Canadian Housing Is The Least Affordable In The World… For Local Incomes

Canadian home prices have been growing at a breakneck speed, and incomes aren’t even close to keeping up. Organisation for Economic Co-operation and Development (OECD) numbers show Canada topped the house price to income index. Canada’s gap between house price and income growth grew so fast, it tops the list of high-income, advanced economies.

House Price To Income Ratio

The house price to income ratio is a basic affordability measure, to see if incomes are keeping up. To get the ratio, they take the cost of a median home, and compare it to median income. The lower the ratio, the better income growth is doing relative to house price growth. The higher the ratio, the worse income is doing compared to house price growth. Lower ratios are more likely to support home prices, since incomes can more easily carry them. Generally high ratios are only seen in bubbles and developing nations.

Reading the index put out by the OECD needs a quick explainer, because it’s not a straight ratio. Instead, the organization uses an index with a 2015 base. In plain english, the index is set at 100 for 2015, not the actual ratio. They’re assuming that 2015 was a generally accepted normal year. The increase or decline is relative to that year. For example, if the index hits 120, it means home prices grew 20% faster than income from that period. If it drops to 90, it means incomes grew 10% faster than home prices (or home prices fell) from that year.

Canada Has The Highest Ratio In The OECD

Canada’s house price to income ratio is the highest in the world – by a large margin. The index reached 122.9 in Q4 2018, up 2% from the year before. The country was followed by Portugal, which sat 5.2 points lower. Slovenia reached third on the index, 6.68 points lower than Canada. Most of you probably couldn’t point out those two countries on a map.

OECD House Price To Income Ratio

An index of house price to ratios for OECD countries.

Source: OECD, Better Dwelling.

For context, the US is at 108.11, which means the gap between housing and income grew at 40% of the rate of Canada. The UK, which is being called a “bubble on a bubble,” sat at 107.82. There’s undeniably a lot of home price growth in Canada, or relative income stagnation – your pick.

Growth Peaked In The First Quarter of 2016

The good news is Canada’s ratio has begun to stall. In Q4 2018, the ratio only grew 0.02% from the quarter previous. The biggest jump occurred in Q1 2016, when quarter-over-quarter growth peaked at 4.11%. Since then, the ratio has gradually tapered to mostly flat movements.

Canada House Price To Income Change

The quarterly percentage change in Canada’s house price to income ratio.

Source: OECD, Better Dwelling.

Canada’s gap between home price and income growth dwarfs any other developed country. Over the past 3 years, Canadians have seen prices soar over 20% faster than incomes have been able to grow. Home price growth is cooling in the first quarter of 2019, likely to bring the ratio down on the next report. However, it’s still a pretty big gap created over the past few years.

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  • Liquidity, Liquidity, Liquidity 5 years ago

    If the real estate agents aren’t old enough to remember what happened the last time things were like this, find an older real estate agent. In the late 1980s, a bunch of 20 something sales people were shoveling the same pile of poop – foreign buyers, immigration, world class city, etc.

    The fact of the matter is, home prices can’t improve faster than the people that support them. Self-ish fools dismiss this as jealousy, not everyone can be a homeowner. That’s true, and aside from not everyone wants to be a homeowner, you’re forgetting that not everyone can absorb your home at the the price you think it’s worth.

  • cto 5 years ago

    Are you a condo landlord, ?…sorry don’t mean to pry but…
    why do you make it sound like you are stressed out about not getting enough rent for your rentals?
    i know, i know, rent controls, right?…
    weird though…just yesterday reading study about how 1/2 the Cities population can’t survive on what rent specuvestors are asking? (2000/mnth for 1 bdrm)..too much!!!!
    you know…some of the cities population make yearly gross of about 90,000+/ pp. by stats canada they rep about 10%.
    Most of the newbies 30 yrs old and younger that would rent that 1 bdrm make in the $50000-60000 range and they may be, may be…. 10%.
    Know what, i suggest stats Can for good positive info,,,because i smell a rat!
    A sound economy is built on jobs and fundamentals. in other words, your City can compete with the world if it can sell it’s primary product at competitive prices. if, due to external factors, prices get too high for business to survive, (such as housing costs), then a correction, or recession is imminent
    . the longer this game persists, the worse it will be. it will not be a crash, but a very,… very long excruciating downturn. to me, its better to rip the bandaid off you know…

  • Fraser 5 years ago

    YI – Thanks for the info, makes sense to me…so tell us, where do see the market going in Canada over the next few years and is this even predictable in any way…?

