Highlights:

• Canadian housing affordability posted a fifth consecutive improvement in Q1’25. The mortgage payment on a representative home as a percentage of income (MPPI) fell 0.7 percentage point. Seasonally adjusted home prices increased 1.1% in Q1’25 from Q4’24; the benchmark mortgage rate (5-year term) declined 15 basis points, while median household income rose 0.8%.
• Affordability improved in 8 of the ten markets in Q1. On a sliding scale of markets from best progression to least: Vancouver, Toronto, Victoria, Hamilton, Ottawa-Gatineau, Calgary, Winnipeg and Edmonton. On the flip side, Montreal and Quebec deteriorated in the first quarter. Countrywide, affordability enhanced 0.9 pp in the condo portion and 0.7 pp in the non-condo segment.

Housing affordability remains a significant challenge for Canadians, though the first quarter of 2025 brought continued relief. Nationally, affordability improved for the fifth consecutive quarter—marking the longest such streak since 2008–2009. This progress brought the mortgage payment as a percentage of income (MPPI) to its lowest level in three years. Despite higher home prices across all markets, affordability gains were more widespread this quarter, supported by rising incomes and declining interest rates. Since peaking in late 2023, 5-year mortgage rates have fallen by a cumulative 91 basis points, reaching their lowest point in nearly three years. However, Montreal and Quebec City were notable exceptions. Home prices surged by 3.0% and 4.2% respectively during the quarter, preventing any affordability improvements. These markets remained resilient despite broader trade uncertainty, supported by less-stretched valuations and a still-strong labour market. Notwithstanding the widespread improvement in Q1, the composite MPPI remains well above its historical average. Anticipating the second quarter, further improvements in affordability from mortgage interest rates are likely to be limited, as the drop in 5-year rates is marginal thus far. However, ongoing weakness in Ontario and British Columbia’s real estate markets could lead to price drop in several cities. Over the longer term, a slowdown in immigration and softening labour market conditions may also ease pressure on housing demand. Still, resolving market imbalances will take time.

https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/logement/housing-affordability.pdf