From National Bank of Canada
In the fourth quarter of 2023, Canada experienced a second consecutive decline in housing affordability, impacting every market. This decline was driven by increased mortgage payments as a percentage of income (MPPI), attributed to rising interest rates and home prices. Consequently, recent affordability improvements have been nearly erased, with the national affordability index nearing its worst levels since the 1980s.
Notably, the condo sub-index hit a two-decade high in unaffordability, with median condo mortgages requiring nearly half of pre-tax median household income. This poses significant challenges for first-time homebuyers, as entry into the housing market becomes increasingly difficult.
Furthermore, the rental market offers little relief, with the rental affordability index hitting an all-time low. On average, it would take almost one third of pre-tax household income to afford the rent for a two-bedroom condo.
Looking ahead to 2024, the outlook remains challenging. While there are indications of declining mortgage interest rates due to anticipated central bank rate cuts, housing demand continues to be fueled by unprecedented population growth. As a result, price increases are expected in the coming year.
Additionally, the rental market faces constraints, with Canada’s rental market vacancy hitting a record low of 1.5%, as reported by the CMHC. This leaves minimal room for rent improvements. Supply shortages are likely to persist, as building permits have plummeted in many Canadian cities at the end of 2023.
https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf
