When it comes to homeownership these days, one of the biggest and most talked about issues is affordability. This issue is particularly relevant when it comes to a generation of young Canadians that many people say is struggling to enter the marketplace due to the high costs of owning a home.
However, like anything else in this country, affordability is relative and truly dependent on context. If you’re a millennial or a potential first-time homebuyer of any stripe, you’re much better off entering the market in Calgary than other major centres like Vancouver or Toronto.
Robert Hogue, senior economist with RBC Economics, says affordability in Calgary has consistently been better over the last few years than Canada’s two largest population centres.
“Price levels are much lower in Calgary than in Toronto and Vancouver, and they haven’t increased as much as (those cities) have over the last I would say decade because the last spike in Calgary was a couple of years before the Great Recession,” he said.
“Also, incomes are higher still, despite it all, in Calgary than they are in Toronto and Vancouver. When you measure affordability as housing costs as a percentage of household income, Calgary does compare quite favourably.”
The RBC Housing Affordability Measures show the proportion of median pre-tax household income that would be required to service the cost of mortgage payments (principal and interest), property taxes and utilities based on the average market price for detached homes and apartment-style condos, as well as for an aggregate of all housing types, in a given market.
“Incomes are higher still, despite it all, in Calgary than they are in Toronto and Vancouver. When you measure affordability as housing costs as a percentage of household income, Calgary does compare quite favourably.” – Robert Hogue, RBC Economics
The affordability measures are based on a 25 per cent down payment and a 25-year amortization at a five-year fixed rate. They are estimated on a quarterly basis for 14 major urban markets in Canada, plus a national composite.
According to RBC’s quarterly Housing Trends and Affordability report, which was released in December, the overall affordability measure in Calgary for the third quarter of 2019 was 38.6 per cent, while the figure for all of Canada was 50.7 per cent. The average since 1985 has been 42.1 per cent in Canada and 40.6 per cent in Calgary.
Digging a little deeper, the single-family market’s affordability measure was 42.5 per cent in Calgary and 55.8 per cent in Canada, while condos landed at 23.4 per cent in Calgary and 41 in Canada. Historical measures were 45 per cent in Canada for single-family homes and 43.6 per cent for Calgary, while condos were 34.2 per cent in Canada and 26.7 per cent in Calgary.
Where Calgary really shines is when you compare that affordability measure with Vancouver and Toronto. In the single-family market, the Vancouver area’s affordability measure was a whopping 104.9 per cent, while Toronto’s was 78.6 per cent. In the condo market, Vancouver was 47.6 per cent and Toronto scored 43.0 per cent.
So, with low interest rates, a high degree of affordability and a solid amount of choice available in the market, why is the Calgary housing market still experiencing its fair share of struggles?
“Affordability is not the issue for the Calgary market right now,” said Hogue. The issue is the broader economy and uncertainty in the labour market. The main obstacle to the market is not affordability.”