Canadian Real Estate Hasn’t Been This Unaffordable Since The 90s Bubble: BoC Data

Canadian real estate affordability is getting worse as the market adjusts to higher rates. A Bank of Canada (BoC) update to its Housing Affordability Index (HAI) shows a sharp climb in Q2 2022. An average household now requires nearly half their income to service a mortgage. It’s a level rarely seen in Canada, and experts don’t see it lasting very long as prices drop.

Housing Affordability Index (HAI)

The BoC HAI shows the share of disposable income needed to service an average mortgage. Carrying costs include mortgage payments including interest, and utilities. Disposable income is what a household takes home after mandatory deductions. The higher the ratio, the more difficult it is for buyers to get into the market and carry a mortgage.

Bank of Canada Housing Affordability Index

The share of disposable income a typical household needs to carry the mortgage and utilities for a home.

Source: Bank of Canada; Better Dwelling.

Canadian Households Need To Spend 48% of Income On A Mortgage

The BoC observed one of the worst erosion of housing affordability in the history of the country. The HAI is up to 48.2% in Q2 2022, meaning an average household needs to shell out nearly half their take home pay to carry a mortgage. Keep in mind, the median income across the country is fairly similar, but this is a national number. 

Housing affordability has seen a sharp increase over the past couple of years. The previous quarter came in at 42.2%, so Q2 has seen a 6-point increase. However, from the first full quarter of nearly zero interest (Q2 2020) to Q1 2022, the index rose 12 points. The problem isn’t just rising rates, the excess demand is an issue as well.

Canada Hasn’t Seen Affordability This Bad Since The 90s Bubble

The HAI is at the worst level in over three decades. It hasn’t been this high since Q3 1990, during the early ‘90s real estate bubble. Other than Q2 1990, no other quarter was higher — you’d have to go all the way back to the early 80s to find something worse. 

However, those previous periods were extremely brief, low volume periods for home sales in Canada. Very few people executed a sale at those levels, and the peak was short-lived as prices made sharp declines shortly afterwards. It wasn’t until the current quarter we’re in that home prices began to really pull back as rates climbed. Banks have forecast the decline for real estate will kick off with an “enormous” shock in the coming months. This is expected to improve housing affordability, despite rising interest rates. 

7 Comments

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  • Reply
    François Tardy 6 days ago

    Affordability does not mean taking out a huge loan that is much larger than the historical value of the house and dumping it on speculators. That is the opposite of affordability. I’m glad to see this period come to an end.

  • Reply
    Dorim 6 days ago

    When we lived in caves , a for sale sign was seldom seen. But when we were forced to colonize and dwell in company houses and work for the the man in return for our food, we replaced the spear or bow or sling shot for the shackle of subserviency.

    And we have the audacity to say slavery was abolished .

    And the poor shall become Revolutionary. This is why we can’t get anyone to work any more.
    Bring in more desperate people and dangle the carrot . It goes on and on. When will we ever learn.?

  • Reply
    Remington 6 days ago

    “An average household now requires nearly half their income to service a mortgage”
    Are they referring to one person paying the mortgage or several people living in the house paying combined. 🤔

  • Reply
    Alex 6 days ago

    Affordability means a family is financially ablw to take a mortgage and pay monthly instaĺlments. With such rates the awerage familh is unable to do so. The goverment decided to invest cash in Ukrainian war that’s why found an excuse in high inflation 7% which can be reduced thru reduction of gas prices.

  • Reply
    james allen 6 days ago

    for me affordability is when I have cash in my hand to purchase a house and its increasing day by day, I don’t believe in this fraud affordability on borrowed money

  • Reply
    Yoroshiku 4 days ago

    My neighbour is a suit at RBC. He tells me that it’s not uncommon in the GTA for people to be spending 60-65% of their income on mortgage payments. Crazy.

  • Reply
    Lindy grimm 4 days ago

    Completely ridiculous, I live in an unbearable apartment with constant construction noise. People, Canadians that have lived here have absolutely no hope. Zero hope. What they did during covid was absolutely ridiculous and our government watched it happen. Speculators scooped up thousands of homes to rent out. Is housing not a nessissity. It isn’t the stock market. During covid people literally used the free money cerb just to mention 1 and continued to work under the table. They used the 40,000 business loan towards the downpayment of a house. I tryed to buy a house it was impossible and it will never happen. So we are stuck the Canadian people who have lived here and were born here with no hope.
    No answer now, Toronto every subway corridor being saturated with condos they think that the answer. So the people stuck here unable to find other suitable housing well….nothing. perhaps they will come up with assisted death to end the ridiculous way we have to live, to have piece of mind living somewhere quiet. Nope neither will happen. Every Canadian person screwed, and our government sat and watched it happen.

  • Reply
    Serge 2 days ago

    Family without large equity in previously bought property cannot afford house, town home or even condo under this prices. This whole situation is outrageous and the it is all tyhe fault of liberal economic model which tries to turn everything into market commodity. Homes are places to live and must not be investment tool.

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