Housing affordability continued to erode in the first quarter of 2015, the third quarter in a row that buying a home has become more difficult in Canada, according to numbers from Desjardins Group.
Of the 18 cities measured in the index, 12 are now listed as being less affordable than they are historically.
Cities near Toronto have plummeted on the affordability scale in recent months, further evidence that rapidly-growing house prices in Canada’s largest metropolitan area are now spreading to nearby cities.
St. Catharines, Ont., for instance, was 6 per cent more affordable than its historic norm in the third quarter of last year; six months later,it's estimated to be 5.2 per cent less affordable than the historic norm.
And despite years of layoffs at its auto plants, Oshawa, Ont., has now fallen into the “unaffordable” category as well.
A similar turnaround is taking place on the Prairies, but in reverse. With oil prices under pressure, western cities’ once-hot housing markets are languishing.
Last fall, Desjardins listed Calgary as a city “to watch,” that is, a city at risk of an unaffordable housing market. This spring, Desjardins listed it as “affordable.”
Affordability erodes when house prices rise faster than buyers’ ability to pay. Desjardins says this has largely been the case across Canada, except in some Prairie cities and in Quebec, where house price growth came in below income growth, improving affordability in that province.
According to the Canadian Real Estate Association, house prices in Canada continued to climb in April, rising 9.5 per cent from a year earlier, to a nationwide average of $448,862.
Incomes in Canada have been growing at an average pace of 2.7 per cent recently, or less than a third of house price growth.
But a surprise rate cut by the Bank of Canada in January spurred lenders to push already low mortgage rates even lower, with major lenders now offering mortgages below 3 per cent.
That has helped keep mortgage payments in check, despite rapidly rising house prices.
Here are the most and least affordable housing markets in Canada, according to Desjardins.