Canada affordability crisis: "It's really sad"

Skyrocketing home prices pushed affordability out of reach for scores of would-be buyers in Canada’s housing market during the COVID-19 pandemic – and while they plummeted in many cities over the last year, buying a first home still looks a distant prospect for many.

In Vancouver, one of Canada’s most notoriously heated housing markets, the benchmark price of a detached home alone in May was an eyewatering $1.95 million, according to the Real Estate Board of Greater Vancouver (REBGV).

Townhouses’ benchmark price clocked in at over $1 million, while apartments came in at $760,800 – figures well above the price range of most first-time buyers unable to rely on a gifted amount from another party.

Sales activity is also ticking upwards, with 3,411 properties changing hands in May compared with 2,947 the same month in 2022, a jump of 15.7%.

For Camilo Rodriguez (pictured top), the Vancouver-based chief executive officer at the Mortgages Lab brokerage, affordability hurdles are proving a near-impossible task for new buyers to overcome.

“One of the things that brings me pleasure in my profession is the fact that a lot of people take pride in homeownership,” he said. “But right now, it’s really sad that too many good people miss out. In my market, you have a couple of people making $60,000 to $80,000 a year – normal jobs – and they have two or three kids [but] they cannot buy. They cannot own a home.

“It’s getting to a point where its not possible. How can you tell a mom and dad that they have to make another $60,000 or $70,000 of income in order to be able to purchase a home? It’s really sad.”

Canada’s #householddebt is now the highest in the G7 – and amidst economic headwinds and rapidly rising #interestrates, some observers have sounded concern about the fragility of the national housing and mortgage markets in recent weeks.https://t.co/IlEvlnMkVm#mortgagenews

— Canadian Mortgage Professional Magazine (@CMPmagazine) June 26, 2023

The national housing agency, Canada Mortgage and Housing Corporation (CMHC) states as its number-one objective making housing affordable to Canadians – but has recently sounded a pessimistic note on the likelihood of enough homes being built to fulfil its goals.

In October, the Corporation said that housing starts would likely end up well short of its 2030 affordable housing supply targets even under best-case scenarios, with British Columbia, Ontario, and Quebec to remain especially undersupplied.

There is a current shortfall of 3.5 million housing units in Canada – and two-thirds of those are in Ontario and BC, according to CMHC. “These two provinces have housing markets that are not affordable, and they have faced large declines in affordability,” it said.

In April, CMHC chief economist Bob Dugan said housing starts for this year would likely total about 212,000 units, a figure well below the clip of 271,000 units it hit in 2021.

There’s little indication that things will dramatically improve soon, either. Dugan expected 2024 to improve to a pace of just 224,000 starts throughout the year.

“A lot of people need to get together and think through this to be able to bring about a solution because it’s going to create more problems and a lot of dissatisfaction,” Rodriguez said. “I came to Canada 20 years ago and I could not understand my life here without owning a home – and now that’s the proposition that you’re giving people that are coming to Canada today in a lot of markets.”

Recent research by Royal Bank of Canada (RBC) indicated that while housing affordability has improved marginally in recent weeks, that shift is “no game changer.”

The bank’s aggregate affordability measure for Canadian dropped in the first quarter of 2023 for the first time in nearly three years – although parts of the country including Vancouver and Toronto remain in a “full-blown affordability crisis,” RBC assistant chief economist Robert Hogue said.

That uptick in spring housing market activity, as well as the resumption of rate hikes by the Bank of Canada, are likely to place a ceiling on how much housing affordability can improve for the remainder of the year, Hogue added.

‘Our base-case macroeconomic and housing market scenarios imply a decline of approximately five percentage points in the national affordability measure over the coming year,” he said. “This would reverse only one quarter of the record 20-point increase since the middle of 2020.”

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