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Canadian housing affordability declined in the first quarter of the year, but there are signs of relief for homebuyers in the country’s most-expensive real estate markets, suggests Desjardins.

On the national level housing affordability deteriorated by three percentage points from a year earlier in the first quarter, according to the Quebec-based association of credit unions’ affordability index of 20 markets.

Rather than merely looking at home prices, Desjardins measures affordability by calculating the ratio of an average household’s disposable income and the earnings required to qualify for a mortgage on an average home in a given market.

Provincial declines were led by Ontario, where affordability eroded by 6 percentage points in 2017’s first quarter compared to where it rated one year earlier.

The census metro areas of Windsor and Kitchener-Cambridge-Waterloo posted the biggest drops in affordability in the country at 11.9 and 9.4 percentage points, respectively.

Priced out of Toronto, many house shoppers have been expanding their searches further outside the city, leading to explosive price growth — and worsening affordability — throughout southern Ontario.

Last quarter, the Toronto metro area — the country’s most active housing market — had affordability erode by 7.2 percentage points compared to Q1 2016.


The market is now 30 per cent out of line with the long-run affordability average dating back to 1996.

However, Desjardins Economist Chantal Routhier says there is reason to believe affordability will improve in the province moving forward.

“We think that [the foreign-buyer tax] will affect the market in a good way,” the economist tells BuzzBuzzNews.

On April 20th, the Ontario government announced a foreign-homebuyer tax of 15 per cent for the Greater Golden Horseshoe, which includes the Greater Toronto Area.

“As we saw in Vancouver last year… the new tax had affected the market’s growth, and [Vancouver] is more affordable now than it was… last year,” Routhier notes.

In fact, Vancouver housing affordability improved by 2.3 percentage points in Q1 compared to last year, according to the Desjardins index.

With both Metro Vancouver and the Greater Golden Horseshoe having non-resident taxes now, some have speculated that Montreal would see greater interest from investors which could chip away at affordability in Canada’s third-largest city.

Routhier, however, tells BuzzBuzzNews that “the presence of foreign buyers in the market in Montreal is really low — it’s around 1.1 per cent.”

“We haven’t seen a significant increase of foreign buyers in Montreal in the past few months,” Routhier says.

The foreign buyers who are active in the market are looking to “really well located” neighbourhoods like “Mont Royal,” she adds.

A small increase in the number of foreign buyers could be a result of a new direct flight linking Shanghai and Montreal, which Air Canada launched earlier this year, Routhier suggests, rather than from some investors’ desires to avoid a non-resident speculation tax.

Montreal housing affordability only dropped off by 0.2 percentage points last quarter on a year-over-year basis.

Still, that relatively small change was enough to put the market onto a list of six markets “to watch closely” because Montreal is still slightly less affordable than the long-run average.

Meantime, the Canadian market with the most improved affordability was elsewhere in the province: Quebec City, where the affordability index was up by 4.6 per cent.

Following job losses resulting from oil prices bottoming out last year, Calgary affordability took a turn for the worse.

“There was a recession in Alberta,” Routhier points out, adding a recovery in the average after-tax income there has been slow. “That’s affected capability of households to get property.”

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