  • cto 5 years ago

    Sorry MM, you read very wrong.
    I failed to mention that i am in my 50s, and i have a family with a nice house in metro almost paid for.
    But,,of course i bought at a different time. so you are not a very got judge of character.
    Ok,…so you are still pretty young maybe.
    lets just say i have seen some crazy shit come down in this 1st world country over the past 20-30 years. i have owned tonnes of real estate, (including my Georgian Bay cottage), but i have only ever seen the mania that has overcome T,O condo’s preceeding a correction,….not a crash. but a correction.

  • MOFO 5 years ago

    It will be interesting to see if they eliminate the Stress Test for buyers who lock in 10 year mortgages (currently at 2.99% at HSBC).

    • Peter 5 years ago

      HSBC only does collateral mortgages as far as I know. Caveat emptor.

  • Mmr 5 years ago

    Most people who buy Toronto and Vancouver bring money from home country so local income irrelevant for quite some time now. It’s only applicable city like Ottawa aka most boring shitty city in Canada where local income only souce to buy home. Also please stop whining how many years it will keep going on. No one force any one to live or buy property at Toronto or Vancouver…dont afford it? Dont like it? Get the f*** out then please.

    • C.o.V. 5 years ago

      Mmr…. lol…. get your head out of your derrière…..take your Audi back to your dealership before you can’t afford the lease anymore and get a real job. It’s so hard not to get personal when you see comments like yours. First the real estate spin doctors wanted us to believe that foreign investment is only a small part of the housing activity in van and TO and now you come along and tell us most people who buy in those cities bring wads of cash from their home country, rendering local incomes meaningless when it comes to real estate….. lol…..

      • Mmr 5 years ago

        Dont worry about me lmao…I guess you new on this forum….Toronto property owners like us already have return upto 300 percent since 2009….so yes let me enjoy my Audi while you cry like a baby and pay 2500 rent for shoe box condo you renting and do three jobs to support your self….enjoy.

        • C.o.V. 5 years ago

          Not worried about you, buds. I sold my condo last year and am happily paying the 2500 bucks in rent right now in my penthouse apartment overlooking the mountains and Harbor while enjoying taking my Beamer out (which I paid for in cash) into the hills as I please.
          Remember, you don’t make money in real estate until you sell….so have fun watching your “equity” evaporate every day…. tick tock…..

          • Mmr 5 years ago

            Happy for you. Enjoy whatever little money you have on selling one condo…and burning it on expensive car. After a while you will be back at shoe box penny less. Tick tock when it last.

    • Ren 5 years ago

      I was born in Vancouver. Why tf should I be forced to leave my home in order to make room for millionaire “housewives” and “students” to buy multiple properties that sit empty?

    • Investor 5 years ago

      Dummy comment.

  • cto 5 years ago

    Absolutely agreed.
    if young Canadian’s can’t afford to live in Toronto,…they should stay in their own communities. believe it or not, there are good jobs there too. and if you pay attention to the stats, they are actually better jobs and pay similar salary.
    i’m thinking the trend will eventually catch on, that T.O stinks of the “overrated flatulence”.
    Trends happen,…then they change, but the debt lives on….
    ….Got to take the day off…sittin here in my sunroom reflecting…

  • CanadaSucks 5 years ago

    People will eventual leave Canada if the inflation problem in Canada is not addressed. Same as Australia. I think we are now seeing people leaving Australia. 1 US = 1.44 AUD. Australia is really close to a currency collapse as is Canada.

    I bought some from brake rotors from the US for my pickupr. Even with low Canadian currency and with 50 $ dollars shipping charge, I save 60$ CAD. Everything is too expensive.

