Q2 2017: The least affordable market in 9 years

The worsening of affordability in Q2 was the eighth in a row, the longest run in almost 3 decades. As a result, our national composite is the least affordable since 2008 (top chart). Canadian households have been able to fall back for some time on the condo market which was more affordable on an historical basis. However, the deterioration in Q2 was more acute in this segment compared to other dwellings. As a result, even the condo market is now the least affordable in years (worst since 2011). Yet again this quarter, there is still a significant divergence across regions with no less than 6 markets showing an improvement of the situation in contrast with British Columbia and GTA cities that experienced further deteriorations (middle chart). The deterioration of affordability in Canada over the past two years appears to be negatively impacting consumer confidence. The latter is shown by the index related to “whether it’s a good time to make a major outlay such as a house” diverging substantially from the index grouping other questions of the survey (bottom chart). We note that despite labour markets being essentially at full-employment in Ontario and British Columbia, the percentage of respondents considering it a good time to make such an outlay is barely above Alberta’s level which is still coping with the pinch of the oil shock. The mortgage rate hike observed so far in the third quarter will certainly not alleviate this sentiment going forward.