Housing Situation Report in Canada: Short Review

A report focusing on the Canadian real estate market conditions of 2008 and the 1st half of 2009 was recently released by The Canada Mortgage and Housing Corporation. It is focused predominantly on the housing starts and the problem of affordability to rent and own.

The report shows that after the shock of last year, now our real estate market is getting better again, however slowly. 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 opposition to the July 2008 figures.

The general tendency on the real estate market is growth now, and this goes also for the new housing price index. The average price in Canada has moved from -0.6% to -0.1% between January and May. The new housing price in Toronto has changed only slightly over zero values, in keeping with the improvement of the resale market.

Economic conditions: Unemployment

We can be quite optimistic now in regard to our 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 shocking 273,000 decline in the first quarter of 2009. Second, the Bank of Canada has observed that there is finally some positive results of the various stimulus packages employed in many countries.

Affordability to rent

When we want to calculate the affordability to rent, we need to know how many hours in a month people need to work in order to earn the average price of a 2-bedroom apartment rent or the average mortgage payment down to 30% of gross monthly salary. (The Canadian hourly income average increased by over 5% and reached $23.69 in 2008 (Ontario: $24.65, Toronto: $24.93)).

Canada in general experienced a decrease in the number of hours necessary to bring the average rent for a 2-bedroom flat down to 30 per-cent – from 114 to 113 hours a month. The number of hours for Toronto decreased from 149 to 146 and brought this city the second "most expensive" position right after Vancouver, while the biggest decrease was recorded in St John's, Brantford or Guelph.

Affordability of home owner-ship

As we can see, the overall decrease of hours necessary to rent was only slight. On the contrary, the number of hours necessary to bring the average mortgage payment down to 30% of gross income was more significant: from 255 hours in 2007 to 240 hours one year later. Toronto was one of the places that experienced one of the largest decreases in hours necessary to own: from 299 to 286. But yet Toronto stays 4th among the most expensive places to own after Vancouver, Victoria and Abbotsford.

Conclusion

As a result of the current situation when the housing market is still cooling from the second half of 2008, the new housing is now somewhat more affordable, which is news I really like to bring to my clients, being a realtor in Toronto. In the first six months of 2009, the prices were slightly decreasing and the affordability of renting and also home ownership was getting more favorable. With ongoing low interest rate, this period of time remains ideal time to purchase a property, before the market will take second breath.