• Home ownership costs balloon as interest rates continue to soar: The Bank of Canada’s battle against inflation has made it a lot harder to buy a home in this country. Massive rate hikes since March drove RBC’s aggregate affordability measure to 62.7%, its worst-ever level. The deterioration totaled an astounding 14.5 percentage points over the past year.
  • No exception to the worsening trend: Buyers face materially higher ownership costs in every market we track. The 12-month increase has been unsurpassed historically in the vast majority of cases.
  • Affordability is overstretched in BC and Ontario: And conditions are now more challenging than usual in other parts of Canada too.
  • Price correction should soon bring relief to buyers: The low point for affordability is likely close at hand. Widespread price declines—especially in Ontario and BC—should help lower ownership costs once interest rates stabilize. We expect benchmark prices to fall 14% nationwide from the peak by next spring.

Deeper pockets necessary to handle higher rates

Sky-rocketing home prices earlier in the pandemic raised the bar by several notches for Canadian buyers. But the spike in interest rates since March served a crushing blow in parts of the country. To qualify for a mortgage on the purchase of a typical home (at the benchmark price) in the Vancouver area a buyer needed to earn a minimum of $200,000 annually in the third quarter of 2021. A year later, the qualifying income had soared 34% to an astounding $268,000. In the Toronto area, it was $240,000—a 29% increase. What was already a very tough hurdle to clear is now nearly impossible for many potential purchasers. No wonder homebuyer demand has plummeted since the Bank of Canada initiated its rate hike campaign.

The more challenging conditions aren’t limited to Canada’s most expensive markets. Higher mortgage rates require deeper pockets from coast to coast. It’s in fact buyers in Halifax and Saint John who have faced the biggest increases in the minimum qualifying income in the past year (up 44% and 41%, respectively)—though the required amount in Saint John ($74,000) is still the lowest among the markets we track. To qualify for a home valued at the benchmark price, buyers in Victoria (who need at least $216,000 to qualify), Vancouver ($268,000), Calgary ($123,000), Toronto ($240,000), Ottawa ($149,000), Montreal ($127,000) and Halifax ($116,000) must all have six-figure pre-tax income. These levels widely exceed the respective median household income, which ranges from $74,000 in Montreal to $92,000 in Calgary. In other words, it’s Canadians in the upper income echelons who can afford an average home in these markets—especially so in Vancouver, Toronto and Victoria.

Worst-ever affordability levels

It’s never been so unaffordable to buy a home in this country. Further interest rate increases propelled RBC’s aggregate measures to yet new record highs nationally and in Victoria, Vancouver, Toronto, Ottawa and Halifax in the third quarter. (An increase in the measure represents a loss of affordability.) Montreal’s measure is rapidly approaching that mark too. The situation isn’t as grim in other markets though affordability levels now look more stretched than usual in all but one market (Edmonton). The national aggregate measure rose in the past eight quarters.

Housing market correction approaching its final phase?

The massive erosion of affordability has kept Canada’s housing market on a major correction course since spring. Home resales have plummeted 36% nationwide—more so in BC (-43%) and Ontario (-41%)—reaching levels far below those that prevailed before the pandemic. The pace of decline has eased in recent months, though. Falling prices also appear to be slowing. These may be early signs the correction is approaching its final stage.

Intense pressures to persist for now

Still, headwinds will remain stiff in the near term. Affordability issues aren’t likely to reverse quickly. It will take more time for the market to absorb the rise in mortgage rates. We expect the market to bottom out around spring.

Price drops will eventually help affordability

The market correction’s silver lining is it’s setting the stage for some affordability improvement in the year ahead. We expect the national benchmark price to fall 14% from its early 2022 peak, providing significant scope to lower ownership costs once interest rates stabilize. We think that could start in the early part of 2023—though the timing is poised to vary by market. Growing household income will partly drive the improvement process. It will likely take years to fully reverse the tremendous deterioration that took place since 2021.

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.

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