Average home price growth in Canada outpaces affordability
Home prices have more than doubled wage growth in Canada over the last 25 years, highlighting how housing has become unaffordable across much of the country, a new report has concluded.
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Desjardins Economic Studies published a study in May finding average home prices since 2000 have 'ballooned' by more than four times whereas household disposable income has only increased a little more than two times.
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Desjardins further noted that first-time buyers face a steep hill to ownership, especially given they are also paying historically high rent across many Canadian markets.
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The report pointed to the Desjardins Affordability Index being at historical lows for affordability even as mortgage rates have eased and home prices have fallen in Canada's most expensive markets like the Greater Toronto Area.
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Affordability hit bottomed out coming out of the pandemic as interest rates soared from near historical lows to about seven per cent for five-year fixed mortgages by fall 2023, but the report noted Canadian households remain under pressure — made worse by Canada-United States trade anxieties.
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Desjardins added that home price pain is not merely an outcome of lower interest rates during the pandemic and recently high migration to Canada. Prices have accelerated gradually over the last 25 years — though more so as a result of the pandemic.
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Assuming a household could save 20 per cent of disposable income, earning three per cent per year on money saved, it would take six years to have a down payment for the average home in Canada, about $700,000.
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Given the economic uncertainty, stirred largely by U.S. policy, affordability is unlikely to improve soon, it added.
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