Canadian real estate affordability is improving at a record pace—after collapsing at one too. National Bank Financial’s (NBF) Housing Affordability Index shows affordability across the country improved for an 8th consecutive quarter in Q4 2025. The bank’s data reveals meaningful progress, but the core problem remains: Home prices are still deeply unaffordable, even after the fastest affordability improvements on record.
Canadian Real Estate Affordability Improving At Record Pace, But Still Far From Historic Norms
Canadian housing affordability is improving faster than ever, but has a long way to go. Monthly mortgage payments as a percentage of income fell 0.4 percentage points to 51.6% in Q4 2025, 4.5 points lower than last year and 10.4 points below the record high reached in Q4 2023. After falling for 8 consecutive quarters, the market hasn’t been this affordable in roughly 4 years.
“This was the longest streak of improving affordability ever recorded in the country,” explains NBF.
Despite record progress, affordability is even more strained than usual. Their calculations show the long-term average is 40.5% of the median income since 2000, indicating the market is still 27% less affordable than usual. Keep in mind that the affordability threshold is 30% of income, so affordability has been evasive over the long run—but it’s even worse than usual.
Income Gains Fuel Affordability Gains Despite Rising Home Prices
Improved affordability isn’t being driven by home prices. NBF notes that seasonally adjusted home prices rose in Q4 2025, according to their methodology using property registry data. However, the five-year benchmark mortgage rate declined four basis points, reversing the Q3 increase. “Income gains, however, contributed more to the improvement in the quarter than changes in interest rates,” explains the bank.
Median household incomes rose 0.8% in the quarter, double the rate of home prices. “Although incomes have lagged home price growth in recent years, the gap has been narrowing, and the home-price-to-income ratio now stands at its most favourable level in five years,” says NBF.
While NBF doesn’t get into this, the income trend has been influenced by recent changes to immigration. The reduction of the country’s non-permanent resident (NPR) population means fewer young adults, who tend to be on the lower end of wages. Removing them provides a lift to the population that skews slightly higher, but may not translate into a material improvement for buyers.
Canadian Affordability Gains Driven By The Frothiest Markets
National improvements were also heavily concentrated in the most stretched real estate markets. Erosion in relatively affordable markets like Quebec City and Ottawa is more than offset by the sharp drops in the Big Two—Vancouver and Toronto.
Vancouver remains the least affordable market, with a typical mortgage eating up 85% of the median income in Q4 2025. That’s an improvement from the peak of 103.9% in Q4 2023, but the city remains 18.9 points above its historical average of 65.4%.
Toronto has made an even sharper correction than Vancouver. A mortgage currently requires 69.8% of the median household income in Q4 2025, falling 19.6 points over 8 consecutive quarters. This is still 15.6 points above its long-term average of 54.2%, over half the median income. For those who recall Toronto being much more affordable, that’s because it was.
The long-term average isn’t volume adjusted, allowing recent stagnation to drag the index higher. Despite near record-low sales, it will drag the average higher the longer it stays at this level.
On the topic of superficial improvements in Toronto, there is also the matter of young adults fleeing the region. A lack of affordability is driving early career households outside of the greater region, helping to skew averages to more experienced workers. The city now has more seniors than children, which ultimately means a very different shift than most imagine. Yes, it’s more affordable to local incomes—but the demographic least likely to buy a home is driving the gains.
Calgary deserves a special mention this quarter. The region made its fastest quarterly improvement since early 2023, falling to 39.3% in Q4 2025. It remains just 3.3 points above its historical average of 36%, but as recently as the early 2020s it had plunged below 20%.
There are signs of affordability improvement, driven by lower mortgages and higher incomes. However, it’s unclear if this improvement is a material gain for buyers or largely superficial due to methodological quirks. Material improvements will result in rising sales in the coming quarters. Improvements driven by composition change won’t change much. Out-of-reach home prices don’t suddenly fall into a buyer’s budget just because there are fewer people that make less around them.
I’m not seeing any real signs of improvements in affordability; things are still just as unaffordable as ever, and getting worse. The improvements we think we are seeing are just statistical anomalies.
Things are never going to get better, Canada IS BROKEN!
REVOLUTION NOW!
I’m in!
Lets be clear. We know that stats Canada’s CPI is absolutely nonsense. It has as much to do with actual inflation as Freeland’s words did to the truth. Secondly, since the method by which Inflation is created is 100% a result of poor regulation by the feds and ignoring rules by the banks, allowing mortgage payments to massively exceed 33% of income, thereby creating exponential growth in the money supply which is the root cause of inflation.
So, one should ask how the implementation of the ‘stress’ test on incomes, pushed as a great regulatory tool by the feds, has worked? Well clearly the banks and the govt have completely ignored the simple fact that almost no one could qualify for a mortgage in toronto, vancouver, and so on for the last few years.
