Anshu Arora LLM, MSc, PMP

Cell 604-828-7331 |


Homebuyers’ choices have undoubtedly improved, but affordability has not improved as much. For markets to be fully on the buyers’ side, they need plenty of choice and affordability. Thousands more homes are available to purchase, but most remain out of reach of mid-income earners.

There was a 32 per cent increase in listings in September, according to the Toronto Regional Real Estate Board (TRREB), dropping the sales-to-new-listings ratio (SNLR) to 28.6 per cent. The industry rule of thumb says an SNLR of less than 40 per cent favours buyers and more than 60 per cent to favour sellers. Going just by that rule, it looks like a buyers’ market. The same report also said the average Toronto home price in September increased by three per cent from August. The average has increased by almost eight per cent since January. If housing was unaffordable earlier, it is still unaffordable.

Housing affordability is tied as much to prices as it is to mortgage payments. Affordability worsens if either or both sharply increase. Homebuyers have recently been hit with a double whammy of rising prices and borrowing costs. Housing prices starting in mid-2020 escalated fast as ultra-low interest rates fuelled their growth. Later, inflationary pressures necessitated an increase in lending rates, which jumped from those ultra-low levels in 2020 to much higher levels not seen in decades. The consequences were unavoidable: higher housing prices were financed at even higher lending rates.
The rapid increase in mortgage rates contributed to a significant increase in mortgage payments for those with a variable mortgage rate. Almost 60 per cent of Canadian homeowners have a mortgage, many of whom had opted for variable mortgage rates earlier. The Bank of Canada maintains a housing affordability index, a ratio of the average quarterly mortgage payment to the average quarterly income. A higher index value suggests worsening affordability. The index dropped when mortgage rates were low and in mid-2020 hit its lowest level since the Great Recession.

However, the index increased by 60 per cent by the third quarter of 2022, suggesting worsening affordability. Affordability continued to worsen even when average prices declined in 2022. Higher borrowing costs wiped out the gains from falling prices.














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