Every Canadian Housing Market Got Less Affordable in May
The mortgage payment on a benchmark home in Vancouver now eats 106% of median pre-tax household income. Not 106% of discretionary income. All of it, plus 6% you don't have.
That figure comes from the National Bank of Canada's May housing affordability report, released in late June. Vancouver topped the unaffordability rankings, but the story isn't the city everyone already knows is broken. The story is that no market in the country moved in the other direction. From St. John's to Victoria, affordability deteriorated. Not in most markets. All of them.
The rate environment did this
The Bank of Canada held its policy rate at 5% through May, but that's not the rate anyone actually pays on a mortgage. The posted rates that feed into affordability calculations climbed through the spring as bond markets priced in a higher-for-longer scenario. The five-year fixed rate that National Bank uses for its benchmark sat near 5.64% in May, up from where it was at the start of the year. A small move in percentage terms. Not small when you're financing $700,000.
The composite affordability measure, what it takes to carry mortgage payments, property taxes, and utilities as a share of income, hit 63.9% nationally for a representative home. That's the highest reading since the early 1990s, and the early 1990s had double-digit mortgage rates but house prices a fraction of today's. The math was different then. Prices could fall and affordability could recover. This time, the mortgage cost is high and the principal is a lifetime commitment.
Condo affordability is not a solution anymore
For years, the standard advice to a priced-out buyer was to start with a condo. Build equity, ride the appreciation, upgrade later. That trade-off has now compressed to the point of disappearing. The income required to afford a benchmark condo in Toronto hit 60% in May. In Vancouver, 84.4%. A one-bedroom in Vancouver requires more of your pre-tax income than a detached house in Montreal.
Condos were supposed to be the release valve. They're becoming another closed door.
The tightrope between inflation and insolvency
The Bank of Canada paused rate hikes in January 2024 after bringing the policy rate from 0.25% in early 2022 to 5% by mid-2023. The pause bought time, but it didn't reverse the affordability damage already done. Household debt-to-income ratios remain near record highs. The people who locked in sub-2% rates in 2020 and 2021 haven't renewed yet. Most of those renewals land between now and 2026.
When a borrower who locked in at 1.79% renews at 5.5%, the payment doesn't go up 3.71 percentage points. It doubles, sometimes more, depending on amortization. The bank gets paid. The borrower just stops spending everywhere else.
The market can absorb some of that. It cannot absorb all of it simultaneously, and "simultaneously" is what's coming.
No market moved the other way
In past cycles, some regions lagged, some corrected, some stayed flat while others ran. May 2024 had none of that. Every market worsened. The divergence people used to count on, the idea that if Toronto is unaffordable you move to Winnipeg, if Vancouver is out of reach you try Calgary, has compressed into a national condition. The income required to buy the benchmark home rose everywhere, by different amounts, but in the same direction.
There is no geographic arbitrage left. Just different degrees of the same problem.
