Canadian housing affordability continues to deteriorate: nesto

The Bank of Canada's benchmark rate has fundamentally altered the income requirements for home purchases

Canadian housing affordability continues to deteriorate: nesto

While the Canadian housing market is showing sustained signs of cooling, affordability continued to erode in October, according to a new analysis by nesto.

Despite the Bank of Canada’s rate remaining frozen at 5% in September and October, “it’s undeniable that the work from BoC [Bank of Canada] has left a lasting impression on income requirements for homes throughout core provinces,” the digital mortgage brokerage said.

This was most apparent in British Columbia, which registered a $30,500 annual increase in average home prices. During the same period, the average income needed to purchase a home at the benchmark price increased by $14,168 – pushing up the level from $188,439 in October 2022 to $202,607 last month.

Affordability also deteriorated in Ontario, which saw its average home price spike by $5,400 to $879,300, and the income needed to purchase rising from $175,168 to $183,598.

“It is not unusual to see a cooler market as we head into the holiday season,” nesto said. “However, it is worth noting that even with less competition and rate hikes, there are still fewer opportunities to enter the housing market with income needed increases.”

“While seasonality is at play, there’s also a growing segment of would-be home buyers who are optimistic about falling home prices coupled with lower mortgage rates in the near future who are patiently waiting for their time to enter the market,” said Chase Belair, co-founder and principal broker of nesto.

At the same time, Belair believes that consumers should not hold their breath for the super-affordable rates of years past.

“I would caution anyone that is timing their decision on mortgage rates alone not to expect a return to the pre-pandemic, ultra-low rates that many Canadians had benefited from,” he said. “While we may see rate cuts in 2024, there is no indication we will see rates below 4% in the foreseeable future.”