Canada House Prices: Vancouver Second Least-Affordable City, International Study Says

Vancouver Least Affordable Housing

The Huffington Post Canada   First Posted: 01/23/2012 3:13 pm Updated: 01/23/2012 3:19 pm

Vancouver is the second-least affordable city for housing among 325 major developed cities, a new study says.

Only Hong Kong was found to be less affordable than Vancouver among cities in a group of countries that includes Australia, Britain, Canada, Ireland and the U.S., according to a study from Illinois-based consultancy Demographia.

The study determines affordability by comparing a city’s median income with its median home price. Historically, Western cities have had a housing-to-income ratio of around three, the study says, meaning the median house price is typically three times the median annual household income.

In Vancouver in 2011, that ratio hit 10.6; the median house cost 10.6 times the median income. Only Hong Kong was less affordable, with a ratio of 12.6.

This is not to say that Vancouver is the second-most expensive city to buy a house in the world. The study measures affordability according to earnings in each city. New York City, for example, is more expensive in real terms than Vancouver, but because incomes are higher in the Big Apple, the city ranks as more affordable. (New York City ranked 10th in the survey.)

Of the 35 metro areas in Canada that were part of the survey, all six of the largest -- Toronto, Montreal, Vancouver, Ottawa, Calgary and Edmonton -- were listed as “severely unaffordable,” meaning a ratio of more than five.

Toronto’s ratio was 5.5, and the study notes “a deterioration of 40 per cent in housing affordability since 2004.”

Montreal, which according to the study has been “one of the worst performers in housing affordability,” has seen its affordability erode by 60 per cent since 2004, the study said.

The affordability numbers add more weight to the argument that Canada’s housing market is in for a correction -- an argument that many have been making more forcefully in recent months, as evidence mounts that Canada’s long run-up of house prices is unsustainable.

The IMF last year warned that Canadians’ household debt -- which in 2011 passed 150 per cent of household income for the first time -- poses a risk to future economic growth.

Even Bank of Canada Governor Mark Carney has hinted that consumers' debt levels may be reaching unsustainable levels, although that has not dissuaded him from keeping in place the low interest rates that contribute to growing house prices.

Banks continue to engage in heavy competition for mortgage buyers, with BMO just last week announcing an all-time record low rate for a five-year fixed mortgage: 2.99 per cent. Several banks have already followed BMO’s suit.

The debate over housing has shifted from whether or not there will be a correction in the housing market to a question of how large the correction will be.

The Economist reported last year it estimates Canada’s housing market to be at least 25 per cent overvalued. But others suggest the correction will be minor, amounting to maybe a 10 per cent decrease in house prices. Among those optimists is Wall Street’s “Dr. Doom,” who surprised many last week with his rosy outlook for Canada’s economy, including a prediction that any housing market correction will be small.

The federal government has taken steps in recent years to cool the housing market by increasing the entry barriers to buying a home. Ottawa twice reduced the maximum amortization period for a mortgage insured by the Canada Mortgage and Housing Corporation, to 35 years in 2008 and then again to 30 years in 2010.

According to recent reports, the Harper government continues to be worried about an overheating housing market, and is prepared to tighten mortgage rules again if further evidence surfaces of an overheating market. New rules could include tighter regulations for how mortgage-seekers report income, as well as new, tougher rules on how to measure affordability for condo buyers, the Financial Post reported.

THE 10 LEAST AFFORDABLE CITIES FOR HOUSING

The number shown is the housing affordability ratio -- a measure that shows how much a median home costs relative to median incomes in a given city. Historically, a typical ratio has been around three.

