Canada’s Real Estate Bubble Is Approaching The Largest In History

Canada’s real estate bubble has blown past the 90s bubble, and is going for the biggest of all time. National Bank (NBF) data shows affordability in Q3 2022 eroded to the worst level since the early 1980s. Just like the 80s bubble, they don’t expect this one to persist for much longer. Affordability is expected to improve next year as home prices continue to fall.

Canadian Housing Affordability Is The Worst Since 1981

Canadian housing affordability is now the worst in not one, but two generations. NBF estimates median households buying a home would need 67.3% of their income to carry a mortgage in Q3. It’s a big jump of 3.8 points from the previous quarter and 21.0 points higher than last year. Buying a home in Canada’s cities hasn’t been this hard since the 1981 inflation-real estate bubble.

Remember, that’s right across Canada—it gets worse in the more expensive cities. A median household would need to spend a lot more to carry a mortgage in Vancouver (102.1%), Victoria (100.5%), and Toronto (93.1%). Even Hamilton (68.1%) has reached the point where a typical family can no longer afford to buy. Can you name one thing Hamilton is famous for? Exactly.

Canadian Mortgage Affordability

The share of income a median household would need to spend servicing a mortgage on a typical home in each respective market.

Source: National Bank Financial; Better Dwelling.

Even markets considered “affordable” are beginning to look frothy these days. A much smaller share of income is needed to carry a mortgage in Edmonton (31.7%), Quebec (32%), and Winnipeg (33.9%). However, that’s close to the maximum leverage a lender will lend to people. It only looks affordable in contrast to Canada’s mega bubbles, which happen to top Global Bubble Indexes.

Canadians Need To Make Over $250,000 To Own In Toronto Or Vancouver

Okay, it’s impossible for a typical household to buy a home in most of Canada’s cities. How much does a household need to make to carry the mortgage on one? Nationally, buyers of a typical home in major cities require a qualifying income of $189,000/year to carry the mortgage in Q3. That’s around double the median income. It’s also so steep that most existing homeowners likely wouldn’t qualify for a mortgage on their home today. 

Once again, that’s across Canada—a lot more is needed to buy in the largest cities. The highest minimum incomes are in Vancouver ($279,000), Toronto ($254,000), and Victoria ($233,000). It’s even multiples of a median household’s income in Hamilton ($223,000). Even small “working class” cities with a population of fewer than 600,000 people are out of reach.

Canadian Househousing Affordability Hasn’t Been This Bad Since 1981

The minimum qualifying income for a mortgage on a typical home vs the median household income in each region.

Source: National Bank Financial; Better Dwelling.

The erosion of affordability is due to a combination of high prices and high rates. Low rates boosted investor demand for housing, sending prices soaring. Now that rates are climbing, we’re at that awkward transition phase. Home prices are falling, but not as fast as rates have been rising. NBF expects affordability to start improving by next year as prices continue to fall. They estimate we’re about halfway to the bottom.

15 Comments

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  • Mark Bayky 2 years ago

    Not much of a life spending your whole working life paying for a mortgage. In a country with vast amount of space. Many people leaving for cheaper more pleasant places to live.

  • GERALD SILVA 2 years ago

    The Banks will put a positive spin on this situation, as they stand to lose a pile money if the correction goes deeper than what it is.

  • Ike 2 years ago

    Hopefully this correction will allow more people to get into the market while at the same time the rate increases will end before ruining the lives of home owners currently being stressed.

    They’re okay and don’t need to walk away from their homes for now.

  • Woolsock 2 years ago

    We don’t have “Real-Estate Bubbles” in Canada, we have “Real-Estate Domes”. They’re massive and seem to stay up as if by magic, but in reality it’s engineered that way.

    • Johnny 2 years ago

      I like your perspective. Something like this cannot go on unless it’s made to!

