Bank of Canada, Better Dwelling
Unaffordable real estate? The Government has no idea what you’re talking about. The Bank of Canada
(BoC) Housing Affordability Index (HAI) shows affordability improved since 2008. Despite the hard to believe reading, it provides an interesting warning. Affordability of real estate is deteriorating with minor rate hikes, compared to 2008.
Real Estate Housing Affordability Index
The BoC’s Real Estate Housing Affordability Index (HAI) is the ratio of income used to pay for a home. The amount of disposable income households make, are divided into quarters. The ratio is the percent of that income that goes towards paying a mortgage and utilities. Costs exclude things like taxes and insurance, so the cost of a home is usually higher. It’s not perfect, but it’s what your central bank uses. They’re in charge of the money supply, so it’s probably worth checking out their work.
Canadians Spend Over 35% Of Their Income On Housing Costs
Housing affordability is on the decline, but it’s nowhere near the high. The end of Q1 2018 reached 35.4%, up 1.72% from the year before. That’s not Toronto or Vancouver… it’s across the country. We’re nowhere near the 2008 peak of 39.2%, or even close to the pre-historic 1990s or 1980s peaks of 53% and 62.9% respectively. At first glance, it’s a little confusing to think of housing as “cheap,” even for real estate agents. If we look back, we see that as early as 2014, the BoC said Canadian real estate is 30% overvalued
. How can it be more “affordable,” and does that mean there’s less risk?
Bank Of Canada Housing Affordability Index
The percent of income used to service mortgages across Canada. This number includes mortgage payments, and utilities.