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  • 10: New York City - 6.2

    The number shown is the housing affordability ratio -- a measure that shows how much a median home costs relative to median incomes in a given city. Historically, a typical ratio has been around three. Source: Demographia, <a href="http://www.demographia.com/dhi.pdf" target="_hplink"><em>8th Annual International Housing Affordability Survey</em></a>

  • 9: Auckland, New Zealand - 6.4

    Source: Demographia, <a href="http://www.demographia.com/dhi.pdf" target="_hplink"><em>8th Annual International Housing Affordability Survey</em></a>

  • Adelaide, Australia - 6.7

    Source: Demographia, <a href="http://www.demographia.com/dhi.pdf" target="_hplink"><em>8th Annual International Housing Affordability Survey</em></a>

  • San Francisco - 6.7

    Source: Demographia, <a href="http://www.demographia.com/dhi.pdf" target="_hplink"><em>8th Annual International Housing Affordability Survey</em></a>

  • London - 6.9

    Source: Demographia, <a href="http://www.demographia.com/dhi.pdf" target="_hplink"><em>8th Annual International Housing Affordability Survey</em></a>

  • San Jose, California - 6.9

    Source: Demographia, <a href="http://www.demographia.com/dhi.pdf" target="_hplink"><em>8th Annual International Housing Affordability Survey</em></a>

  • Melbourne, Australia - 8.4

    Source: Demographia, <a href="http://www.demographia.com/dhi.pdf" target="_hplink"><em>8th Annual International Housing Affordability Survey</em></a>

  • Sydney - 9.2

    Source: Demographia, <a href="http://www.demographia.com/dhi.pdf" target="_hplink"><em>8th Annual International Housing Affordability Survey</em></a>

  • Vancouver - 10.6

    Source: Demographia, <a href="http://www.demographia.com/dhi.pdf" target="_hplink"><em>8th Annual International Housing Affordability Survey</em></a>

  • Hong Kong - 12.6

    Source: Demographia, <a href="http://www.demographia.com/dhi.pdf" target="_hplink"><em>8th Annual International Housing Affordability Survey</em></a>

WHAT $350,000 WILL BUY YOU IN THESE CANADIAN MARKETS

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  • St. John's, Nfld. -- $125 Per Square Foot

    This four-bedroom, two-bathroom custom-built bungalow in St. John's West End neighbourhood boasts hardwood floors, a covered sundeck and an oversized yard. With an asking price of $349,900 and 2,750 square feet of livable space, this spacious home costs approximately $125 per square foot.

  • Trois Rivieres, Que. -- $127 Per Square Foot

    This five-bedroom, two-and-a-half bathroom house features a double-width garage and a heated inground pool. At approximately 2,750 square feet and an asking price of $349,900, it works out to around $127 per square foot.

  • Winnipeg -- $160 Per Square Foot

    This spacious split-level home in southeast Winnipeg features four bedrooms and three baths, a stone fireplace and a jazuzzi in the master bedroom. It sits on a 142-foot-long, pie-shaped lot. At 2,182 square feet and a $349,900 asking price, it works out to around $160 per square foot. <strong>CORRECTION:</strong> <em>An earlier version of this slide incorrectly listed the price-per-square foot as $600</em>.

  • Red Deer, Alta. -- $248 Per Square Foot

    This five-bedroom, three-bath home features vaulted ceilings, a fireplace and a massive walk-in closet in the master bedroom. At 1,408 square feet -- this average-sized house on the prairie works out to $248 per square foot.

  • Montreal -- $250 Per Square Foot

    This two-story townhouse condo just east of downtown Montreal features three bedrooms and two baths, cherry wood floors and a terrace. At 1,400 square feet and an asking price of $349,000, this condo works out to $250 per square foot.

  • Burlington, Ont. -- $388 Per Square Foot

    This cozy bungalow on the edges of the Greater Toronto Area features four bedrooms, two baths and a long, 175-foot lot. Highlights include a granite countertop and newly finished hardwood floors. At a snug 900 square feet, this house is going for $388 per square foot.

  • Toronto -- $499 Per Square Foot

    This one-bedroom, one-bath condo in Toronto's Entertainment District features a balcony with a southeast exposure. In a sure sign the condo is outfitted with just the basics, the unit's sellers boast of its "brand name appliances" and "frost free refrigerator." At 700 square feet (including the balcony), it works out to $499 per square foot.

  • Vancouver -- $688 Per Square Foot

    This one-bedroom, one-bathroom corner unit in Vancouver's Kitsilano neighbourhood "shows much larger than the square footage," the realtor boasts. That's good, because at 508 square feet, this place is only slightly larger than some of the bedrooms and living rooms available in similarly-priced houses in other markets. The condo boasts "gorgeous mountain views," but it'll cost you -- $688 per square foot.


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