Homeownership “Severely Unaffordable” in Canada’s Big Cities

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Canada has one of the most unaffordable housing markets in the world, with Vancouver, British Columbia being the third-most unaffordable city to buy a home worldwide. According to Demographia’s 2017 International Housing Affordability Survey, Vancouver was deemed “severely unaffordable,” based on the value of house prices compared to median household incomes.

“Vancouver house prices increased the equivalent of annual household incomes over the last year,” said the report.

While Canada is among the world’s most expensive, housing markets in Australia and China were deemed even more unaffordable. The report found Hong Kong is the world’s most unaffordable housing market.

Other cities that appeared on the top ten list of the least unaffordable included Auckland, New Zealand; Honolulu, Hawaii; and three cities in California – San Jose, Los Angeles and San Francisco.

And though not in the world’s top ten ranking, Toronto is Canada’s second-most unaffordable city for housing, also being classified as “severely unaffordable.”

“Over 13 years, Toronto’s house prices have nearly doubled compared to household incomes,” Demographia said. “There are no affordable major markets; one major market is rated as moderately unaffordable, three are rated seriously unaffordable and two are rated severely unaffordable.”

Montreal, Calgary and Edmonton: All “Seriously Unaffordable”

Montreal is Canada’s third-most unaffordable housing, according to Demographia’s survey, with Calgary and Edmonton following close behind.

“From the early 1970s to their first inclusion in the Survey, there was virtually no housing affordability deterioration in the major markets, with the exception of Vancouver,” Demographia found.

Ottawa-Gatineau was the only major city that ranked as just “moderately unaffordable.”

U.S. and U.K. more affordable than Canada

In evaluating middle-income affordability, Canada’s housing market received a “median multiple” of 4.7, meaning homes are more unaffordable in Canada than in the United States (3.9) or the United Kingdom (4.5).

“The health of the housing market has been deteriorating rapidly in Canada,” the organization said. “Indeed, house prices have been rising well above the economic fundamentals in Canada for at least a decade.”

Anything over a 3.0 is deemed an unaffordable market, according to Demographia.

CMHC Echoes Report’s Findings

Last fall, Canada Mortgage and Housing Corporation (CMHC) released a report that lines up with Demographia’s findings: it issued its first ever “red alert” for Canada’s housing market, with Vancouver, Toronto, Hamilton, and Quebec City being identified as particular concerns.

“Strong evidence of problematic conditions for Canada overall,” said Bob Dugan, CMHC’s chief economist. “Home prices have risen ahead of economic fundamentals such as personal disposable income and population growth, resulting in overvaluation in many Canadian housing markets.”

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