    Immigration, lower interest rate, housing incentives, student temporary visa (700 000 per year) will not fix the problem. Real inflation is too high in Canada. I am talking about real inflation, not bull shit stats from Canadian gouverment.

  • Rana 5 years ago

    If house prices stays flat 10 years after that everything should be okay

  • Rana 5 years ago

    MM ur real practical life genius

  • C.o.V. 5 years ago

    @ Mmr….. Nah, i’ll be fine. The cash from the condo sits in my TSFA invested in ETF’s. The cash for the car came from me going to work and puttin it in the bank instead of blowing it on an overvalued single asset that is about to drop like it’s hot! Rent is paid for by the the rental return I receive from investing in a transport truck. …. this could go on forever, I’m sure, but I have better things to do… like counting the boats in the harbour. All the best.!

    • Mmr 5 years ago

      That is great. Annex house purchased for 600k in 2009 now going for 2.2 mil. Honestly I dont think it will go back to 600k any time soon. And the other properties I have from before financial crisis have even higher roi. I honestly dont know why ppl say it’s bad investment. Real estate always been wealth generator and will be all over the world in coming decades. Peace.

      • C.o.V. 5 years ago

        Ok, so you made some excellent choices in 2009 and earlier when it comes to your real estate holdings but do you think it would make sense for you to go all in at 2019 prices? Would you be able to make ends meet and cover your expenses from renting out your property after plowing in 2.2 million dollars, and would you even be able to afford it? Does real estate historically not closely track the rate of inflation? I believe you would be hard pressed to claim that it has done so in the last 10 to 15 years here in van and TO, or is it simply different this time?

      • vnm 5 years ago

        Don’t forget to mention your acumen was based on inheriting property from relatives who must be rolling in their grave at your pathetic conceit and entitled arrogance. My cat would have made just as much as you inheriting those properties. Do you have another purpose posting on BD other than to offend?

        • mmr 5 years ago

 least I am not homeless and on social well fare like you. after all looser like you lost everything in 93 crash…now whining like baby every day for last 30 years for a crash that never happened.

      • Investor 5 years ago

        Folks who act rich are the best – just like in the movies.

  • Frost 5 years ago

    Rent almost never ever goes down. Even if the housing was to magically correct itself (say the feds did something about money laundering) the rent would still continue to rise exponentially as the demand will only rise as people scramble to offload their properties that are heavily under water. Who in the right mind would buy an over assessed property with a massive property tax when it’s sale value will be much lower? Topple this with developers not wanting to build any rental units since the 1990’s, and we are in for a real treat. I foresee 4 people to a single bedroom with bunk beds just like it is now in places like London UK. Until the local government starts building it’s own rental high rises just like it did in the 90’s but stopped nothing good will come out of it. No amount of rent control or absence of it will fix this problem when there is a 6 month waiting list for a 2 bedroom in the North York area, never mind downtown core.

  • FOMO 5 years ago

    The brain drain that impacted Canada for decades has reversed. Loads of high paying jobs coming back to Canada – thank you Donal Trump.

    No just technology jobs.

    Entertainment too. Just met a young writer from India – $2000 a week job – so $2k/month for rent is no problem he said.

    Netflix, HBO and Amazon all investing huge in content.


  • Steve Threndyle 5 years ago

    There was a fascinating–and truly frightening–story in the USA HuffPo over the weekend about homelessness in Salt Lake City, a city that had actually become a poster child for eliminating/seriously reducing homelessness. It found that a rent increase of as little as $100 per month would send a family out onto the street. The new homeless have jobs, they are generally responsible (no drug or booze habits,( though probably not so great credit) and their lives have gone from precarious to, well, poverty, quite likely. And it’s a poverty they will find extremely challenging to climb out of as well.

  • Paul 5 years ago

    Mm mmr are quite obviously the same person. Poor language and grammar are hard to fake or disguise. All the abled commenters have stopped weighing in because of the trolls.

    Rent won’t keep going up and neither will house prices. To find “Value” in the system “They” will trigger a recession whether you want it or not. If you can weather not having a tenant for six months then good for you. I imagine that isn’t even close to the case for the majority of landlords in the city.

