home prices and local wages is stark in the province, where houses have been selling for well above $1-million in the Vancouver region for years.

Now, new data show that a typical buyer in the lowest income quintile, with a median annual income of $29,800, spent a median of $499,000 on a home in 2018, according to the report from Canadian Housing Statistics Program (CHSP).

In comparison, someone in the middle quintile with a median income of $97,600 spent a median of $490,000 on a home, according to the study, which analyzed property assessments, land-registry data and tax filings.

“The divergence between property prices and incomes in some areas demonstrated that sources other than income can play an important role in homeownership,” the report said. Annik Gougeon, a CHSP senior analyst, said the data suggest many home buyers are either taking out very large mortgages or using savings and wealth to make purchases.

The study attempts to provide a measure of housing affordability by analyzing the purchase price of a property against the buyer’s income. The higher the price-to-income ratio, the greater the financial burden the buyer takes on.

As the CHSP relies on co-operation from the provinces for the data, it analyzed just three provincial real estate markets: B.C., Nova Scotia and New Brunswick. The study is not a comprehensive look at the country, especially as it does not include the two largest markets: Ontario and Quebec.

The study found that B.C.’s median price-to-income ratio of 5.4 was more than double the ratios in Nova Scotia and New Brunswick.

The highest median price-to-income ratio was found in West Vancouver, followed by Richmond. There, buyers spent 17 times and 12 times their incomes, respectively.

What is surprising about the CHSP data is what buyers in the lowest income quintiles were able to afford in B.C. In the second-lowest quintile, a buyer with a median income of $65,500 spent a median $450,000 on a property. In contrast, in the top quintile, a buyer with a median income of $223,000 spent a median $673,000 on a home.

For the bottom quintile, Elan Weintraub, a mortgage broker based in the Toronto area, said a buyer with a median income couldn’t afford a home unless they had a very large down payment. But he said people who earn $30,000 a year typically do not have significant savings.

“Even if they could borrow $300,000, how could they make their monthly payments plus food, utilities, given their income is $2,500 per month gross?” said Mr. Weintraub, director of the Mortgage Outlet Inc.

The CHSP study said its income measurement didn’t capture wealth accumulated through previous home ownership, savings or financial support from people not on a property’s title, such as a parent.

Laura Martin, chief operating officer of mortgage brokerage Matrix Mortgage Global, said often the largest barrier to entry for hopeful home buyers is having enough wealth accumulated to afford the down payment.

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