Image credits: Timothy Cook
Welcome to a comprehensive analysis of the Canadian housing market's affordability from 1999 to 2023. In this article, we will explore historical trends using data on home prices, household incomes, and mortgage rates. By examining 14 major Canadian cities, we aim to provide you with a clear picture of housing affordability across the country.
Multi-City Trends - 1999 to 2023
Let's begin by delving into an interactive tool that analyzes six key indicators of housing affordability in the Canadian real estate market:
- Average home price by city
- Household incomes (pre-tax median income)
- Price-to-income ratio
- Implied monthly mortgage payment for new homebuyers
- Implied mortgage payment as a % of income
- "Qualifying" income (income required to buy the average home)
Feel free to explore the tool by selecting an indicator from the drop-down menu below. You can also toggle city labels in the chart and hover over lines for more details.
Single City Spotlight - January 2023 Dashboard
Now, let's narrow our focus to a single city. Select a city from the drop-down menu to view the latest price and affordability indicators, along with comparisons to the national average, in the table. The chart will also showcase the annual percentage change in home prices over time for your chosen city.
Canadian Mortgage Rates Over Time - 1999 to 2023
To provide further context to the observed trends, here is a look at the average mortgage rates in Canada from 1999 to 2023. Mortgage rates play a pivotal role in driving changes in home prices. As mortgage rates fall, home prices usually rise, and vice versa. For instance, from 2021 to 2023, mortgage rates increased from 3.2% to 5.8%, leading to an approximate 15% drop in average home prices across the country.
Other Trends and Takeaways
Now, let's highlight a few intriguing pieces of data we found while examining the numbers.
The Most Expensive & Least Expensive Cities in Canada
Cities with the most expensive homes (based on the average home price in Jan. 2023 according to the MLS home price index):
- Vancouver: $1,124,400 (average home price)
- Toronto: $1,069,000
- Victoria: $881,600
- Hamilton: $799,800
- Ottawa: $612,100
On the other hand, the cities with the least expensive homes are:
- Quebec City: $304,600
- Moncton: $312,300
- Regina: $320,100
- Winnipeg: $326,300
- Edmonton: $370,900
As of January 2023, the average home price in Canada stands at $714,700.
How Much Have Canadian Home Prices Fallen By?
Across most Canadian cities, real estate prices reached their peak in Spring 2022 due to a pandemic-induced buying frenzy. Since then, home prices have declined significantly in major cities. The most substantial drops have been witnessed in Hamilton and Toronto, with current home prices approximately 20% lower than their all-time highs. Calgary, Regina, and Saskatoon, however, continue to experience home prices at or near their peak. As of January 2023, the average home price in Canada has fallen by 15%, with the current price at $714,700 compared to an all-time high of $841,400.
The Most Unaffordable Cities in Canada
In spite of recent declines in home prices across many Canadian cities, the housing market remains unaffordable for most potential homebuyers. In January 2023, a homebuyer purchasing the average home in Canada with a 20% downpayment and current mortgage rates would have a monthly mortgage payment of $3,611 ($43,332 per year). Compared to the median pre-tax household income of $89,709, this means that the mortgage payment represents 48.3% of income.
Using the same measure of housing market affordability across Canada, the cities with the most unaffordable housing are:
- Victoria: 73.1% of pre-tax household income paid towards the mortgage
- Toronto: 72.4%
- Vancouver: 69.9%
- Hamilton: 52.9%
- Montreal: 43.2%
These cities pose significant financial challenges for the average citizen looking to purchase a home. Paying over 50% of your pre-tax household income towards a mortgage is simply not sustainable for most individuals. Those who do manage to buy homes in these markets are often dual-income couples with incomes well above average or individuals fortunate enough to receive help from parents for a substantial downpayment.
On the other hand, the most affordable places to live in Canada are:
- Moncton: 18.9% of pre-tax household income paid towards the mortgage
- Regina: 21.0%
- Winnipeg: 23.2%
- Edmonton: 23.8%
- Quebec City: 23.8%
Data Sources and Notes
The data used in this analysis was derived from various sources, including:
- Home prices (2005 to 2023): Canadian Real Estate Association - MLS home price index data (seasonally adjusted values)
- Home prices (1999 to 2004): Teranet home price index
- Mortgage rates: Canadian Mortgage and Housing Corporation / StatCan - 5-year conventional mortgage rate
- Household incomes: StatCan - 2020 household income by region, combined with monthly data on employment incomes by province
- Canadian inflation data: StatCan - consumer price index (all items), not seasonally adjusted
For further reading on incomes, taxes, and the overall cost of living in Canada, we recommend exploring the following resources:
- Rent versus buy calculator: A spreadsheet to determine whether renting or buying is the better financial decision
- 2023 Canadian income tax calculator: A tool to compare tax rates and after-tax incomes across Canada
- Rent prices versus income in major Canadian cities
- Exploring Canadian incomes by province, age group, and sex
That concludes our comprehensive analysis of the Canadian housing market's affordability. We hope you found this article insightful and informative. Stay tuned for more data-driven insights in the future.