    • Edisthatyou 2 years ago

      More immigration! Of course that must be the answer to all our problems /s

  • sam 2 years ago

    Canadian economy is build on Real-estate and immigration so Real-estate bubble will not burst in Canada. These is the right time to buy because immigrants are going to rent your house and pay for you. Short term pain but long term gain. Buy only in Ab, On and Vancouver. Other provinces are not good in term of infra and weather. QC is good as long as you know FRENCH otherwise people feel isolated.

  • Iain 2 years ago

    We live in one of the best countries in the world. Some of our cities also rate in the global top 10. The demand for real estate, one of the best investments, in this country has a bit more to its pricing than has been highlighted in this article. A 30% reduction in pricing is absurd, saying so is alarmist and one wonders if there is an alterier motive to this sort of direction.

  • BRUCE LAW 2 years ago

    Why is Hamilton being maligned again? Has the author ever spent time there?
    Hamilton is famous for “being the best city to raise a family” among many other things. Derogatory “uncivil” views shouldn’t be accepted in an article, as suggested for the comments!

  • Veronica YY 2 years ago

    When it is more affordable, people will rush into the market, and buy more, then it will be unaffordable again.
    It is a Rat Race game.
    Unless people change their mind, dump the house and just invest in stocks or other assets.

  • Lee 2 years ago

    We have the largest housing bubble here in the world ahead of Singapore, a tiny city nation.

  • Lee 2 years ago

    The largest bubble in the world

  • Andrew 1 year ago

    Well now more then ever smart consumers need to look for alternatives to selling their property. Stop paying Realtors 5% there are tons of high value, low cost options out there.

  • PUNTANG 1 year ago

    I am extremely great full that I don’t have to worry about the mess that Canadians put themselves into. Honestly, what were you thinking, lol. If the war in Ukraine wasn’t blaring alarm bells, then you deserve to lose your house, and now, must live in your car, YIKES! The bubble will go down a further 25-35% on top of inflation, with oil to go through the roof because of the Russian price cap, lol, then the wealthy guys, you know, the ones living it up in Mexico, or somewhere warm, will buy your foreclosures, ha ha. Anyway, what they didn’t tell you, is that Putin will be pushing the button in the very near future while the wealthy hide in their bunkers, lol, and hopefully die a miserable slow death when they come out from the nuclear fallout. The final blow will come in 2024, I won’t tell you when. Hint, it has something to do with American politics, and voting for you guessed it, a new president, with much bigly, tremendous help from the other right winger, E, you know who I am talking about, all three of them were sleeping together including puntang himself, lol, anyways, if you survive, which most 99.9% wont, and then another final blow just before judgement day, to kill of the rest of the population, and send them back 10 steps behind, you know her, Karma, that’s right, enjoy, Eye know this because I’ve seen the mushroom clouds in my visions, and guess what, they were real. When you witness the Kapital of Syria in a heap of ruins, you know, it’s time to kiss your A$$ goodbye. The Turks, and Russians will take care of that before they invade Israel. It’s called the final battle of Armageddon, The BOOK was real, but many have never read it. Enjoy all of it. the expressions on their filthy faces will be speechless.

  • Edward HC Graydon 1 year ago

    It really helps in the world of banking ,finance and personal reputation to be ahead of the crowd !

    Edward HC Graydon
    October 10, 2021 at 7:36 AM
    If I might extend a concern that still relates to mortgage debt . The stipulation in the mortgage agreement with Canadian banks states they may call their loan at any time regardless of reason . This is also applied to lines of credit and credit cards ,mortgages are just another form of credit line although usually in larger finanacial amounts .The underlying problem is the banks ability to make the decision on your behalf if they believe you are having problems. As of today 10 10 2021 I believe the Canadian banking system is going to make the lives of a great deal of mortgage holders in this country responsible for what was in fact the biggest pyramid play in Canadian history . The Canadian Banks are starting to call in all their loans while reducing credit lines, it is going to really start to get tough for many people.

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