Housing Trends and Affordability


  • Price upswing partly rolled back earlier affordability gain: RBC’s national aggregate measure rose 1.3 percentage points to 49.1% in the third quarter, reversing part of the 3.0 percentage point decline in the second quarter. Strong price increases in a majority of markets contributed to the deterioration.
  • Temporary boost to household income began to fade: Unprecedented government transfers eased slightly, making it harder for many to cover rising ownership costs.
  • Owning a home still affordable in most of Canada: Huge issues persist, though, for buyers in high-priced Vancouver, Toronto and Victoria.
  • Accelerating price gains signal further loss of affordability ahead: Demand-supply conditions remained incredibly tight overall into the late stages of 2020. This will keep most property types appreciating rapidly in the near term. The main exception will be downtown condos in Canada’s biggest cities where ample supply will keep prices muted. Smaller markets could face material affordability erosion if recent strong price increases persist.

Surge in demand for detached homes raises affordability bar

The pandemic tremendously disrupted Canada’s housing market, though it ultimately hasn’t destroyed activity. Spring transactions were shifted to the summer and fall. The displacement, rather than loss, of activity cranked up the market’s heat in the third quarter, propelling prices to new heights and rolling back some of the second quarter’s affordability gains. All markets we track saw an overall deterioration in ownership affordability. Perhaps more noteworthy, the pandemic created new market dynamics impacting affordability trends differently across categories. Chief among them are soaring demand for larger living space and reduced attachment to live in, or near core urban areas. Single-detached and other low-rise homes have become highly coveted and pricier as a result. And the ability to work from home has helped spread the heat—and affordability erosion—to all sorts of markets. RBC’s single-detached affordability measure increased across the board in the third quarter, rising between 0.2 percentage points (St. John’s) and 2.7 percentage points (Vancouver). (A rise in the measure represents a loss of affordability.) In the majority of cases, the deterioration far exceeded that in the condo measure, reflecting comparatively softer market conditions for the latter—especially in Canada’s largest cities. Our measure for condo apartments fell in the Toronto area where supply has ballooned during the pandemic.

Second quarter’s income effect partly reversed

Rising home prices weren’t the only factor eroding affordability last quarter. Declining household income also contributed. This came on the heels of a record 11% increase in the second quarter when governments rolled out unprecedented financial aid to Canadians in the face of soaring unemployment. A partial retracement in government transfers caused household disposable to fall 3.1% in the third quarter. With the imminent start of mass vaccination brightening the economic outlook in 2021, we expect a further dialing down of transfers in the period ahead.

Big picture for affordability largely unchanged across Canada

While the share of income needed to cover ownership costs increased unevenly from market to market in the third quarter—with Vancouver (up 2.8 percentage points) and Victoria (up 1.5 percentage points) recording the bigger rises—the overall picture hasn’t changed much. It was still more affordable to own a home compared to the same period a year ago in virtually all markets (Ottawa being the lone exception). Affordability continued to be in line with historical norms in the majority of markets. Vancouver, Toronto and Victoria kept their standings as the least affordable markets in Canada, with some moderate strains persisting in Montreal and Ottawa. Much of the affordability stress in these larger markets is due to high prices for single-detached homes. Condo apartments are a generally more achievable option for buyers.

Second-quarter affordability gain to unwind further

We expect a gradual re-normalization in government transfers to households and sustained property appreciation to further unwind the sharp affordability gain that occurred in the second quarter. Recent declines in mortgage rates will provide a partial offset. Buyers in Canada’s least affordable markets—Vancouver, Toronto and Victoria—are most vulnerable to any erosion in affordability given how stretched they already are, especially when shopping for a single-detached home. Local buyers in many smaller markets may also be challenged by rapid price increases. Strong demand is putting intense pressure on their housing stock.


Read the full Housing Trends and Affordability report for extensive market-by-market analysis.

Read full report



Robert Hogue is responsible for providing analysis and forecasts on the Canadian housing market and provincial economies. Robert holds a Master’s degree in economics from Queen’s University and a Bachelor’s degree from Université de Montréal. He joined RBC in 2008.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.