Housing Affordability Monitor<\/a> report, the National Bank of Canada (NBC) stated that housing affordability in the country worsened for the fifth consecutive quarter. The mortgage payment on a representative home as a percentage of income (MPPI) rose 4.9 points in Q1-2022, up from the 2.2-point increase recorded during the previous quarter. This marks the worst quarterly deterioration in more than 27 years.<\/p>\nBetween the ten major markets analyzed in NBC\u2019s report, affordability declined in all of them, particularly Victoria, Toronto and Vancouver.<\/p>\n\n
\u201cOver the last 12 months, the worsening in affordability was the nastiest in 40 years,\u201d said the report. \u201cFor the first time since 1994, it would take more than 50 per cent of income for a representative household to service the mortgage on a representative home in Canada\u2019s main urban centres.\u201d<\/p>\n
Growing home prices and higher borrowing rates were cited as the two main causes behind Canada\u2019s crumbling housing affordability in Q1-2022. For instance, NBC\u2019s five-year benchmark mortgage rate used in its affordability metrics increased 46 bps in Q4-2021, the largest one-quarter change since Q3-2013.<\/p>\n
According to NBC\u2019s economists, most homebuyers have been able to avoid steep increases in recent months by opting for variable rate mortgages, but financing conditions for these mortgages are becoming less attractive. As a result, this is making an impact on the resale market.<\/p>\n
\u201cHeadwinds will continue to blow against Canada\u2019s real estate market in the months ahead with the Bank of Canada pursuing its monetary policy normalization process through higher policy rates and quantitative tightening,\u201d said the report.<\/p>\n
Affordability declines hit Canada\u2019s largest cities the hardest<\/h3>\n
Canada\u2019s largest and most expensive cities faced the harshest declines to their affordability in Q1-2022.<\/p>\n
For the third quarter in a row, Victoria registered the largest annual deterioration to its MPPI, which increased 19.6 pp. As a result, Victoria\u2019s MPPI hit 80 per cent, the highest level for the city since Q2-2008. On a quarterly basis, the MPPI in Victoria increased 8.5 pp. For non-condos and condos, the MPPI climbed to 85.7 per cent and 44.2 per cent, up 9.3 per cent and 4.1 per cent quarter-over-quarter.<\/p>\n
Now, the annual household income needed to afford the representative Victoria home is $204,078 for a non-condo and $123,747 for a condo. It would take 382 months (31.8 years) at a savings rate of 10 per cent to acquire enough funds for a downpayment on a non-condo home, and 58 months (4.8 years) for a condo.<\/p>\n
![\"For](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2022\/05\/nbc-q1.jpg\")
<\/a>Graph:\u00a0National Bank of Canada (NBC)<\/em><\/p>\nIn the same province, Vancouver faced strong affordability deterioration as the MPPI grew seven pp during Q1-2022, an acceleration that hasn\u2019t been on record since 1994. Vancouver remains Canada\u2019s least affordable city to buy a home in, with the representative mortgage payment now accounting for 81.4 per cent of the median income. For non-condos, the Vancouver MPPI increased nine per cent quarterly to 101.5 per cent and climbed 3.2 per cent to 43.4 per cent for condos.<\/p>\n
In British Columbia\u2019s largest city, you\u2019ll need an annual take home of $285,078 to afford a non-condo home, and at least $142,357 a year to pay for a condo. If you\u2019re planning to put together a downpayment, it would take about 452 months (37.6 years) and 63 months (5.25 years) of savings at a 10 per cent rate to afford a non-condo and condo dwelling.<\/p>\n
![\"The](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2022\/05\/affordabiltiy-nbc.jpg\")
<\/a>Photo:\u00a0Elena_Alex<\/a> \/ Adobe Stock<\/em><\/p>\n