Global Macro Service > Research Briefings > Canada
Our Housing Affordability Index, now expanded to 10 Census Metropolitan Areas (CMAs) in Canada, shows that while the average home is out of reach for median-income households in Toronto and Vancouver, it’s affordable in other metros. Looking ahead, lower mortgage rates and continued moderate income growth should support a slight improvement in housing affordability across much of the country this year. But tight supply and robust demand in some regions could result in higher-than-forecast prices that would hurt affordability. Unaffordable housing in Canada is largely a tale of two cities: Toronto and Vancouver. Their sky-high home values have many people opting for less costly condos, renting rather than buying, setting up multifamily households, moving further from these urban centres, or simply postponing forming households. In stark contrast, the average home in Calgary and Edmonton is quite attainable. Following the global financial crisis and then the 2014-2015 oil price crash, home prices moderated in these Alberta markets, and affordability was largely maintained by significant declines in mortgage rates.Homes in the eastern CMAs of Hamilton, Ottawa, Montreal, Quebec City, and Halifax are also largely affordable, though this has eroded somewhat over the last five years. Our baseline forecast suggests affordability will improve in these markets in 2020 as mortgage rates fall and house prices rise roughly in line with incomes. However, the risk of overheating is a growing concern. Tightening supply-demand conditions in these eastern metros as well as Toronto and Vancouver suggest upside risk to our baseline house price forecast, though this upside is likely limited in already-overvalued Toronto and Vancouver.
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