All the billions of dollars that different levels of governments have promised to improve housing affordability in Canada have yet to show much success, as laid out in a new report from Ratehub.ca “A combination of stagnant borrowing costs and growing home values further put the squeeze on home buyers in May, according to the latest affordability numbers from Ratehub.ca,” says Penelope Graham, director of content at Ratehub.ca. “The May edition of our study, which calculates the minimum annual income required to buy the average home in some of Canada’s major cities, found affordability conditions worsened in 11 of the 13 markets studied on a month-over-month basis.” Analysis of the targetted markets compared real estate data from April and May 2024, showing how changing mortgage rates, and the accompanying mortgage stress test, as well as housing prices impact the overall purchasing power needed to buy a home in the measured markets. “While interest rates remained relatively flat month-over-month, the increase in home values was enough that affordability worsened in those 11 cities. And on the flip side, the decrease in home values was enough to improve home affordability in those two cities,” says Graham. The average five-year mortgage rate remained fairly flat in April and May, moving to 5.49% in May from 5.5% in April, however rising home price values were sufficient enough to take affordability further out of reach. The mortgage stress test, meanwhile, remains elevated at 7.49%. Each of the three largest markets in Western Canada, Calgary, Edmonton and Vancouver, saw required income to buy the average priced home rise marginally. In Calgary, the average price in April was $580,900, requiring a yearly income of $119,500. The average rose to $587,100 in May, increasing the required income to $120,520. Edmonton’s average home price in April was $388,500 with a required income of $84,850. May’s average price moved up to $392,700, with the required income rising to $85,540. The average price in Vancouver in April was $1,206,500 with a required income of $232,150. The average in May reached $1,212,000, taking the required income to $232,950. The largest increase in the average home price was in Hamilton, says Graham, adding April’s average price was $858,900, rising to $868,300 in May. “Hamilton tops the board in terms of rising required income,” she says. “A home price increase of $9,400 means buyers must now earn $1,550 in additional income to afford an average-priced home as they did in April.” Victoria had the second largest average home price increase of $7,600 from $866,7000 to $874,300, taking the required annual income from $170,950 to $172,180. “Canadians may be surprised to see affordability conditions improve within the City of Toronto,” says Graham. “Buyers there required $1,250 less income to purchase the average priced home at $1,117,400, down from $1,123,300 in April. The required income in Canada’s largest market declined to $215,920 from $217,170.” The other market that saw a decline in income required was Halifax, says Graham. “Halifax saw the most improvement to affordability with $2,070 less income required to purchase the average home,” she says. Ratehub’s May analysis was done before the Bank of Canada’s June rate cut and it remains to be seen whether lower mortgage rates will heat home prices further, according to Graham, adding real estate boards across the country, including the Canadian Real Estate Association, are forecasting an increase in sales in the coming months, as buyers are encouraged by easing borrowing costs. “While this latest quarter-point decrease, which brought the central bank’s key overnight lending rate to 4.75% from 5%, has had a small impact on borrowing costs, further cuts in July or September could certainly bring a renewed sense of urgency to the market,” says Graham. “It’s a phenomenon that we’ve seen play out before in previous rate cut cycles.”
All the billions of dollars that different levels of governments have promised to improve housing affordability in Canada have yet to show much success, as laid out in a new report from Ratehub.ca “A combination of stagnant borrowing costs and growing home values further put the squeeze on home buyers in May, according to the latest affordability numbers from Ratehub.ca,” says Penelope Graham, director of content at Ratehub.ca. “The May edition of our study, which calculates the minimum annual income required to buy the average home in some of Canada’s major cities, found affordability conditions worsened in 11 of the 13 markets studied on a month-over-month basis.” Analysis of the targetted markets compared real estate data from April and May 2024, showing how changing mortgage rates, and the accompanying mortgage stress test, as well as housing prices impact the overall purchasing power needed to buy a home in the measured markets. “While interest rates remained relatively flat month-over-month, the increase in home values was enough that affordability worsened in those 11 cities. And on the flip side, the decrease in home values was enough to improve home affordability in those two cities,” says Graham. The average five-year mortgage rate remained fairly flat in April and May, moving to 5.49% in May from 5.5% in April, however rising home price values were sufficient enough to take affordability further out of reach. The mortgage stress test, meanwhile, remains elevated at 7.49%. Each of the three largest markets in Western Canada, Calgary, Edmonton and Vancouver, saw required income to buy the average priced home rise marginally. In Calgary, the average price in April was $580,900, requiring a yearly income of $119,500. The average rose to $587,100 in May, increasing the required income to $120,520. Edmonton’s average home price in April was $388,500 with a required income of $84,850. May’s average price moved up to $392,700, with the required income rising to $85,540. The average price in Vancouver in April was $1,206,500 with a required income of $232,150. The average in May reached $1,212,000, taking the required income to $232,950. The largest increase in the average home price was in Hamilton, says Graham, adding April’s average price was $858,900, rising to $868,300 in May. “Hamilton tops the board in terms of rising required income,” she says. “A home price increase of $9,400 means buyers must now earn $1,550 in additional income to afford an average-priced home as they did in April.” Victoria had the second largest average home price increase of $7,600 from $866,7000 to $874,300, taking the required annual income from $170,950 to $172,180. “Canadians may be surprised to see affordability conditions improve within the City of Toronto,” says Graham. “Buyers there required $1,250 less income to purchase the average priced home at $1,117,400, down from $1,123,300 in April. The required income in Canada’s largest market declined to $215,920 from $217,170.” The other market that saw a decline in income required was Halifax, says Graham. “Halifax saw the most improvement to affordability with $2,070 less income required to purchase the average home,” she says. Ratehub’s May analysis was done before the Bank of Canada’s June rate cut and it remains to be seen whether lower mortgage rates will heat home prices further, according to Graham, adding real estate boards across the country, including the Canadian Real Estate Association, are forecasting an increase in sales in the coming months, as buyers are encouraged by easing borrowing costs. “While this latest quarter-point decrease, which brought the central bank’s key overnight lending rate to 4.75% from 5%, has had a small impact on borrowing costs, further cuts in July or September could certainly bring a renewed sense of urgency to the market,” says Graham. “It’s a phenomenon that we’ve seen play out before in previous rate cut cycles.”
