Affordability drops nearly across Canada in the third quarter, according to Desjardins economists

LÉVIS, QC, Oct. 29, 2013 /CNW Telbec/ - According to Desjardins Group Economic Studies, the Canadian housing market is now less affordable than it has been on average for the last 25 years. This decline stems from average home prices outpacing household income in the third quarter as well as a small hike in mortgage rates.

Despite affordability declining in the third quarter, it is only slightly below the average for the last 25 years. "A much steeper drop would be needed to rein in the Canadian housing market," according to Desjardins economists. Home sales, which plummeted after the new federal government rules came into effect in summer 2012, have started to trend upward in the last few months. Rising mortgage rates during the summer hurried buyers; many took action out of fear that mortgage rates would climb even higher. Even if the coming months bring more increases; they won't be enough to trigger a significant dip in affordability. However, housing market activity in Canada should stabilize soon. Rising prices, which are at historic highs in the country's main agglomerations, should eventually start cooling buyer enthusiasm.

Most markets are still affordable in Ontario, none in Québec

Despite a decline in nearly all Ontario CMAs, most markets are still affordable. Toronto is an exception, where the average home price is $527,821, well above that observed in other agglomerations in the province.  The Desjardins Affordability Index is only slightly under the historical average in Calgary, despite relatively high home prices ($438,793 in the third quarter). The sharp rise in average household income, which now surpasses $110,000, makes home purchases easier.

"No markets in Quebec are considered historically affordable," according to Desjardins economists. Sherbrooke and Quebec City rank alongside Vancouver as some of the least affordable agglomerations in the country. Even though housing prices are much lower than on the west coast, incomes in these two CMAs are considerably lower, making home purchases more difficult.

The financial capacity to buy a property in Quebec was fairly stable in the third quarter of 2013, at slightly below the average level that has been prevailing since the end of the 1980s.  "While housing prices continue their ascent in Canada, they seem to be stabilizing in Quebec," says Hélène Bégin, Desjardins Group Senior Economist. Home price increases paused in Montreal and Quebec City due to a surplus in condos. Rising prices are losing steam in the Quebec City market while prices in Montreal are starting to edge down. Prices continue to rise, however, for single-family homes, whose market is balanced, overall. Housing prices continued to climb in Gatineau, Sherbrooke, Saguenay and Trois-Rivières, affordability thus deteriorated in the third quarter.

For more information, consult the most recent study.

About Desjardins Group

Desjardins Group is the fifth largest cooperative financial group in the world with assets close to $205 billion. To meet the diverse needs of its members and clients, Desjardins offers a full range of products and services through its extensive distribution network, online platforms and subsidiaries across Canada. The group has one of the highest capital ratios and credit ratings in the industry, and outranks all American banks as the fourth safest and strongest bank in North America according to Global Finance magazine and Bloomberg News respectively. In keeping with their cooperative nature, Desjardins Caisses' surplus earnings are reinvested into the communities they serve.

SOURCE: Desjardins Group

Information (for journalists only):
Francine BlackBurn
Advisor, Media Relations
514-281-7000 or 1-866-866-7000, ext. 7544

Hélène Bégin
Senior Economist
418 835-8444 or 1 866 835-8444, ext. 2850