So we have a mess where there was effectively no regulation of predatory lending, where ‘investors’ were able to use \clearly over valued property to justify massive credit risk in these markets as ‘normal’, and a BoC and Federal Govt who knew exactly what waqs going on, and allowed it to happen.
The key line is this – ‘Monthly mortgage payments as a percentage of income fell 0.4 percentage points to 51.6% in Q4 2025, 4.5 points lower than last year and 10.4 points below the record high reached in Q4 2023. After falling for 8 consecutive quarters, the market hasn’t been this affordable in roughly 4 years.’
The hard rule for affordability for housing is 33% of pretax income for housinh payments (mortgage, condo fees), property taxes and heat. If that number is now 52% nationally, that means that housing is still eating up 20+% of the average persons salary than it should to be affordable? So how did we get here?
Well the problem is clear. The median income in Canada has barely moved since 2014, still at roughly 74K. During that time the real value of that income is down 40+%. So basically the median family income in Canada has dropped by 40+% since 2014, but the price of housing has increased dramatically?
Since interest was low, one might argue, that banks were OK to lend like this, but the problem is today rates are not that much higher than they were in 2019, or even 2022? What has gone up exponentially is consumer debt. Now, in our current economic system, where debt and income are almost indistinguishable, most of us thought we were rich because the ‘valuation’ of our houses went up just as fast. However, as noted above, the median house price should be close to 33% of median income to be sustainable, and its not. So prices have a very long w3ay to go down, or real wages to go up to support these prices.
NBC’s analysis is good, but misses an important point—historically rates got cheaper after they bought.
A buyer in the 90s went from 13% to 2% over time. Payments on a $300k mortgage went from $3.5k/month to $1.3k/month, no rise in income needed. The longer they kept it, the more disposable income they got.
At close to the bottom, these inflated prices mean payments get *more painful* in the future.
I understand what you are saying, but here is the problem. In 1987 if you bought a house in Toronto for $400K at the peak of that market, with rates at 12+%, in the next 5ys, if you hung onto that house, the price would have almost dropped to 50% of what it was worth in 1988. It wont be till 2006/7 that that house got back to 400k. So the cyclical down sweep is about 20ys from peak to recovery in that cycle.
Now, consider from 1988 to 2007 the inflation coefficient was 79%, which means that from 1988 the 400k you paid was now 716k, which prices didnt reach till the mid 2010s. So this was a really bad ‘investment’. with a break even of more than 30y on that purchase.
Now, saying we are ‘close to the bottom’ would imply that prices arent going much lower, and while that might have been true in 1994, that was 5-6 years from the peak. we are 2ys in on a much much longer cycle that began in 1995. The 1988 peak was only 5y from the 1983 trough.
Add to that a govt, central bank that keeps adding inflationary pressure, and hopes to keep the easy credit going as long as possible, and it would be very odd that this is the bottom. in fact, in markets, the bottom is usually when no one is talking about a bottom anymore for a year or more, and the market is dead as it was in 1993-95. If there are still speculators hoping for a v shaped recovery, that pretty much assures us it wont happen.
For Canada to have a healthy market again would require that a median price would generate a median mortgage payment of 30% or less of that median income. Currently at %75k, or no more than 1875 /month. Today that will get you a 325k mortgage. As of today the average house price in Canada is 665k, meaning we have a very very long way to go down. In fact, in past down cycles, like 1989-95, 1981-83, even Alberta 2008-2010, prices fall below that before recovering. As I said above, it took almost 30y for the 1989 recession to make a ‘real’ recovery in prices in the GTA. We are 2ys into this correction\, and the direction and velocity of decline is accelerating, not slowing down.
Hate to oversimplify but it seems we are all working for the banks… Aren’t they supposed to be serving society? I know we need a strong banking sector for the Canadian economy but this banking is damaging growth in Canada. We have too many sectors of the economy dominated by monopolistic businesses. (Food, insurance, investment,banking, media)
1. Dissolve the CMHC ( they cause more damage than good so what’s the point?)
2. Give banking co-ops funds to grow small businesses
3. Stop making real estate development dependant on pre-sales ,the banks have to learn to manage the risk,instead we shield them and what a surprise it turned out badly.
4. Get government to STOP SPENDING! If you’re broke stop spending (ev subsidy again??!!)
The banks are supposed to work for society not the other way around…..
We work for the banks
It sucks
OK, that is true, but has been true since 1690 when the Bank of England was formed. The key thing is to seek to reduce debt as soon as possible, and not borrow for consumption, only to make more money. Also stop voting for a govt whose clear aim is not helping 99% of us, only the top 1%, whihc is and has always been the Liberal party of Canada.