Housing affordability is declining at levels not seen since the 1980s; however, the magnitude of the deterioration is much more pronounced this time, according to a new report from the National Bank of Canada.
Canada has recorded seven straight quarters of declining housing affordability compared with 11 quarters from 1986 to 1989, economists Kyle Dahms and Alexandra Ducharme found. In 1989, following the rapid rise of real estate prices, prices dropped for several years, followed by a correction that lasted more than a decade.
Housing costs are considered affordable if they account for 32 per cent or less of household income. On average, the monthly mortgage costs now cost the average Canadian household 67.3 per cent of its income, the most since 1981. Economists calculated that another 75 bps increase in interest rates would mean an additional $300 on the average household’s monthly mortgage payment.
The good news? Dahms and Ducharme say falling house prices combined with stabilized interest rates should improve affordability in the coming months. “The slowdown in real estate activity in several markets is expected to result in a cumulative 15 per cent decline in home prices in 2023 from the peak,” the report states.
Economists measured housing affordability in 10 of Canada’s largest cities. They looked at mortgage costs based on the average cost of a home (all dwellings) and the amount of time it would take to save for a downpayment based on the region’s median annual income. Edmonton and Quebec City were the only cities where the cost of a mortgage did not exceed 32 per cent of a household’s monthly income.
Regional breakdown
Vancouver
Median home price – $1.38 million
Median annual income – $90,000
Months of saving for a downpayment – 368 or 30.5 years
Mortgage payment as a percentage of income – 102%
Victoria
Median home price – $1.15 million
Median annual income – $76,000
Months of saving for a downpayment -362 months or 30 years
Mortgage payment as a percentage of income – 101%
Toronto
Median home price – $1.25 million
Median annual income – $90,000
Months of saving for a downpayment – 335 months or 28 years
Mortgage payment as a percentage of income – 93%
Hamilton
Median home price – $950,000
Median annual income – $93,000
Months of saving for a downpayment – 90.5 or 7.5 years
Mortgage payment as a percentage of income – 68%
Ottawa/Gatineau
Median home price – $656,000
Median annual income – $89,000
Months of saving for a downpayment – 54.5 or 4.5 years
Mortgage payment as a percentage of income – 50%
Montreal
Median home price -$546,000
Median annual income – $73,979
Months of saving for a downpayment – 48 or four years
Mortgage payment as a percentage of income – 48%
Calgary
Median home price – $501,000
Median annual income -$90,000
Months of saving for a downpayment – 33.5 or 3 years
Mortgage payment as a percentage of income – 37%
Winnipeg
Median home price – $410,000
Median annual income -$80,000
Months of saving for a downpayment – 30.5 or 2.5 years
Mortgage payment as a percentage of income – 34%
Quebec City
Median home price – $369,000
Median annual income – $77,000
Months of saving for a downpayment – 29 or 2.5 years
Mortgage payment as a percentage of income – 32%
Edmonton
Median home price – $420,000
Median annual income – $88,000
Months of saving for a downpayment – 28.5 or 2.5 years
Mortgage payment as a percentage of income – 32%
I’m glad you didn’t use AVERAGE income as the benchmark.
But in this presentation (of the Attainable/Affordable advocates’ view), Median is not much help either
For analysis and information purposes Statscan divides the CDN population in 20% chunks called Quintiles (Lowest, Second Lowest, Third, Fourth and Highest – in rev I call them Silk collar, White collar, Blue collar, Company collar & No collar)
Statscan decides the order by Adding Gov’t Transfers and subtracting Taxation to/from Earned Income – the net/total after adjustments is what they compare in both Family & Unattached Individuals Chart/report.
The Bottom two quintiles (total 40%) are likely NOT going to be Buyers of an interest in Real Property and a portion of the Third Quintile could likely NOT buy in a municipality of any size.
My point is that since a considerably large part of the individuals in the lower half of a MEDIAN Income grouping (Average too) are NOT buyers, that including the income of those NON-buyers in the affordability benchmark FOR buying is convenient (yes this type of income data abounds) but not informative.
This is why I used the characterization ‘the Attainable/Affordable advocates’ view’ – if we survey the view of self-excluded people about faith, hope, carbon & climate, civil rights, human rights, electric cars, power-washers, toothpaste, inoculation mandates etc etc we do not get a balanced view of “product users” and/or future users – nevermind what is factual.
In case you didn’t realize There is also a real estate market east of Quebec
You should run these numbers for Fort McMurray
Average price- $500,577
Average household income- $201,000
Downpayment- often a portion is given as an employment signing bonus
Average disposable income- $120,000