Home prices in Hamilton about double what the average household could afford

Home ownership has become even less affordable for the average Hamilton buyer, estimates a recent report from Canada's parliamentary budget officer.

Released last week, budget officer Yves Giroux's report says house prices in Hamilton - along with Toronto and Ottawa - were more than 50 per cent above an affordable level by the end of 2021.

Giroux's report suggests that house prices in most major cities could have been considered affordable in early 2015, based on costs but also on buyers' ability to borrow.

At that time, the national average house price was $413,000 - in Hamilton, it was $369,712, according to data from the Realtors Association of Hamilton-Burlington (RAHB).

But over time - and prior to the pandemic - house prices and borrowing capacities delinked" from one another, according to the report.

Housing prices were on the rise before the COVID-19 pandemic struck two years ago, and have been further fuelled by low interest rates, a desire for more space and a supply that couldn't keep up with demand.

The report comes just weeks after the RAHB revealed that the average sale price of a single-family home in the region had eclipsed $1 million - a stark contrast to just $297,960 a decade ago.

However, the situation laid out in the report isn't surprising" to housing experts, according to Anthony Passarelli, a senior analyst from the Canada Mortgage and Housing Corporation (CMHC).

Affordability of home ownership continues to deteriorate in Hamilton," he said. Based on the math, the average household would have difficulty getting into the single-detached housing market."

Jim Dunn, executive director of the Canadian Housing Evidence Collaborative (CHEC), said experts had expected Hamilton to see price increases over the last decade, even more so as public transportation linkages improved in the region.

Dunn said as the pandemic set in, buyers also opted to buy in Hamilton over Toronto, due to their ability to work remotely and maintain a similar lifestyle" for a fraction of the cost.

It had already been happening, but at a slower pace," said Dunn. That undoubtedly accelerated it, as it did for most communities outside the Greater Toronto Area."

Two other factors include an aging population and the onslaught of investors in the last few years.

Dunn said there has also been an influx of new investors on the market, likening the situation to a feeding frenzy" fuelled by home-equity lines of credit allowing people to become small landlords.

With increased longevity, people are holding onto their homes" for longer periods of time, Dunn said, effectively delaying any turnover that would allow new buyers to come into the market.

That's driving things up as well," said Dunn.

Prices would have to drop to make home ownership more affordable to the average buyer, Giroux said. One possible avenue is to boost housing supply, which Giroux's report notes didn't keep up with the population boom between 2015 and 2019.

Dunn said that solution will mean embracing different kinds of housing" that could accommodate families, while also overcoming barriers such as municipal zoning and existing housing policy.

Aled ab Iorwerth, deputy chief economist for Canada Mortgage and Housing Corporation, said the only real answer in the long-term" is more supply - and without delay.

-With files from the Canadian Press

Fallon Hewitt is a reporter at The Spectator. fhewitt@thespec.com