Housing affordability has been a hot-button topic for many in the Canadian real estate and mortgage industries.
The National Bank Housing Affordability Monitor from January 2019 showed that affordability worsened in the final quarter of 2018 – the fourteenth consecutive deterioration. The 2018 Q4 period had the largest one-quarter drop in over a year.
In Toronto, National Bank economists found that the representative non-condo residence cost an average of $902,916 — meaning a household would need an annual income of $165,755 to afford it. The representative condo price was $536,082, meaning a household would need an annual income of $98,413.
Since January, housing affordability forecasts have not improved much. While RBC noted in their March 2019 Housing Trends and Affordability report that “a softer housing market in Canada provides some affordability relief,” they went on to note that the fourth-quarter relief “barely made a dent in Vancouver and Toronto.”
“Affordability is still at crisis levels in these markets and pressure is intensifying in Montreal,” RBC economists stated.
If housing affordability is not improving – or at least not improving quickly – the question becomes what can be done about it?
Mortgage Professionals Canada took that question a step further. In February of 2019, they released a list of recommendations to policymakers about how to improve housing affordability for Canadians.
“Our members are seeing downward trends and/or depressions in areas like the resale market, the outlook on employment in the housing construction sector, and a continued decline in rental vacancy rates,” Mortgage Professionals Canada wrote in the February report.
“Simply put, federal policy changes are disqualifying potential first-time homebuyers and creating immense pressures on the rental market, which is in turn driving rental prices higher.
“The problem is spiraling.”
Their recommendations for improved housing affordability included:
- Decoupling the mortgage stress test rate from the posted Bank of Canada rate and instead setting it at 0.75% above the contract rate.
- That an exemption be implemented to the B-20 guideline stress test for mortgage holders who have completed and met the obligations for a minimum of five years of their original amortization period, and who wish to switch to a different lender upon renewal.
- That qualified first-time homebuyers be provided access to mortgage amortization periods of up to 30 years for insured mortgages.
- And more. Read the full list of recommendations here.
The 2019 Federal budget address housing affordability with the inclusion of the First-Time Home Buyers’ Incentive, which has received some criticism.
Certain markets are less affected by housing affordability than others. To find those markets and estimate equity on properties you are considering, Purview can help. Learn more about our tools today by calling 1-855-787-8439 or visiting www.purview.ca.
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