Home affordability worsens in 2018’s fourth quarter

By Staff | January 24, 2019 | Last updated on January 24, 2019
2 min read
Home For Sale Real Estate Sign in Front of Beautiful New House.
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Finding an affordable home isn’t getting any easier for your clients.

In the fourth quarter of 2018, affordability worsened for the fourteenth consecutive quarter, National Bank says in a report released Thursday. The deterioration was the largest in a single quarter in more than a year—the result of rising mortgage rates and home prices.

In the quarter, the benchmark mortgage rate (five-year term) rose 20 basis points and seasonally adjusted home prices increased 0.9%. Financing costs were up for the sixth consecutive quarter, the longest streak of increases since 1999-2000.

Partly offsetting these increases, median household income rose, but only 0.2%. The report describes the year-over-year increase in incomes of 1.7% as “tepid.”

The worst deteriorations in affordability were in Victoria, Toronto and Vancouver. The only markets showing an improvement were Calgary and Edmonton.

For example, in Vancouver, mortgage payments as a percent of pre-tax median income are now 101.5% for a representative home. Thus, homes are “even more out of reach for a median income family,” says the report. The deterioration of affordability in the city is less pronounced for condos.

In Victoria, the corresponding figure is about 86% of pre-tax median household income; in Toronto, about 76%; in Montreal, about 36%.

The time required to save for a down payment at a savings rate of 10% of pre-tax income is 340 months in Vancouver, 102 months in Toronto and 34 months in Montreal. Median prices for representative homes in these cities are, respectively, about $1.1 million, $847,000 and $341,000.

In contrast, Edmonton and Calgary experienced declines in time required to save—to 23 and 33 months, respectively. Corresponding median home prices are about $397,000 and $438,000, respectively.

Countrywide, affordability generally worsened for condos and non-condos alike.

On the bright side, the report puts Canada’s home affordability in a global context, showing in a graph that Canadian homes are relatively affordable compared to those in cities such as London, New York and Paris. The most expensive city to buy a 645-square-foot, urban home? Hong Kong.

For methodology and details according to city, see the full National Bank report.

National Bank partners with mortgage broker

Also today, National Bank announced its partnership with a mortgage broker in Quebec.

The bank has partnered with M3 Group, which operates mostly under the banners of Multi-Prêts Mortgages, Mortgage Intelligence and Verico, the bank said Wednesday in a release. The partnership will give M3 Group’s brokers the option of offering the bank’s products to their clients in the province, starting this spring.

The partnership complements the bank’s diversified mortgage distribution model, made up of about 430 branches and a team of mobile specialists, says the release. White label distribution through a partnership model will continue unchanged, it says.

Advisor.ca staff


The staff of Advisor.ca have been covering news for financial advisors since 1998.