Home prices must plunge to fix Canada’s affordability crisis: CEO
The challenges facing the market have developed over decades: wages have risen only modestly compared with a massive surge in average home prices, meaning it’s become increasingly difficult for buyers – especially those purchasing for the first time – to put together enough money for a downpayment.
The average Canadian home price, Gaudio noted, historically sat at roughly 3.5 to 4 times average household income, a level widely regarded as a marker of a sustainable market. But that average ballooned to 12 times the average income at the peak of the COVID-19 housing market, and even in a cooler market has only slipped to approximately nine times.
“In order to get back to a traditionally healthy market, we’ve got to get back to that 3.5 times, from nine,” he said. “That’s a lot. That’s a big distance to cover.”
Market watchers are divided on the best way to achieve that. Housing minister Gregor Robertson stirred debate last year when he suggested home prices don’t necessarily have to fall to unlock affordability for more Canadians.
Others say lower interest rates would improve the picture for homebuyers, but Gaudio doesn’t see that idea as a surefire hit. “You drop interest rates, the price of housing goes up,” he said. “So we need to think a little more globally.”
