Residential Market Commentary - Affordability Improves

A pair of new reports say housing affordability in Canada is getting better.  Ottawa’s fiscal watchdog, the Parliamentary Budget Officer (PBO), and well known housing economist Robert Hogue say falling interest rates and rising household incomes are the key factors in the improvement.

In his report economist Hogue calculates the national average share of household income needed to cover ownership costs has fallen to 53.6% (as of Q2 2025) from its all-time high of 63.5% at the end of 2023.  That percentage varies greatly across the country though.  In Vancouver it takes 89.2% of income to pay for housing costs while in Edmonton it is 32.2%.

Hogue also says the pace of affordability gains is expected to slow largely due to declining wage growth as more slack develops in the labour market.  Unemployment in Canada no stands at 7.1%.

The Parliamentary Budget Officer’s report tracks housing affordability based on the gap between average home prices and what the typical household can afford.  It shows cheaper borrowing costs and stronger wages narrowed the affordability gap from 80% in September 2023 to 34% in August 2025.

As with the Hogue report, the PBO says affordability gains varied widely across the country.  The biggest improvements were seen in Toronto and Hamilton, while Calgary, Montreal and Quebec City saw affordability deteriorate.

The Bank of Canada’s trendsetting Policy Rate has dropped to 2.25% and another quarter-point reduction is expected by the end of the year.