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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