Report

House Price Assessment: A Borrowing Capacity Perspective

Feb 17, 2022

This report provides an assessment of house prices relative to a household’s capacity to borrow and pay for the purchase of a house in selected Canadian cities.

Highlights

Beginning in 2015—and prior to the pandemic—house prices in several cities (Hamilton, Toronto, Ottawa, Victoria, Halifax and Vancouver) “de-linked” from household borrowing capacity, rising 20 per cent, or higher, above affordable prices.
Household borrowing capacity increased during the pandemic due to lower interest rates and COVID-19 financial support. However, further increases in house prices far outpaced gains in borrowing capacity, resulting in wider gaps in affordability.
At the end of 2021, the average house price nationally was $811,700—an increase of 43 per cent from December 2019 and a 97 per cent increase compared to January 2015.
We estimate that in December 2021, average house prices in Hamilton, Toronto, Halifax and Ottawa were more than 50 per cent above affordable levels, based on household borrowing capacity.
While approximate, our results suggest that household financial vulnerability is elevated in several cities for households that have recently purchased homes.