Toronto home affordability improves slightly, but experts warn gains won't last

In May, Toronto's housing market offered a small reprieve from years of escalating prices. The annual salary needed to purchase an average home in the city had fallen to $222,600—a drop of roughly $3,450 from the same month a year earlier, when the threshold sat just above $226,000. The shift was driven by a decline in median home values, which had slipped to approximately $1.16 million, down more than $85,000 from May 2022.

Frank Clayton, co-founder of Toronto Metropolitan University's Centre for Urban Research and Land Development, was characteristically measured about the development. The improvement, he suggested, was a temporary phenomenon—a "blip" unlikely to persist. His reasoning was straightforward: home prices, after falling through much of the previous year, had begun climbing again in recent months with no indication of stopping. Interest rates, meanwhile, were expected to continue rising. The combination of these forces would quickly erase whatever breathing room buyers had gained.

The data came from Ratehub, a mortgage comparison platform that calculated required income based on a standard mortgage scenario: 20 percent down payment, a 25-year amortization, $4,000 in annual property taxes, and $150 monthly heating costs. The rates used were averages from Canada's five largest banks' five-year fixed offerings. Home prices were drawn from the Canadian Real Estate Association's MLS index.

Toronto was not alone in experiencing this modest affordability shift. Most major Canadian cities saw required incomes decline slightly in May compared to a year prior. Hamilton was particularly notable: buyers there needed approximately $171,000 annually to purchase an average home, down from more than $180,000 in May 2022. The average price of a Hamilton home had fallen by more than $105,000 to $877,000. Only Calgary and Halifax bucked the trend, with both cities requiring higher incomes than they had a year earlier. Halifax's average home price had dropped by more than $9,000 to $529,000, yet the income requirement still rose. Calgary's average price had climbed by more than $13,000 to $540,000.

James Laird, Ratehub's co-CEO, framed the moment as transitional. The affordability gain existed in a narrow window created by two competing forces: home prices had fallen year-over-year, but interest rates had not risen as dramatically as they would in the months ahead. The Bank of Canada had already begun raising rates by May 2022, so the gap between last year's rates and this year's was smaller than it might otherwise have been. "The increase of rates is not enough to erase the savings because of the lower home values," Laird explained. But he, like Clayton, saw no reason to expect this window to remain open. Some markets had already rebounded enough to approach their pandemic highs.

Nationally, the picture was bleaker. The average Canadian home price stood at $729,044 in May, up 3.2 percent from May 2022, according to the Canadian Real Estate Association. Clayton pointed to two structural forces working against any sustained improvement in affordability: Canada faced a significant housing shortage, and immigration was accelerating. Under those conditions, he argued, meaningful affordability gains would require something far more severe than a temporary price dip. "The only way we'll get affordability is if we have a big recession," he said. For now, Toronto's brief moment of relief was exactly that—brief.