Home Prices in Canada Outpace Income Growth Worsening Affordability Crisis

With the release of the latest Canada housing market report — many Canadians are wondering if now is a good time to purchase a home and have questions about housing affordability?

Home prices in Canada have been a significant concern as the high price tag associated with many homes in Canada puts home ownership out of reach for many Canadians. The benchmark home price in Canada was $717,800 in August 2024 — which is much higher than the $649,096 average home price.

For those looking to purchase the average home in Canada it would take annual houshold income in excess of $150K to be considered affordable. This cost is much higher than the average household income in Canada which was $106,800 in 2022 — or $113,239 in 2024 inflation adjusted dollars.

Table of contents

• How Affordable Are Homes In Canada?
• Historical Home Price-to-Income
• Affordability Across Provinces

How affordable are homes in Canada?

The benchmark home price in Canada which is the price of a typical home has increased from $236,400 in 2004 to $717,800 in 2024 — which is a 203.64% increase of this period. Over this same period the average household income has increased from $62,485 in 2005 to $113,239 in 2024 — an increase of 81.22% which is much less than the home price increase.

If we were to try and purchase the benchmark home with a 20% down payment at a mortgage rate of 5.00% over a 25-year amortization period and use the 28/36 rule as a guide to mortgage affordability — it would take income in excess of $140,000 based on this mortgage affordability calculation to afford the benchmark home price.

Historical home price-to-income in Canada

One way to track home affordability is to look at the home price-to-income ratio. This helps us compare the cost of owning a home across different periods of time. Based on the current home price in Canada of $717,800 and household income of $113,239 — the current home price-to-income ratio is 6.34X. This means that it would take 6.34X the average household income to purchase the typical home in Canada.

If we were to look at the home price-to-income ratio in 2005 it would be 3.78X. This is based on a benchmark home price of $236,400 and average household income of $62,485. Over the period of 2005-2024 the home price to income ratio has increased 67.55% which indicates that the trend in increasing home prices is outpacing the rate at which income is increasing.

Home price to income ratio by province

The below table is a breakdown of the home price-to-income ratio at a province level.

When compared to Canada's home price-to-income ratio of 6.34X there are two provinces with higher ratios. The first province is Ontario with a ratio of 7.17X and the second province is British Columbia with a ratio of 8.85X. All of the other provinces have price-to-income levels lower than the national ratio.

When compared to the historical 2005 home-price ratio of 3.78X in Canada many of the other provinces have also seen a trend of home prices increasing faster than income with higher current day home price to income ratios.

Source: CREA, Canada Income Survey