    And even if you think you have all your corners squared we are al connected and not quite the haves and have nots you’ve been imagining. Canada has an extremely small population compared to other countries. This makes us different and much more vulnerable.

    • MM 5 years ago

      The main difference between socialists and capitalists is…

      Capitalists think that businesses that CREATE valuable goods and services should be rewarded. For example, rental housing providers, creators of more supply that population needs, etc.

      Socialists think that solution for all problems is repossessing existing wealth and fairly spreading it across poor but very very fair people of the country.

      As a result, Canada as socialist country did a perfect job repossessing wealth and spreading it more or less equally. But when it comes to solving housing issues, socialists automatically say “Let’s take what they own and it will be a solution”. Unfortunately, housing crisis in Canada desperately needs CREATING new value (units). Repossessing existing units can only help for a very short timeframes, like BC today, not long term. And guess what, Canadian socialists have no idea how to incentivise businesses to CREATE that new value for population. Therefore, you get what you deserved, lack of supply.

      Keep hoping for your desired outcomes, but don’t forget to pay rent on time. And be grateful that at least some brave and very good people still provide you the roof under your head. Exactly that roof that you have no balls to create for your family.

      • WorldClassCitizen 5 years ago

        Wow. You are a piece of work man. You have clearly had everything handed to you on a silver platter because you don’t seem to know the first thing about real estate, finance or good business

      • Theo 5 years ago

        The difference between socialists and capitalists is socialists know rentiers have no clue what they’re talking about. Whereas capitalists pat rentiers on the back, and tell them they’re a part of the club, but really the know these suckers just provide interest payments and lower their taxes.

        Rentiers hate socialism, except when it provides low interest rates, mortgage liquidity and insurance, and mixed market support for housing. True capitalist economies see housing prices collapse regularly, as a part of market efficiencies.

      • Jeevan Jayenthiran 5 years ago

        I would agree with most of what you said regarding RE relating to the past 15 years. I’ve been wrong over that time and have been humbled by it. That being said, I also do think it’s fair to raise the issue of a lack of affordability. As you rightly said, it’s not allowed for tenants to put 6 people in a one bedroom if you’re they’re landlord. However, at the same time, if you block that, then you won’t have enough people to pay market rent. So it’s a double edged sword. Every market has a ceiling for rent.

        Now, if Toronto becomes solely a foreign capital/money laundering pad, then you’re right, prices will just keep going. However, I don’t think Canadians will accept that. We’ll eventually do what NZ did and ban foreign investment.

        Honestly, I agree with most of what you said, but we should have an open and frank discussion about it. Do we want housing to continue to be a commodity that is at the whim of foreign capital and thereby destroy housing as a dwelling for local citizens? Or, do we put safeguards in place to protect local citizens.

        I personally don’t think we should allow further foreign investment. Local owners have already profited wildly as your example in the Annex has shown. Not allowing foreign capital won’t tank your equity value and it will put a cap on the rampant annual year-over-year gains. It’ll allow the market to slowly re-balance to local incomes which is what housing should be. Then RE investments will return to what they have historically been, income generating assets. At the moment, they’re speculative investments for capital gains. Any new property purchased in the GTA is going to be CF negative with 20% down let alone 5%. So we’re in a dangerous position where a major debt implosion in China could cause their citizens to dump foreign assets in order to recapitalize themselves. I don’t want that risk hanging over us. That would crush your gains and many fellow Canadians.

        The trouble is people who already own homes like yourself don’t want to stop the music. You think it can continue forever and if it does, you don’t care about the human cost to our citizens because hey, what the heck, you’re getting rich in the process. I don’t hate you for that or think you’re an evil capitalist. I just think housing should be just that, a dwelling to live in, not an asset class like the stock market that’s only privy to the wealthy.

        For the record, I can afford a house now. I just choose not to take on mind numbing debt with our current political/trade situation. If this trade war goes sideways and we get stagflation, watch out. But if that clears, the world regains growth and we avoid a recession, I agree with you that housing will keep inflating due to dirt cheap interest rates.

