Despite what the mortgage companies and loan-sharks tell you: All’s NOT hunky-dory with the Canadian real estate scene. Even the government, at all levels – Federal, Provincial, Municipal – are trying desperately to put on a brave face on the impending market correction. However, the numbers never lie.

Here’s why many analysts believe that Canada is heading for a housing bubble crash that could be much bigger than what our neighbours to the South experienced in 2008-09!

Facts and figures

When Royal Bank of Canada (RBC) pushed out its Housing Affordability indicators for Q4-2017 a short while ago, it indicated that there was some improvement in the average Canadian’s ability to afford a home. This was the first good news in over two years. RBC’s Canada-wide affordability indicator stood at 48.3% in Q4 2017, compared to an average of 39.4% since 1985.

So, what do these facts and figures mean? Well, in simple terms: Higher is bad. Lower is good!

48.3% means that, for the average Canadian household, 48.3% of their household budget will be consumed on home ownership spending. That includes utilities, property taxes (not to mention HST/GST and other taxes) and yes – especially mortgages! Back in 1985, only 39.4% of a household’s income went towards affording a home. To put things in perspective then, Canadian’s spend 48.3 cents, on the average, out of every dollar they earn on housing affordability.

Posing a rhetorical question: “Are we at a turning point for affordability?”, the RBC report offers us this gloomy outlook for Canada’s real estate market:

“No… Rising interest rates will put upward pressure on home ownership costs, and recent policy measures are more likely to reduce household and market risks than provide material affordability relief”

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