Signs of a rebound may be emerging in Canada’s real estate market after months of declining home prices.
While buyer-friendly conditions persist in some markets, many Canadians will have to shell out more for their monthly mortgage payments, a new report shows.
The monthly home affordability report by RateHub.ca looked at home prices and mortgage rates from 13 Canadian cities. In eight of those cities, mortgage affordability got worse in May.
Penelope Graham, mortgage expert at Ratehub.ca, said the buyer-friendly market conditions are unlikely to last for very long.
“While buyers have enjoyed attractive housing affordability conditions throughout the spring, those days may be numbered. The latest May national housing data reveals sales are firming up over the short term,” she said.
While mortgage rates remained largely unchanged, rising home prices mean you’d have to spend more money on your monthly mortgage payments, depending on where you live. For most Canadian cities, the annual household income you’d need to get approved for a mortgage has also gone up.
In May, the price of the average Canadian home was $691,299. While that is still down 1.8 per cent compared with this time last year, it is an increase of 1.9 per cent compared with April this year.
A Royal Bank of Canada report said buyers are expected to dive back into the market as the uncertainty around U.S. tariffs becomes clearer.
“We expect housing market confidence to gradually rebuild as tariff de-escalation lifts some of the uncertainty that hindered activity earlier this year,” RBC economist Robert Hogue said in the report.
Costlier mortgages
The data from Ratehub’s report is based on a 10 per cent down payment with a 25-year amortization. The city that saw the highest increase in monthly mortgage payments was St. John’s, N.L., where someone locking down their mortgage in May would have to pay $45 more and would need an annual household income of $86,450.
“St. John’s saw the most significant increase, with $1,690 in additional income required to purchase the average home. This is due to home prices rising ($8,900), the biggest increase of all the cities,” Graham said.
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Halifax also saw affordability worsen, with the average resident paying an additional $38 a month for their mortgage. They would need a household income of $122,830 (an increase of $1,430) to buy a house.
Regina (increase of $27) and Montreal (increase of $26) both saw monthly mortgage costs go up. In Regina, you would need an annual household income of $79,350 (an increase of $1,020 since April) and in Montreal, you’d need $124,620 (an increase of $980 since April).
After a drop in home prices in April, the price for an average home in Toronto rose $3,400 to $1,012,800 in May. A Torontonian would have to spend $17 more ($5,139 a month) and need an annual household income of $206,500 to be able to afford a home.
Winnipeg saw monthly mortgage costs rise by $13 a month to $1,968 and the average Winnipegger would need $88,250 annually to be able to buy a house.
Edmonton ($7) and Fredericton ($5) both saw minor increases in monthly mortgage costs. In Edmonton, you’d need an annual household income of $96,670, while in Fredericton, you’d need $78,200.
The only city that saw no change in affordability was Calgary. The average home price in the city remained the same as in April ($583,000), as did the monthly mortgage cost ($2,958) and annual income needed to buy a house ($125,170).
Where did affordability improve?
“While the majority of the cities saw affordability worsen, the biggest change was actually in Hamilton, where affordability saw a massive improvement, with $3,480 less income required to purchase the average home,” Graham said.
A Hamilton homebuyer would need an annual income of $163,020 to be able to buy a house. With a 10 per cent down payment and a 25-year amortization, their monthly mortgage rate came down to $3,973 a month.
This means that a Hamilton mortgage buyer who locked down their rate in May would save $93 a month compared with someone who locked it down in April.
The decline in home prices comes amid the U.S. trade war and President Donald Trump’s 50 per cent tariffs on foreign steel and aluminum. Hamilton is home to major Canadian steel producers and faces growing concerns about the potential for layoffs and plant closures as a result of the tariffs.
While Vancouver saw the second biggest decline in home prices, with a decline of $7,500, it remains Canada’s most expensive housing market by far, with an average home in May costing $1,177,100.
Vancouverites also need the highest annual income of any city in Canada at $237,550 a year. They would also have to pay the highest monthly mortgage of $5,973 with a 10 per cent down payment, although it dropped $38 from April.
In May, Victoria came in as the third most expensive housing market in Canada after Vancouver and Toronto, though average home prices dropped to $892,700, with the average homebuyer needing an annual salary of $183,750. Monthly mortgage costs dropped $38 to $4,530 a month.
Affordability also improved in the nation’s capital, with the average Ottawa home price dropping to $629,800. An Ottawa resident would save $7 on their mortgage payment if they bought in May ($3,196 a month) and would need an annual household income of $134,020 to be able to buy a house.
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