Big Six Bank: Canadian Real Estate Affordability Worsens For The Longest Run In Decades

Big Six Bank - Canadian Real Estate Affordability Worsens For The Longest Run In Decades

Canadian home prices are rapidly detaching from incomes, according to a new report from one of the “Big Six.” National Bank of Canada (NBC) published their quarterly affordability report, and analysts expressed concern regarding decaying affordability in Canada’s urban centres. The report notes that “affordability worsened for a ninth quarter in a row in Q3, the longest run in three decades.” Amongst their biggest concern is how long it now takes to make a downpayment, which is now up to 5 times longer than the long-term trend.

About The Numbers

There’s going to be some questions about NBC’s calculations, so we’ll try to answer them before you ask them. The median house and median incomes were used as the base. The months of savings are calculated assuming 10% of savings on the median household pre-taxed income. The average months of savings are the long-term average for the city, starting in 2000. The latter part is important, because it demonstrates how quickly home prices are detaching from income.

It Takes On About 5 Years To Save A Downpayment

The urban composite of all homes, saw the time required nearly double across 10 urban areas. The median family would have to save for 58.3 months, that’s 80.5% higher than the average number since 2000. The king of unaffordability is Vancouver, where you now need 353.6 months of savings to make a downpayment. That’s up from an average of 55.6 since 2000. Toronto came in second with 113.9 months of savings, up from the average of 41.2 months. Quebec City and Winnipeg were tied for the “most affordable,” requiring just 28.2 months of savings, up from 20 months.

Source: National Bank of Canada.

Condos Now Take 34.8 Months For A Downpayment

The length of time required to save a downpayment on a condo spiked almost 50% above the average. The urban composite across Canada saw a rise to 34.8, up from an average of 23.3 months. Vancouver’s 54.5 months made it the least affordable, up from an average of 29.9 months. Toronto came in second with 44.5 months to save, up from an average of 24.6 months. Edmonton was the most affordable at 16.2 months of savings, up from an average of 15.8 months.

Source: National Bank of Canada.

Semi-Detached, and Detached Homes Now Take 86.4 Months For A Downpayment

Semi-Detached and detached homes now require more than twice the average months of savings. The urban composite now takes 86.4 months of savings, up from the average of of 41.6 months. Vancouver was the hardest to save for (can you see the trend here?), with a whopping 437.4 months of savings required for a downpayment. That’s up from an average of 88.9 months. Toronto came in second with 127 months, almost triple the average of 44.4 months. Edmonton was once again the most affordable at 28.2 months, up from an average of 24.7 months.

Source: National Bank of Canada.

The rapid detachment from income is a concerning trend. When real estate starts making drastically more money than the people that live in the houses, you have a mismatch of labour value. People aren’t being paid nearly enough to live in these cities, or prices have grown way too quickly. Either way, the cities with the larger the detachment, the larger the consequences.

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  • Kim J. 7 years ago

    Anyone that says this is normal, is a dotard.

    • Meaghan 7 years ago

      or a real estate agent… lol.. buy now before interest rates rise! What happens when you buy said house and they do rise and have to re-sign your mortgage? jokes on the buyer

  • Justin Thyme 7 years ago

    Why last Christmas did people pay four, five times the price of a Hatchimal, knowing it would return to normal the day after Christmas? And that they would be paying off the credit card bill at 15, 20% interest?

    Because now about the only ones left in the market are the crazies.

    • Justin Thyme 7 years ago

      Like I said, about the only ones left in the market are the crazies.

  • Tommy 7 years ago

    Toronto comes in 3rd on all the graphs, not in second place. Victoria comes in 2nd place.

  • Al Daimee 7 years ago

    I didn’t see any mention of what percentage the downpayment is compared to the price. Are these calculations based on 20% down? If so, then the info isn’t as dire below the $1MM threshold where a full 20% downpayment is not mandatory.

    For entry level condos sub-$500K, you can buy with a 5% downpayment if you just want to get into the market and start building equity via mortgage payments instead of paying rent and trying to fight an uphill battle to keep up with market prices. The $500K to sub-$1MM price ranged properties can be bought with 10% downpayment. This price range strikes the sweet spot for most home ownership needs.

    There is no question that housing, especially low-rise homes, is going to be accessible only to above average household income earners. The City Toronto is going to see a higher percentage of renters as time goes and needs to bolster the volume of rental availability to keep prices in check or accessibility of ownership is going to continue to run away.

    Benjamin Tal (a Big 6 Bank economist) sees long term growth in Toronto and Vancouver as 2 of the more desirable places to live in Canada, if not the world. He seems to have been correct more often than not about real estate, so I would give him a real good listen to what he has to say.

    • Functioning Brain 7 years ago

      Just gonna take a stab in the dark, you’re a real estate agent right?

      Oh and just to counter your stab, no I’m not a “basement dwelling” renter….

      • Al Daimee 7 years ago

        Yes, I am a Realtor and there is nothing wrong with that! No stabs here. I also look at the market objectively as I am personally invested.

        Realtors do not manipulate the market like some would think. It comes down to the willingness and motivation of buyers and sellers to settle on an agreed price through negotiations. Do some negotiate better than others? You’re darn right! However, when prices greatly swing up or down, it is largely the fundamentals at work on a macro level.

        What we see is a rental market getting more expensive, making buying vs. renting more appealing for those who can manage to get enough downpayment and handle the full carrying costs.

        I have been hearing the same bubble talk since my first foray into home ownership back in 2001 (eventually buying in 2003 when I realized the folly of that notion). I kept hearing it over and over and it prevented me from buying a second property until 2007. I thought the bull run was surely over in late 2008, but spring 2009 proved that there was more to Toronto real estate than economic boom times.

        During my extensive travelling in the past 5 years, I have been comparing real estate in other major cities to Toronto and speaking to Realtors in those cities. Interestingly, they are acutely aware of Toronto as one of the best cities to live or invest in right now and are often surprised to hear how low our prices are given all of the benefits and reputation we enjoy.

        The one thing I will say about us Canadians is that we are stuck thinking too small and undervalue ourselves and our country. Canada is one of the best places in the world to live in for many reasons and it’s time we stop selling ourselves short.

        • Tup 7 years ago


          It’s nice of you to think so positively. Please keep up that good attitude after and during the crash, Toronto will need that enthusiasm to whether the storm.

          • Tommy 7 years ago

            Toronto might “crash” but only after average square foot in the city of Toronto proper has reached $1000 per sq ft. Toronto is playing catch up as a major city in high demand. It’s the NYC of the north with continued tremendous growth over the next few years. Land to build on has been delayed for years, development costs have risen sharply, all of which will put a cap on new supply to the market in the next few years as immigration numbers are driven higher – 450k per year. More demand, less supply, in a sought after city.

    • Trader Jim 7 years ago

      Same Benjamin Tal that warned the B-20 tests would ruin Toronto and Vancouver real estate, right before changing his mind around Christmas bonus time?

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