Canadian house prices have doubled since 2015: report

It’s no secret that Canadian house prices have risen sky-high in recent years. But a new report from the Parliamentary Budget Office (PBO) highlights exactly how much prices have shot up.

The report, titled “House Price Assessment: A Borrowing Capacity Perspective,” essentially points out what most Canadians are already aware of: that there’s a housing affordability crisis happening. But what the PBO report reveals is that although prices have ostensibly only really taken off during the pandemic, this trend of unaffordability has been going on across major markets since 2015.

In fact, prices have virtually doubled in the past seven years. Back in 2015, the average Canadian house price was $413,000. But by the end of 2021, the average had reached $811,700 — a 97% jump. The PBO estimates that in December 2021, average house prices in Hamilton, Toronto, Halifax, and Ottawa were more than 50% above affordable levels, while prices in Vancouver, Montreal, and Victoria were approximately 30-40% above affordable levels.

Many of these markets, the report says, began experiencing a “de-link” between house prices and a household’s borrowing capacity back in 2015, with housing prices in Vancouver, Toronto, Hamilton, Ottawa, Halifax, and Victoria, in particular, sitting 20% higher than an affordable price based on local household borrowing capacity.

During this time, population increases quickly outpaced new housing completions, bolstering demand and putting upward pressure on prices, suggesting the limited inventory seen during the pandemic is not an entirely new issue. Just prior to the pandemic, at the end of 2019, the average house price in Canada was $565,800 — a 37% increase from 2015.

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In March 2020, the National Bank of Canada dropped interest rates to a historic low, which the report notes did increase the average household’s borrowing capacity. This greater capacity, though, was no match for rapidly growing Canadian house prices. The report found that for those who had recently purchased a home in several markets across Canada, the household financial vulnerability was elevated.

With rates expected to increase this year, the PBO is projecting a decline in borrowing capacity over the medium term.