The State of Canadian Housing Affordability: A Closer Look

Owning a home in Canada is a dream for many, but the affordability crisis has been a pressing concern. While there's a glimmer of hope with a recent slight dip in ownership costs, the challenges remain substantial in various parts of the country. In this article, we explore the latest findings from RBC economists, shedding light on the evolving landscape of Canadian housing affordability.

National Affordability Trends:

According to a recent report from RBC, the bank's affordability measure for ownership costs experienced a decline in the first quarter of 2023, marking the first such decrease in nearly three years. This measure assesses what percentage of the median household income goes toward ownership costs.

In the first quarter of 2023, this percentage stood at 59.5%, representing a 1.6% reduction. While not a dramatic decline, it brings a welcome respite for homeowners who have been grappling with rising costs since 2020.

Factors Affecting Affordability:

The report attributes this modest improvement in affordability to the Bank of Canada's decision to pause its rate hikes. This move helped stabilize mortgage rates, subsequently lowering ownership costs associated with home purchases in the first quarter of 2023. However, it's important to note that this relief only marginally offsets the significant loss of affordability that has occurred since mid-2020.

Regional Variations:

The affordability crisis is particularly acute in expensive cities like Vancouver, Victoria, and Toronto. In these cities, middle-income households find it increasingly challenging to realize their dream of homeownership. Montreal, Ottawa, and Halifax also face affordability issues, albeit to a lesser extent.

The demand-supply imbalance is a contributing factor, making it difficult for prospective buyers to find suitable properties. While housing prices have decreased, the surplus of properties on the market is not enough to meet the high demand, further exacerbating the problem.

City-Specific Insights:

1. Vancouver: While affordability costs have dipped slightly, it remains the most expensive place in Canada to own a home, with an affordability measure of 96.1%. RBC expects the market's recovery to be capped due to persistent unaffordability.

2. Victoria: Although there was a slight decrease in affordability costs, it remains a challenging market with an affordability measure of 73.5%.

3. Toronto: Affordability in Toronto is slowly improving, but it still consumes nearly 80% of a family's median household income, indicating a continued affordability crisis.

4. Ottawa: The affordability measure in Ottawa is near its worst-ever levels at 47.1%, making it challenging for potential buyers, especially with rising prices.

5. Calgary: Home resales remain above pre-pandemic levels, and overall affordability is better than in many other regions.

6. Edmonton and Saskatoon: Both cities offer relatively high affordability, with affordability measures of 34.2% and 34.3%, respectively.

7. Regina: Currently the most affordable market in Western Canada, but there are warnings of potential impacts on affordability due to increased demand.

8. Montreal and Quebec City: Home resales and average prices vary, with Montreal seeing a dip in resales, while Quebec City remains accessible for average buyers.

9. East Coast: Saint John, N.B. grapples with increased ownership costs and a significant drop in home resales. Halifax faces a 20-year low in new listings due to supply constraints. St. John's, N.L. remains one of the more affordable places, but rising interest rates pose a challenge.

Housing affordability in Canada remains a complex and evolving issue, with variations across regions. While some cities have seen slight improvements, others still grapple with significant challenges. As the housing market continues to shift, prospective homeowners must stay informed and consider their options carefully.