HOW DISCONNECTED ARE CANADIAN REAL ESTATE PRICES FROM INCOMES? VERY
Canada’s Middle Class is seeing its shot at homeownership vaporize, but it wasn’t always this way. Not just in expensive cities where lofty expectations pushed ownership out of reach for all except high-income households. But now most cities across Canada are out of reach for the country’s Middle Class. A median household now needs to spend up to 80% of their income to pay the mortgage on a home in their local market.
Median Canadian Household Needs To Spend 53% of Income
Canada’s cities have never been affordable but the gap is now comically large. A median household needs to spend 53.2% of its income to carry a mortgage on a typical home in Q1 2022. That’s a 13 point increase from the average since 2000 (40.5%), already outside of reach for most buyers. The recent phenomenon pushes it to extreme levels even for an already disconnected trend.
How Much Has Affordability Changed For Canadian Real Estate?
The share of income a median household would need to spend to service the mortgage on a typical home across Canada in Q1 2022.
| Region | Q1 2022 | Avg. Since 2000 |
|---|---|---|
| Vancouver | 81.4 | 63.2 |
| Victoria | 80 | 61.6 |
| Toronto | 75.6 | 49.7 |
| Hamilton | 54.6 | 31.8 |
| Urban Composite | 53.5 | 40.5 |
| Ottawa/Gatineau | 38.6 | 29.4 |
| Montreal | 37.8 | 30.2 |
| Calgary | 27.9 | 32.4 |
| Winnipeg | 26.7 | 25.1 |
| Edmonton | 25.5 | 29.4 |
| Quebec | 24.8 | 22.8 |
Source: NBC; Better Dwelling.
Toronto Buyers Would Need To Dedicate 75.6% of Income For A Mortgage
Canada’s largest city pushes this number to an extreme. A median household would need to spend 75.6% of their income on a mortgage in Q1 2022. It’s 25.9 points higher than the average since 2000 (49.7%). It was already next to impossible for the city’s residents to buy a home. Now they’re expected to dedicate 50% more income than the previous generation did.
Vancouver Households Have The Lowest Chance of Owning A Home
Vancouver real estate is some of the priciest in the world, so it shouldn’t be a surprise that it’s not affordable. What might shock you is how little people make compared to the gilded city’s home prices. A median household would need to dedicate 81.4% of their income to service a mortgage on a typical home in Q1 2022. This is up 18.2 points from the average since 2000 (63.2%). Needless to say, but we will anyway — it’s the most extreme number across Canada.
Calgary and Edmonton Have Seen Improvements In Affordability
Only two major markets in Canada are more affordable than usual — Calgary and Edmonton. Calgary’s median household needs to spend 27.9% of its income to service a mortgage if buying a home in Q1 2022. That’s 4.5 points lower than the long-term average since 2000 (32.4%). It’s pushing the limit, but it’s always been possible for a median household to buy a home in Canada’s third-largest city.
Edmonton real estate also saw an improvement in its already affordable housing. A median household needs to spend 25.5% of its income to service the mortgage if buying a typical home in Q1 2022. It’s a drop of 3.9 points from the long-term average since 2000 (29.4%). It was possible before and improved.
Canada’s markets that have seen affordability improve did so for various reasons. Home prices didn’t fall but incomes climbed much faster than debt servicing costs did. With all of the talk of rate hikes being punitive, most people don’t realize rates are still 41% lower than the start of 2020. The erosion in affordability in most markets is due to low rates fueling exuberance, with households still getting a discount on capital.
Story by: Better Dwelling
