Laurin, Marianne

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House Price Assessment – Update

PDF

Marianne Laurin

Published on September 29, 2022 PDF

This report provides an update of PBO’s assessment of house prices relative to a household’s capacity to borrow and pay for the purchase of a house in selected Canadian cities. In addition, to gauge the potential downward adjustment in house prices in 2022, we consider scenarios based on assumed increases in mortgage rates and household debt service ratios.

Highlights

The rapid increase in house prices during the pandemic pushed the national average price up 52 per cent to a peak of $839,600 in February 2022 from $551,100 in February 2020. The average house price has since declined by 7 per cent to $777,200 in August as mortgage rates have increased sharply.
We estimate that the gap between the average house price and the affordable house price nationally in August was 67 per cent. Average house prices in Hamilton, Toronto, Halifax, Ottawa, Montreal, Victoria and Vancouver were more than 50 per cent higher than their respective affordable prices.
To gauge the potential downward adjustment in house prices in 2022, we construct scenarios based on assumed increases in mortgage rates (to 6.25 per cent for the 5-year fixed rate) over the remainder of 2022 and assumed household debt service ratios. Our scenarios imply price declines at the national level (relative to peak) ranging from 12 per cent to 23 per cent by the end of this year.

Communications

Quote

The gap between the national average house price and what an average household could afford has increased from 45% in December 2021 to 67% in August 2022, a jump of 22 percentage points in just eight months. This increase is attributable to higher mortgage rates, which have lowered household borrowing capacity.

Yves Giroux
Parliamentary Budget Officer

News Release

{"id":38,"created_at":"2022-09-27T13:35:17-04:00","updated_at":"2022-09-29T08:57:11-04:00","slug":"despite-recent-drop-in-house-prices-canadians-still-face-widening-affordability-gap-says-pbo-malgre-la-baisse-recente-du-prix-des-proprietes-lecart-daccessibilite-continue-de-se-creuser-au-canada-selon-le-dpb","title_en":"Despite recent drop in house prices, Canadians still face widening affordability gap, says PBO","title_fr":"Malgr\u00e9 la baisse r\u00e9cente du prix des propri\u00e9t\u00e9s, l\u2019\u00e9cart d\u2019accessibilit\u00e9 continue de se creuser au Canada, selon le DPB","body_en":"The Parliamentary Budget Officer (PBO) today released an updated assessment of house prices in Canada. \n\nThe report examines house prices relative to a household\u2019s capacity to borrow and pay for the purchase of a house in selected Canadian cities. \n\nThe Bank of Canada has increased its policy interest rate by 300 basis points since the beginning of March and the average 5-year fixed mortgage lending rate breached 5% in June\u2014a first since 2010. As a result, despite the reduction in the average house price since the peak in February 2022, housing is becoming less affordable for average households across all the census metropolitan areas (CMAs) considered.\n\n\u201cThe gap between the national average house price and what an average household could afford has increased from 45% in December 2021 to 67% in August 2022, a jump of 22 percentage points in just eight months\u201d says Yves Giroux, PBO. \u201cThis increase is attributable to higher mortgage rates, which have lowered household borrowing capacity.\u201d\n\nTo gauge the potential downward adjustment in house prices in 2022, the report considers scenarios based on assumed increases in mortgage rates (to 6.25% for the 5-year fixed rate) over the remainder of 2022 and household debt service ratios. These illustrative scenarios imply house price declines at the national level (relative to peak) ranging from 12% to 23% by the end of this year.","body_fr":"Le directeur parlementaire du budget (DPB) a publi\u00e9 aujourd\u2019hui une mise \u00e0 jour de son \u00e9valuation du prix des propri\u00e9t\u00e9s au Canada.\n\nLe rapport examine le prix des propri\u00e9t\u00e9s par rapport \u00e0 la capacit\u00e9 des m\u00e9nages d\u2019emprunter et de payer pour l\u2019achat d\u2019une maison dans certaines villes canadiennes.\n\nLa Banque du Canada a major\u00e9 son taux directeur de 300 points de base depuis le d\u00e9but du mois de mars, et le taux fixe moyen d\u2019un pr\u00eat hypoth\u00e9caire d\u2019une dur\u00e9e de 5 ans a atteint 5 % en juin, une premi\u00e8re depuis 2010. Par cons\u00e9quent, malgr\u00e9 la baisse du prix moyen des propri\u00e9t\u00e9s observ\u00e9e depuis le sommet atteint en f\u00e9vrier 2022, l\u2019habitation est devenu moins abordable pour les m\u00e9nages moyens en 2022 dans toutes les r\u00e9gions m\u00e9tropolitaines de recensement (RMR) \u00e0 l\u2019\u00e9tude.\n\n\u00ab \u00c0 l\u2019\u00e9chelle nationale, l\u2019\u00e9cart entre le prix moyen et le prix qui serait abordable par un m\u00e9nage moyen est pass\u00e9 de 45 % en d\u00e9cembre 2021 \u00e0 67 % en ao\u00fbt 2022, un bond de 22 points de pourcentage en seulement huit mois \u00bb, indique Yves Giroux, DPB. \u00ab Cette hausse est imputable \u00e0 la mont\u00e9e des taux hypoth\u00e9caires, qui a r\u00e9duit la capacit\u00e9 d\u2019emprunt des m\u00e9nages. \u00bb\n\nAfin de mesurer le rajustement potentiel \u00e0 la baisse du prix des propri\u00e9t\u00e9s en 2022, le rapport \u00e9tablit des sc\u00e9narios fond\u00e9s sur des hausses possibles des taux hypoth\u00e9caires (qui passeraient \u00e0 6,25 % dans le cas du taux fixe de 5 ans) pour le reste de 2022 et sur des ratios du service de la dette des m\u00e9nages. Ces sc\u00e9narios, donn\u00e9s \u00e0 titre indicatif, sugg\u00e8rent que le prix des propri\u00e9t\u00e9s \u00e0 l\u2019\u00e9chelle nationale pourrait diminuer de 12 \u00e0 23 % (par rapport au sommet) d\u2019ici la fin de l\u2019ann\u00e9e.","release_date":"2022-09-29T09:00:00-04:00","is_published":"2022-09-29T08:57:11-04:00","internal_id":"COM-2223-038","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/despite-recent-drop-in-house-prices-canadians-still-face-widening-affordability-gap-says-pbo-malgre-la-baisse-recente-du-prix-des-proprietes-lecart-daccessibilite-continue-de-se-creuser-au-canada-selon-le-dpb"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/despite-recent-drop-in-house-prices-canadians-still-face-widening-affordability-gap-says-pbo-malgre-la-baisse-recente-du-prix-des-proprietes-lecart-daccessibilite-continue-de-se-creuser-au-canada-selon-le-dpb"}},"pivot":{"publication_id":707,"news_release_id":38}}