        I feel for our bottom third. They’re screwed either way. Even if we have a housing meltdown they will likely lose their jobs and won’t be able to afford the discounted homes.

        Good luck to us all!

    • mmr 5 years ago

      Paul…all I hear is blah blah from you…if I can get a penny for housing market crash in last 15 years I will be billionaire by now…please tell us when it will happen…I am sitting with money to invest.

      • Paul 5 years ago


        Less than half of what you say is accurate or even based in reality. I’m not sure why you are on this blog since you just debate everything the articles say.

      • St 5 years ago

        July 23, mark-up your calendar

    • Investor 5 years ago

      Great post! Mm is indeed a troll.

  • Give me a break 5 years ago

    It’s Eminem not Mm you wanta be rapper bro! On a serious question how long do you have the lights on for growing clons for a pot crop.Thanks bro.

  • peter peter 5 years ago

    housing prices are going to drop any day now, i just jumped into the market so that’s a pretty good metric. There is a high correlation between my purchases and prices going down, going back to 2011 and the purchase of gold all the way to purchasing of bitcoin. I’m very well versed in buy high sell low

    • Average Man 5 years ago

      Oh man that’s bleak. Good luck out there buddy.

  • Joseph 5 years ago

    Daniel, about your article today. Slovenia and Portugal (especially Portugal) are easy to find on a map.

    Usually you have decent comments, but not sure about your comment today. I’d bet over 65+ percent of people who read your articles would locate either or both countries. Minimally Portugal.

    • carlton 5 years ago

      You get a gold star, how dare those assholes at BD doubt your geographical skills, you tell em!

      You serious? Canada has the least affordable housing and thats your comment …. sorry i couldn’t help myself.

      Well lets see how long the average household can use 15% of income for debt payments and maintain a debt to disposable income of 1.78.

      Sooner or later the banks are gonna want those H.E.L.O.C.S. paid back.

      • Frost 5 years ago

        Torontonians are reaching their credit limit, a lot of people are already tapped out with no more room. It’s a very sad situation, I believe the landlords already are aware of this however this does not mean they will take on a rational decision to halt rent increases. Like in Hong Kong and London UK, multiple people to a single bedroom and living room turned into a bedroom is on the Horizon for Toronto. The 1.78 debt to disposable income has been surpassed, it’s an old figure. We are closer to 1.84 right now (sorry I do not have a source, read it somewhere a while ago). We all need to pressure our local jurisdiction to built government housing, a simple email to your local rep is easy to do. Only together can we achieve this outcome for our community.

  • John 5 years ago

    Canadian real estate needs a reset. You have Toronto post-secondary graduates competing to work for free under internship programs. It’s not sustainable. Something has to give, hopefully a peaceful fall rather than civil unrest.

  • Jeevan 5 years ago

    Depends on who you ask. The people who bought in the last 5 years would be crushed. People who’ve been holding for ages will be fine. A reset will likely come with a major recession which means university grads likely won’t get jobs to even pay for the reset pricing.

    We’re screwed.

    People will be forced to move. Most employable university grads are going into STEM and will likely have the option to work remotely. It makes sense for employers since they won’t have to pay the wages required to live in Toronto.

  • Haha 5 years ago

    The Supply – Limited Toronto land.
    The Demand – Whole entire world’s investors and money launderers.

    You see, the supply and demand argument is a con used by developers.

  • T 5 years ago

    Downtown Avg. price Per SQFT in USD.
    Hongkong $2858, London $2025, New York $1603, Singapore $1588, Shenzhen $1580, Paris $1578, Beijing $1455, Shanghai $1426, Zurich $1231, Geneva $1191, San Francisco $1175, Seoul $1167, Tokyo $1042, Sydeny $1042, Boston $1022, Munich $1000, Vancouver $770, Amsterdam $770, Milan $763, Oslo $737, Los Angeles $729, Copenhagen $722, Stockhom $708, Toronto $708

    Sigapore, Shenzhen, Seoul, Milan, Tokyo income are lower than Toronto, Toronto housing still Cheap.

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