The streak of improvements in home affordability in major Canadian urban centers came to
an end after three quarters with a slight deterioration in Q4 2019. While mortgage interest
rates were essentially unchanged from Q3, income growth was unable to keep pace with the
rise in home prices for the urban composite. The later registered its strongest increase in more than 2 years. Among the 10 urban centers covered, only Vancouver and Winnipeg saw income
increasing faster than housing prices during the quarter. Vancouver was the only market
showing an improvement in affordability, the monthly mortgage payment as a percentage of
income registering a fourth consecutive decline, a first since 2008-2009 when the global
economy was mired in a recession. While our national housing affordability composite index
stands on the cusp of its two-decade average, we note significant divergence in affordability
among urban centers. Indeed, despite some ameliorations over the past year, the Vancouver,
Toronto and Hamilton markets are still exhibiting affordability concerns while all other markets are either in-line with their historical norms or even better. The widespread improvement in affordability occurred in 2019 thanks to an 85 basis points decline in mortgage interest rates and one of the smallest increases in home prices among OECD countries (+1.2%, see chart page 13). That said, we doubt that a further improvement in home affordability is possible at this point as we see interest rates levelling off and home prices should accelerate given tight supply in the resale market. Indeed, the national active listings to sales ratio is at its lowest since 2007Q2, a level generally associated with worsening affordability.

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