Housing Situation Report in Canada

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August 11, 2009

photo by Jes

The Canada Mortgage and Housing Corporation recently released a report on the Canadian real estate market conditions of 2008 and the 1st half of 2009. It deals mainly with the housing starts and with the affordability to rent & own.

Market situation

According to the report the Canadian real estate market is slowly recovering from the shock it suffered in the past year. While new home market actual starts decreased from January to June 2009 by over 43 per-cent compared to the same period in 2008, the MLS sales increased by over 17 per-cent in comparison to the July 2008 results.

New housing price index growth seems to follow the overall trend on the real estate market. The average price change in Canada has been from -0.6% (January) to -0.1% (May). Toronto new housing price change was mostly slightly over zero, following the resale market recovery.

Economic conditions: Unemployment

There are some good news regarding the economy. First of all, the growth of unemployment appears to be finally under control with only 13,000 net losses in July compared to the whooping 273,000 decline in the first quarter of 2009. Secondly, according to the Bank of Canada, the various stimulus packages employed by many countries in the last year are slowly showing out some effect.

Affordability to rent

Affordability of home owner-ship or renting is based on calculations of how many hours one needs to work in a month to bring the average cost of 2-bedroom apartment rent or the average mortgage payment down to 30 per-cent of gross monthly income. (The hourly wages in Canada in 2008 were increased by over 5 per-cent to $23.69 (Ontario: $24.65, Toronto: $24.93)).

Canada in general experienced a decrease in the number of hours required to bring the average rent for a 2-bedroom flat down to 30 per-cent – from 114 to 113 hours a month. While St John’s, Brantford and Guelph experienced the biggest decrease, Toronto recorded decrease from 149 to 146, securing it’s position of the 2nd most expensive city in this regards right after Vancouver.

Affordability of home owner-ship

While the overall decline in the hours required to rent was rather paltry, the overall decline in the hours required to bring the average mortgage payments down to 30 per-cent of gross income is more noticeable – from 255 hours in 2007 to 240 hours in 2008. Toronto was one of the centers that experienced one of the larges declines in hours required to own: from 299 to 286. But yet Toronto remains 4th among the most expensive cities to own after Vancouver, Victoria and Abbotsford.

Conclusion

As an overall effect of real estate market cooling from the second half of the year 2008, also new housing made a step towards better affordability. First half of this year shows steady or slightly declining prices and slightly improving affordability of both renting and home owner-ship. With ongoing low interest rate, this period of time remains ideal time to acquire a property, before the market will take second breath.