A recent report from RBC revealed that housing affordability in Canada has become very challenging, with just 45 percent of households able to afford a regular condo apartment and only 26 percent able to afford a single-family home. This loss of affordability has greatly reduced the pool of homebuyers in Canada, especially in cities like Vancouver, Victoria, and Toronto where home ownership costs are extremely high. The situation is also challenging in Ottawa, Montreal, and Halifax, according to RBC Economist Robert Hogue.
The report also highlights the varying percentages of people who can afford condos or single-family homes across different provinces in Canada. For example, the percentage of people who can afford a modest condo ranges from 70 to 80 percent in Manitoba, Newfoundland and Labrador, Alberta, and Saskatchewan, while it is much lower in Ontario and B.C. Similarly, the percentage of people who can afford a single-family home varies across the country.
RBC’s report also noted that all markets saw an increase in their affordability measures in the third quarter, with Vancouver and Toronto recording the biggest increases. However, there is hope on the horizon, as the report predicts that home prices will decrease or stabilize in most markets and household income will continue to grow, leading to an improvement in the housing affordability situation.
The Bank of Canada’s recent actions to raise its benchmark interest rate in an attempt to control inflation may pose challenges for buyers, but the report suggests that expectations for interest rate cuts in 2024 could lead to price declines in housing across Canada.
Additionally, a report from the Canada Mortgage and Housing Corporation in June 2022 estimated that the current rates of home-building will leave Canada with a shortage of some 3,500,000 new homes by 2030. The report highlighted that new construction is only building an average of around 200,000 new homes per year, far below the 440,000 homes-a-year target needed to achieve housing affordability.