Canada's Housing Bubble

Jan 26, 2010 Canwest News

Saskatoon’s housing market has been dubbed “seriously unaffordable” by the Frontier Centre for Public Policy.

Saskatoon, at 4.6, rates on par with Calgary, Edmonton, Hamilton and Montreal, according to a report released this week. In 2008, Saskatoon had a 4.6 rating.

The centre's affordability index is calculated by taking the median house price — the exact mid-point between the highest priced and lowest priced house sold in the third quarter — and dividing it by media annual gross income.

For example, in Vancouver, the median value of homes sold in the third quarter of 2009 was $549,000, while the median household income was $58,200 for a multiple of 9.3. In other words, it would take 9.3 years of income to pay for a typical home in Vancouver. Historically, the ratio was three years of salary, but in recent years that has increased dramatically.

In Saskatoon, that means it would take on average 4.6 years of income to pay for a typical home.

Regina's rating remain unchanged from 2008 to 2009. The city has gone from being the most affordable in Canada to moderately unaffordable in less than three years.

“The Saskatchewan (housing affordability chart) is really interesting . . . In 2006, it was at 2.0, then in 2007 it was 2.6, then it went up to 3.5 (in 2008),” said Frontier Centre’s David Seymour.

Regina is still a relatively affordable place to buy a new or existing home, said Gord Archibald, executive officer of the Association of Regina Realtors .

“Outside of Winnipeg, Regina is the most affordable major market in Western Canada and is more affordable than most major markets across the country.”

Vancouver not only has the least affordable housing of 28 markets measured in Canada, but of 272 metropolitan markets ranked in Ireland, the U.K., New Zealand, Australia, the U.S. and Canada, according to statistics compiled by the Winnipeg-based think tank.

As Canada's resale housing market boomed and prices rose in 2009, affordability fell, sending the national average to a reading of 3.7 from 3.5 the year before, placing Canada's overall housing market in the "moderately unaffordable" category.

Toronto moved from a reading of 4.8 to 5.2, moving it into the severely unaffordable category, while Montreal moved from a reading of 4.6 to 4.9. Victoria was second only to Vancouver, with its reading rising from 7.4 to seven while Ottawa's hot housing market remained within the realm of the moderately unaffordable, with a reading of 3.8, up from 3.4 the year before.

Affordability improved slightly in Calgary and Edmonton, the site of some of Canada's hottest housing markets in recent years, falling to 4.6 from 4.8 in Calgary, and to 4.1 from 4.2 in Edmonton. They still, however, remained “seriously unaffordable.”

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