Housing in Canada is becoming more inexpensive, yet it is still unaffordable for the vast majority of the population. The NBF’s Q2 2023 Housing Affordability Monitor (HAM) reports positive trends throughout the country’s housing markets. Home prices have dropped sufficiently to make them more affordable despite increases in mortgage interest rates. It was the third consecutive quarter of rising affordability, but we still have a long way to go to make up for the previous eight. Most Canadian families just cannot afford to buy a home at current pricing.
Rising Rates Improved Affordability for 3 Quarters
Home prices are declining throughout the country, as measured by the C10 National Index. This is a weighted average of the 10 largest real estate areas. In the second quarter of 2023, the median sales price dropped to $744,400, down 1.2% from the first quarter and down 8.1% from the same period in 2022. As house values dropped more rapidly than loan costs rose, homeowners found themselves in a better financial position. NBF reports that this improvement in home affordability is the third straight quarter. That was some encouraging data. Unfortunately, most modern families simply cannot afford to buy a home at the current market price. After eight years of steadily rising prices, they are no longer affordable.
Most Canadians Can't Afford a Home
Most Canadians live and work in a few big cities. In Q2 2023, the median national index home needed $175,900 per year to pay the mortgage. NBF thinks this is almost double the median family income.
Canada's Major Cities Are Unattainable for Local Incomes
The cost of living in Canada’s largest cities has become so high that locals on average wages can no longer afford to live there. According to NBF, a family of four in Vancouver would require $240,000 per year in income to afford the median property price. In other major cities, such as Toronto ($225k/year), Hamilton ($205k/year), and Victoria ($204k/year), the annual salary need was more than twice the local average. Factoid: according to the International Monetary Fund, Hamilton is also the most prosperous city in all of Canada.
Canadian Families Cannot Afford Any Major Real Estate Market
Only in Quebec City were house prices relatively affordable in relation to local salaries. To afford a mortgage on a median-priced property in the United States, one needs an annual salary of at least $86.5k (109% of the median income). It’s also the only city on the list where prices have gone up, so it probably won’t be around for long.
NBF reports a small but positive trend in Canada’s affordability. There is a severe lag between home prices and salaries, and only a catastrophic decline could restore affordability to levels seen before 2015. Even though most Americans are financially unable to purchase a home, very little is being done. Younger families and newcomer communities are particularly hard hit by the housing affordability crisis. The Canadian economy is not likely to be as prosperous for any of these groups as it was for past generations.