Affordability improved in every major Canadian housing market in the third quarter of this year, marking nine straight months that homes have become cheaper relative to incomes, National Bank of Canada says.
The bank’s latest quarterly housing affordability survey found that the national cost of housing has returned to its long-run average of 43 per cent of average income.
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But that “does not mean that the situation is back to normal in all metropolitan areas,” National Bank economists Matthieu Arseneau and Kyle Dahms wrote.
“Despite some welcome progress in the last three quarters, the situation remains difficult in the two largest markets by housing market value,” they wrote, referring to Toronto and Vancouver.
Houses and condos remain well above their average affordability in Toronto, as do detached homes in Vancouver. But condos in Vancouver — where house prices have been falling for two years — have returned to their long-run affordability level, the report found — which, in Vancouver’s case, is still pretty elevated.
But this improvement could be short-lived. With mortgage rates declining over the course of the year, home sales have heated up and house prices are again rising faster than incomes in many parts of the country.
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The Canadian Real Estate Association reported that home sales jumped 15.5 per cent in September, and the national average house price rose 5.3 per cent, to $515,000. It’s the strongest price growth seen in several years.
“Surging population growth in Canada’s largest metro areas, coupled with leveling mortgage rates should limit the scope for further improvement in home affordability,” Arseneau and Dahms wrote.