Global Courant
Canadian housing market saw the biggest improvement in affordability in nearly four years in the first quarter of 2023, according to a report by National Bank of Canada economists.
The report analyzes the affordability of housing in the census metropolitan areas, taking into account the prices of apartments and other housing, as well as the real estate market as a whole.
It measures affordability by tracking the number of months it would take a middle-income household to save for the minimum down payment on a middle-priced home, if they saved 10 percent of their pre-tax income.
The report says that housing affordability in Canada’s 10 largest metropolitan areas improved across the board in the first quarter – the first time this has happened across all markets in two and a half years.
The biggest improvements were in Vancouver, which remains the least affordable Canadian city to buy a home in, Hamilton and Toronto.
In contrast, Calgary, Edmonton and Quebec saw the smallest increases in improvement, the report notes.
The average mortgage payment as a percentage of income (MPPI) was 60.9 percent in the first quarter of 2023, down 3.2 points from the previous quarter and 5.4 points from the second quarter of 2022, when the Canadian housing market reached its most unaffordable level in more than 30 years.
The economists note that while the MPPI improved, it remains high and has failed to counteract the massive rise in unaffordability seen during the COVID-19 pandemic.
Meanwhile, it says its benchmark five-year fixed-rate mortgage used to calculate affordability is down 14 basis points.
Restrictive interest rates, a fall in home prices and rising incomes were factors leading to an improvement in housing affordability, the report notes.
Looking ahead, the National Bank says it expects a “slight relief of pressure” on interest rates in the second quarter of 2023.
That said, stabilization in house prices is likely given the rebound in activity with sales rising while quotes have moderated.
“However, we doubt that this price increase will continue given the restrictive monetary policy that helps maintain affordability at a challenging level.”
