One way to look at if Canadian housing is affordable is to compare it with other similar countries or economies and see how we fare. Demographia publishes an annual comparison of housing affordability for metropolitan markets in Australia, Canada, Ireland, New Zealand, the UK and the US. Demographia measures affordability through a ratio of median house price to median household income. The median was determined for each metropolitan market (with a population of 1,000,000) and then taken for the remaining non-metropolitan areas (with populations of less than 1,000,000). Scores below 3.0 were determined to be affordable, between 3.1 and 4.0 considered moderately affordable, and between 4.1 and 5.0 seriously unaffordable.
The results are clear. If we look at Canada vs. the US in terms of National averages in major metropolitan areas, Canada has a 4.6 average whereas the US has a 3.3 average; and when non-metropolitan markets are considered, Canada’s average is 3.4 while the US has an average of 3.0. Thus, Canada ranks second with numbers just above the US as well as displaying a significant disparity between it an other countries compared in the major metropolitan markets. When the sample is expanded to non-metropolitan markets, it is even more solidly in second. Click here to view the full article.
Here’s another perspective on whether house prices in Canada are becoming unaffordable. This author contends that, contrary to some opinions, Canadian house prices are still very affordable compared to the rest of the world, and this would suggest that a downward correction in prices is not very likely even as interest rates move upward over the next 1-2 years.