Canadas Most And Least Affordable Housing Markets

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For the median price of a property in Vancouver, you could buy four homes at the median price in Windsor, Ont. – and still have lots of money left for renovation work.

Vancouver has the most unaffordable housing market in Canada, and a new survey says the B.C. city has passed Sydney, Australia to become the second least affordable city out of 325 metropolitan markets in Canada, the U.S., Australia, New Zealand, Ireland, Hong Kong and the United Kingdom. Only Hong Kong is worse for affordability than Vancouver.

The annual survey is conducted by Demographia which calls itself "an international public policy firm" based in Belleville, Ill. It says the survey is "produced to contrast the deterioration in housing affordability in some metropolitan markets with the preservation of affordability in other metropolitan areas. It is dedicated to younger generations who have the right to expect they will live as well or better than their parents, but may not, in large part due to the higher cost of housing."

It uses median house price divided by gross (before tax) annual median household income to determine affordability levels. A rating of 3 and under is considered affordable, while 5.1 and over is considered "severely unaffordable".

Canada's overall rank is 3.5 "indicating slightly deteriorating housing performance from last year's 3.4," says the survey. At 10.6, Vancouver is well into the red zone. The four least affordable markets in Canada are all in B.C., with Abbotsford, Victoria and Kelowna coming after Vancouver. The fifth least affordable is Toronto, followed by Montreal, Hamilton, Sherbrooke, Que., Saskatoon and Calgary.

On the positive side, Windsor's median price of $149,900 places it as the most affordable market in Canada, and 16th on the world-wide list. Second most affordable is Fredericton, followed by Moncton and Saint John, N.B. and Thunder Bay, Ont. The most affordable major market in the survey (more than one million population) is Edmonton.

The United States has the world's most affordable markets, with Saginaw, Mich. (not far from Windsor) ranking No. 1 and Detroit coming in second. Ireland is the second most affordable country and Canada is third. The report says the United Kingdom, Australia and New Zealand "continue to experience pervasive unaffordability."

"The causes of massively deteriorating housing affordability are not a mystery," say Demographia authors Wendell Cox and Hugh Pavletich of Performance Urban Planning. "They inevitably result from more restrictive land use regulations adopted by governments with insufficient attention to economic fundamentals….Where land is rationed (by more restrictive land use regulation), house prices will rise. Thus, where house prices have increased substantially, they have been preceded by more restrictive land use regulation."

The authors say, "Vancouver, which like Sydney has largely prohibited housing development on the urban fringe for decades, experienced a significant deterioration" in affordability. "Toronto was also severely unaffordable at 5.5, a deterioration of 40 per cent in housing affordability since 2004, as that metropolitan area's 'smart growth' program has taken effect. Montreal has been one of the worse performers in housing affordability over the years….up nearly 60 per cent from 2004, at the same time as the land for development has been severely limited by an inflexible approach to agricultural zoning," says the survey.

The authors say that when they started the survey eight years ago, "Canada was generally the most affordable nation," but now it ranks behind the U.S. and Ireland. Among all Canadian markets, as house price have gone up, now nine markets are considered affordable, 17 are unaffordable, three are seriously unaffordable and six are classed as severely unaffordable.

The authors say that too much emphasis is placed on housing as an investment rather than a place to live.

"As housing affordability has deteriorated, there has been a tendency on the part of housing industry and financial market analysts to 'cheer on' abnormally high house price increases as if housing were a commodity market, like gold. Housing is much different. It is a basic necessity and adequate, comfortable housing is necessary for a decent standard of living," write Cox and Pavletich.

"The performance of the housing market is thus not genuinely measured based on price increases relatively to other investments. The genuine measure of a housing market’s performance is the extent to which it remains affordable in a well functioning metropolitan economy."

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