Can the government save the middle-class wannabe homeowner in Toronto and Vancouver?

With a new national housing plan coming imminently, let’s catch up on what the recent ups and downs in Canada’s most expensive real estate markets imply for affordability.

Remember that the Paul Simon tune Slip Slidin’ Away? That is your life if you are not a high earner and seeking to afford a house. Toronto and Vancouver are cheaper than they were two decades back, and Victoria and Hamilton are alike. Elsewhere, the information is quite a little better.

With an old-fashioned affordability measure that states a house should cost no more than three times your household gross income, home markets in St. John’s, Halifax, Saint John, N.B., Quebec City, Ottawa, Winnipeg, Regina, Saskatoon and Edmonton look manageable. Calgary’s just a little on the pricey side, as is Montreal.

It was November 2015 when this column at if buyers had any hope of getting a house for three times earnings. Toronto and Vancouver were affordability tender spots afterward, and they are worse today. Toronto’s average resale home price in October was 9.3 times median total family income; 2 decades ago, prices were 8.2 times earnings. Vancouver came in at 12.7 times income in October, compared with 11.2 two decades back.

The story of both of these cities is the fact that while earnings amounts have been volatile in the last few years, costs have increased at a greater rate than income. You need to wonder whether the tradition of middle-class home ownership in these cities will fade away if these trends continue. The national housing plan expected Wednesday will be carefully read for strategies to address this matter.

The next tier of affordability is Victoria and Hamilton, situated in the orbit of Vancouver and Toronto, respectively. Victoria and Hamilton are still markedly less unaffordable than their larger neighbours, but they are still expensive on the basis of how incomes compare with costs.

The affordable markets throughout the nation break into a few distinct classes, the first being cities where home prices are just plain cheap. Saint John is a fantastic example — the average price in October was $168,575, only 2.1 times earnings. Average costs in Halifax, Quebec City, Regina and Saskatoon were under $300,000, with St. John’s only a little above that mark, and homes can be had in each for approximately 3 times income.

Another sort of cheap city leans more on high incomes compared to cheap houses. Ottawa’s a fantastic example. The average home price in October was $369,200, while household incomes were second-highest supporting Calgary at $107,100.

The third group of cheap houses is represented by Calgary, Edmonton, Winnipeg and Montreal. Price-to-income ratios in those cities are from the 3.5 to the low 4 array — also not bad.

Incomes for this analysis were calculated by taking the most recent numbers from Statistics Canada, from 2015, and then upgrading them to 2017 levels utilizing the on the Bank of Canada site. The average inflation rate over the previous two years was 1.4 percent, while the average resale home price for the 15 cities looked at here rose by 6 percent.

As always, when you look at domestic housing amounts, the heavy effect of Vancouver and Toronto must be noted. Average prices in both of these cities climbed 22 and 19 percent, respectively, over the last two decades, skewing the overall numbers greater. In actuality, average costs in half the 15 cities — St. John’s, Halifax, Montreal, Regina, Saskatoon and Calgary — dropped over the last two decades.

The Vancouver and Toronto markets have been volatile in recent years as steps taken by different levels of government to include price increases butted up against strong demand from foreign and domestic buyers. Sales levels in both cities are down over some time frames, and so have costs. But the bottom line over the last two years is that homes are considerably more costly for middle-class buyers.

Higher rates of interest or a recession could reverse this trend, and so might new government measures to cool home that kick in next year. Barring these developments, wannabe homeowners will have to look at other cities for homes which are affordable by the historical standards. For powerful incomes and affordable homes, Ottawa and Calgary stand out.

Courtesy: The Globe And Mail

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