Access to property in Canada has never deteriorated so much for “a generation” during the first three months of the year, according to an index developed by the team of economists at the National Bank.
Posted at 5:00 p.m.
Its housing affordability index experienced its worst deterioration in the first quarter for 27 years, underlines their study published on Wednesday. Over 12 months, this is the worst deterioration in 40 years.
Already battered, accessibility has deteriorated while the rise in mortgage rates has added to a context of appreciation in residential real estate prices, explains the Deputy Chief Economist of the National Bank, Matthieu Arseneau. “We are talking about a rise in house prices of 5.1% and a fixed five-year mortgage rate of 46 basis points during the quarter. »
As a result, this is the first time since 1994 that a household of new buyers earning a median income would have to devote more than 50% of their income to paying off their mortgage if they bought a house “representative” of their local market.
“There was still a frenzy, comments the economist. Prices have run wild and outpaced fundamentals when considering earnings and interest rates over the past few quarters. »
In Montreal, for example, a median household had to save 10% of its income for 51 months (more than four years) to obtain the minimum down payment. In the metropolis, accessibility to housing deteriorated for a sixth consecutive quarter to reach its worst level since 1991.
The situation is still worse in Vancouver and Toronto where the median household would need to save 452 months (over 37 years old) and 363 months (over 30 years old), respectively, to have the down payment necessary to buy a house representative of their market. .
An effect on prices and the economy
With rising interest rates, Arseneau expects house prices to moderate. He points out that the Housing Affordability Index uses the five-year fixed mortgage rate to measure affordability. However, many households chose to take out a variable rate mortgage, whose rate was lower during the quarter, to access the market.
” They [les nouveaux acheteurs ayant choisi un taux variable au premier trimestre] were able to avoid the rise in rates, which may have pushed up house prices even further, but with the Bank of Canada, which is in the process of raising interest rates, there will be no way to hide and that should be reflected in real estate prices in Canada. »
To control inflation, the Bank of Canada began raising its key rate in March. The rate, which had been at 0.25% for 22 months, has since been raised twice to stand at 1%. The next decision of the central bank will take place on 1er June. The National Bank expects the key rate to reach 2.5% by the end of the year.
The economist is not concerned that the increase in household mortgage payments will sink the economy for the time being. “It is clear that for some households, it is still much higher bills, but at the macro-economic level the impact for 2022 is 0.4% of disposable income. [selon les prévisions de la Banque Nationale]. That does not mean that consumption is compromised, yes it will slow down consumption, but it is still manageable. »