Canada

Canadian Home Prices Increased 11x Income Before The Recent Pandemic Boom

Canadian real estate just got another data point to show how lofty recent home price gains have been. Statistics Canada (Stat Can) released the median after-tax income of households in 2019. The data confirms what many suspected — home prices grew much faster than incomes. A lot faster.

About Today’s Data

Today we’re going to be looking at the real median after-tax income for households. This is how much households take home, after government transfers. The data is from the 2019 taxpayer information filed in the Spring of 2020. It might seem a little dated, but it’s the most recent data processed by the agency. Hence, why it was just released this month.

More recent income data is released by Stat Can, but most of it is survey-based. Survey data like the Labour Force Survey (LFS) is great for a quick view, but it’s not hard data. It’s subject to sample bias, whereas this is the actual pool of data declared. The only thing not in it is the money you made slinging edibles that you didn’t declare.

We’re then going to be comparing it to real home price growth over the same period. For home prices, we’ll be using the CREA composite benchmark. This is a weighted index of home prices for all segments. 

Canadian Home Prices Increased 11x The Rate of Income Growth From 2014 to 2019

Canadian households barely kept up with inflation in the latest numbers. The median after-tax income was $54,790 in 2019, up 0.6% from a year before. From 2014 to 2019, it only increased a whopping… 3.4% — not quite as much as most hoped. It’s hard to find a Canadian that doesn’t think home prices will rise at least that much per year.

Real home prices over the same period grew at massive multiples of real income. The typical price of a home hit $578,600 in 2019, up 3.19% from a year prior. Prices increased over 5x that of income growth.

From 2014 to 2019, home prices increased 38.55% — just over 11x faster than incomes. That’s a long time for home prices to rise that much faster than incomes. It’s also at the national level, but prices are rising faster in markets declared “frothy.”

Canadian 2019 Income Growth Vs Home Prices

The annual rate of after-tax income growth for households in 2019, compared to the change in price for a typical home. Measured in real terms.

Source: Stat Can; Better Dwelling.

Toronto Real Estate Prices Grew 69x Faster Than Incomes In 2019

Greater Toronto households did significantly worse than the national average. The median after-tax income came in at $54,470 in 2019, up 0.1% higher than a year before. From 2014 to 2019, incomes jumped 4.4%, just a little faster than the national average. Incomes are lower than the national average, and growing at a slower rate. 

Greater Toronto home prices left household income growth in the dust. The benchmark price of a typical home reached $819,100 in 2019, up 6.95% from the previous year. For those trying to crunch the numbers, this is about 69x the rate of income growth.

From 2014 to 2019, home prices increased 57.34%, about 13x the rate of income. No wonder everyone in the City complains about housing affordability.  

Canadian 2015 to 2019 Income Growth Vs Home Prices

The change of after-tax income for households from 2014 to 2019, compared to the change in price for a typical home. Measured in real terms.

Source: Stat Can; Better Dwelling.

Vancouver Real Estate Prices Have Grown 8x Faster Than Income From 2014 to 2019

Greater Vancouver household incomes grew significantly faster than the national numbers. The after-tax median income for households reached $54,850 in 2019, up 0.6% from a year before. From 2014 to 2019, they increased 6.8% in real terms. Not exactly something to write home about. 

Real home prices fell in 2019, but it barely put a dent in gains made over the years just prior. The benchmark price of a home in Greater Vancouver reached $993,300 in 2019, down 2.94% from the month before.

From 2014 to 2019, home prices increased 53.93%, nearly 8x faster than incomes. Small gains were made in 2019, but doesn’t even make a dent in the gains made over the past few years. 

The data is pre-pandemic but serves as an important benchmark for how things looked. Home prices were greatly outpacing household income growth. This implies home prices were driven by greater access to credit, not income growth. Though home prices absorbing the pandemic credit cuts kind of served as a hint there, didn’t it?

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11 Comments

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  • Dll 3 months ago

    Yes, unfortunately this is the truth. However for those who studied economic history you will find that even more unfortunate is the fact that when home prices increase this way it will not drop unless something crazy happens. Take for instance housing prices in Asia. Hongkong have the worst income to housing cost in the world. At some point in time it was at the same situation as Canada right now. After the 1997 transition an official tried to lower housing prices. The result was millions of home owners marched on the streets because this will put them into negative equity. The government ended up scrapping the plan and now home prices more than 10x since then. If a government wants they can maintain this bubble for ever because majority of their citizens are home owners.

    So just because housing prices increased faster than income does not mean the government will fix this problem.

    • D 3 months ago

      Hong Kong bans new residential property building permits. Apples and oranges. Besides when Hong Kong gets absorbed by the CCP prices will crater. Toronto, and Van prices are going to crater soon enough

    • Joe B 3 months ago

      My guess is Monetary policy will fix the problem, not Government policy. No sitting politician wants a correction to happen on their watch. Eventually interest rates will rise and when they do, the market will run out of buyers and prices will drop.

  • D 3 months ago

    Why don’t they reveal the gross income instead? Someone in the 50th percentile doesn’t pay much if any federal/provincial tax and actually gets some money from the government if they have a good accountant. What about the mean percentile, top 25%, 10%, 5%, 1% percentile? Can stat fudge the facts, we all want to know how we stack up to others!

    • Travis Hunter 3 months ago

      Gross income doesn’t tell you a lot, since lower income people get almost all of their tax money back, but higher middle class and rich people see taxes clowly climb.

    • DDD 3 months ago

      Income after taxes is your real income, don’t fool yourself. 99% of working class are paying enormous taxes here. Compere the same number to the us and you will see the difference.

      • D 3 months ago

        Sure but gross income tells us the money employers are willing to pay in Canada. People on the median income don’t pay federal or provincial taxes if they have an account that knows the simple stuff so the after tax income is skewed because the government gives money back. Canadians earn poor wages in comparison to the states and its not because of the “free healthcare” that we have here. Like another poster said, a lot of our industries are owned by a few players that fix prices and wages.

  • D 3 months ago

    Another thing about Scam stats, according to their fraudulent statistics there are 38.1 million people in Canada when the real number is at or above 40 million. Canada wants 50 million by 2050 but it looks like they’ll beat their projection by 2030.

  • MR 3 months ago

    Most of the immigrants move to a new country because they wanted to have a quality of life. Ridiculously priced Shoeboxes or basements (graveyards) don’t not offer a decent quality of life.

    • monapoly on everything 3 months ago

      Cost of living in Canada is enormous. Elite government monopoly on everything: gasoline, shelter, internet, basic needs. Renting places are infested with insects, if its not condo type.
      Only simple food is affordable.

  • V 3 months ago

    I agree with MR and the brain drain has already begun.

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