Housing affordability in Canada has seen ‘worst deterioration’ in 41 years: report

By Tom Yun

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August 20, 2022 (TVC network) — In the second quarter of 2022, the Canadian housing market experienced the “worst deterioration” in affordability in 41 years, according to a new report. The report, released Tuesday by National Bank Financial Markets, examined housing markets in 10 metropolitan areas across Canada. National Bank economists assessed affordability by calculating the mortgage payment as a percentage of income (MPPI), which compares the mortgage payment for an average home to the median income. “As home prices continued to rise in the second quarter, affordability deteriorated primarily due to rising mortgage interest rates,” the report’s authors wrote. Across the 10 urban areas, the report found that the median home price was $810,985 in the second quarter of 2022. A typical mortgage payment for a home at this price would be $4,166, giving an MPPI rate of 63.9% – the highest since 1981, according to the report. This represents an increase of 10.4 percentage points from the previous quarter and 19.1 percentage points from the previous year. Since 2000, the average MPPI rate was 40.7%. Several urban areas included in the study had MPPI rates over 90%. The Vancouver area had the least affordable housing market, with an MPPI of 121.2% for non-condominium homes, which included singles, semis and townhouses, and 51% for condos, giving a combined MPPI of 96.9 percent. hundred. Victoria’s affordability statistics showed similar figures. BC’s capital had an MPPI of 95.6%, corresponding to 102.5% for non-condos and 52.9% for condominiums. In the Greater Toronto Area, the MPPI was 98.2% for non-condos and 53.3% for condominiums, giving a combined MPPI of 91%. With a combined MPPI rate of 66.6%, the statistics in Hamilton closely mirrored the Canadian average. The Hamilton area had MPPI rates of 50.1% for condos and 71.1% for non-condos, according to the report. Montreal and the National Capital Region of Canada were in the middle of the pack. In the Montreal area, the MPPI for a non-condominium home was 50.1% and 33.9% for condominiums. Similarly, in the Ottawa-Gatineau region, non-condominium homes had an MPPI of 50.9%, while the MPPI for condominiums was 28.6%. The Prairies and Quebec had the most affordable housing markets, according to the analysis. MPPI rates for non-condominium homes in Calgary, Edmonton, Winnipeg and Quebec hovered between 30-37%, while condominiums had MPPIs around 15-19%. However, with the recent downturn in the housing market, National Bank economists say there is good news ahead in terms of housing affordability, as the bank forecasts a 10% decline in housing prices. homes over the next few months. “This development, combined with a stabilization of the benchmark five-year mortgage rate, should improve affordability before the end of the year,” the report’s authors wrote.

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