In November of 2022, housing affordability eroded all across the country. The RBC notes it is now harder to buy a home than it was in the last bubble seen in the 1980’s. The 2021 price surge has definitely caused lasting damage that will take years to correct.
Many buyers today may call some housing prices affordable. But the truth is that Canadian households have never had to spend such a large share of their income on owning a home. The incredibly sharp increase is 14.5 points higher than the previous year across the country.
Canada’s Least Affordable Real Estate Markets
While every market in Canada is seeing higher prices, Ontario and British Columbia are showing the highest numbers. A Toronto household will need to spend 85.2% of their income on a mortgage. That doesn’t leave much room for living.
No generation in Canada has seen the need to dedicate so much of their income towards servicing a mortgage. The sudden erosion has caused rising interest rates, but this isn’t the major issue in most markets.
Hopes for Market Correction
Before the interest rates increased, there was an excess demand, which drove the erosion of affordability. RBC notes that interest rates are stabilizing, and that will help to correct the prices. But we can’t expect this very soon. A 14% correction would be one of the largest in history, rivaling the corrections in the 80’s and 90’s.
Some household incomes are growing, and this should help with affordability. With incomes rising, prices will stagnate and affordability will return to the housing market. But this will take some time.
If you have never considered building a home, maybe now is the best time to consider this option. Give us a call, we’d love to hear from you and guide you through the process of building your home.