Housing affordability on the decline, new study indicates

Homes became less affordable in Canada at the end of last year, marking the second consecutive decline for a three-month period, a new study has found. National Bank of Canada released its Housing Affordability Monitor late last month, revealing the fourth quarter of 2023 marked the second straight span across Canada when the cost of a mortgage relative to median income increased due to higher interest rates for borrowing and rising home prices.

The decline in affordability last year almost eliminated gains made over the last two years, the study found. It further noted that National Bank’s index that tracks affordability fell near to its lowest levels since 1980.

The drop in Canadians’ ability to pay for homes saw monthly mortgage payments increase to about 65 per cent of median income. In the mid-1980s, that figure reached about 75 per cent. At the time, interest rates on mortgages exceeded 10 per cent, and Calgary’s market faced the largest affordability challenge. In the mid-’80s, monthly mortgage payments exceeded 100 per cent of median income in Calgary, which was mired in an economic slump. Today, Calgary is among the more affordable major cities, the study found, with mortgage payments taking about 45 per cent of median income. In contrast, Vancouver monthly mortgage payments were equal to 103 per cent of median income.

In Toronto, mortgage payments were taking just under 88 per cent of median income in December.

Edmonton turned out to be among the most affordable markets. There, the monthly mortgage payment cost about 33 per cent of median income.