With consecutive interest rate hikes across G7 nations, borrowing is getting more expensive for those looking to take on a mortgage.
But Canada may be facing more challenges than its G7 peers.
CTVNews.ca looks at recent data by the intergovernmental Organisation for Economic Co-operation and Development (OECD) to analyze where Canada stands in comparison with other G7 nations when it comes to housing affordability, housing prices, and indebtedness.
Central banks in G7 nations have been aggressive in addressing the rising cost of living through consecutive interest rate hikes.
High interest rates typically would mean high debt servicing costs, which eventually increase the cost of everything—from mortgages to credit cards and loans. The thought behind the hike is to discourage consumers from spending. To address the cost of living crisis, the Bank of Canada steadily raised interest rates, reaching 3.75 per cent last month, from just 0.25 per cent in January this year.
CANADA HAS A HIGH PRICE-TO-INCOME RATIO
When compared with other G7 nations, Canada has the most expensive housing market.
Data from OECD shows that the price-to-income ratio—also known as the measure of affordability—remained the highest for Canada, followed by Germany.
According to the quarterly data released by OECD, Canada’s ratio index reached 148.16 in the second quarter of 2022, the highest amongst G7 nations, which means that housing prices grew at a rate of 48 per cent faster than income since 2015. By comparison, house prices in the U.S. grew roughly 40 per cent faster than incomes since 2015.
In a virtual conference in March this year, Sharon Kozicki, the deputy governor with the Bank of Canada, said that Canadian households that have taken out mortgages with high loan-to-income ratios probably aren’t the ones who have a lot of cash in their bank accounts.
She said rising mortgages can trigger a slowdown in household spending and if enough of them reduce spending, it could impact the entire economy, resulting in slow growth and increased unemployment.
“A drop in house prices could worsen these effects,” she said.
HIGHEST NOMINAL HOUSING PRICE IN G7 NATIONS
Early in the pandemic, higher savings, and historically low interest rates encouraged some Canadians to buy homes. The buying pattern also shifted with people working remotely during the pandemic, which encouraged many Canadians to seek homes in the suburbs, where houses were larger and more affordable. A high disposable income further led to a surge in demand for home mortgages.
In the current high-interest rate environment, higher mortgage rates have contributed to a sharp decline in housing activity, leading to a decline in house prices. According to Wowa’s latest housing market report, average home prices in Canada have fallen by 22 per cent in the span of 7 months.
But the cooling housing market in Canada should not be mistaken for increasing affordability, warned Rebecca Oakes, Vice-President of Advanced Analytics at Equifax Canada in a recent press release.
She said affordability depended not just on home prices, but also on monthly payment obligations for a mortgage.“Higher interest rates coupled with high inflation can really stretch a consumer’s monthly expenditure, while many could find it difficult to qualify for a mortgage,” she said.
But despite cooling markets, recent data released by OECD shows that Canada has the highest nominal housing price. According to the annual data released by OECD, the ratio index for Canada grew 59 per cent since 2015, the highest jump recorded by any G7 nation, followed closely by Germany, which showed an annual jump of 58 per cent since 2015.
In the second quarter of 2022, Canada’s nominal house pricing index was 183.9, followed by the U.S. with a price index of 182
Data from OECD shows that Canadians remain the most indebted in G7 nations and tend to take on more household debt than their G7 peers.
In 2021—the most recent year for which data are available for all countries—household debt in Canada was 185 per cent of disposable income.
In 2020, household debt in Canada was equivalent to 177.3 per cent of disposable income. In comparison, the U.K. has the second-highest household debt at 148 per cent. In comparison to OECD countries, which ranks 38 countries, Canada ranks ninth after countries such as Denmark and Norway that top the list with 255 per cent and 241 per cent of disposable income with household debt, respectively.
Kozicki said high indebtedness amongst Canadians could amplify the impact of interest rates. An additional concern is that a growing share of new mortgages also has variable rates, which tend to fluctuate with the bank’s policy interest rates.
PARIS (AP) — The curtain came down on Paris’ feel-good summer with a grand parade of French athletes on the Champs Elysées on Saturday after the country threw one last party to celebrate the Olympic and Paralympic Games.
The Parade of Champions included 460 Olympic and Paralympic athletes, including 120 Paris medalists. About 70,000 spectators lined up on the parade’s route on the French capital’s famed avenue that ended on a ring-shaped stage around the Arc de Triomphe monument. Hundreds of the Games’ volunteers, Olympic and Paralympic representatives and city officials also attended.
Organizers delivered a celebration of French sport on par with the spectacular and audacious opening and closing of the July 26-Aug. 11 Olympics and the Aug. 28-Sept. 8 Paralympic ceremonies.
“Among us, we call it the 5th ceremony,” Thierry Reboul, the director of ceremonies, told French media. “We tried to include the same elements to this show as we did to the four ceremonies this summer: surprise, emotion and sharing.”
President Emmanuel Macron and his new prime minister, Michel Barnier, also attended. During the ceremony, Macron decorated with state honors 120 French Olympians, who had medaled in Paris, including the star swimmer and judoka, Léon Marchand and Teddy Riner. In all, 187 French athletes were bestowed with the Legion of Honor or the National Order of Merit on Saturday, but not all participated in the parade.
Macron’s celebration of the Olympic spirit that he said has produced “national harmony” came against the backdrop of a harsh political reality and a deeply divided society following an inconclusive legislative elections in July, just before the start of the Paris Games.
Faced with a hung parliament, social tensions and ballooning debt, Macron earlier this month appointed Barnier — a veteran conservative and the European Union’s former Brexit negotiator — to form a new government.
Macron’s decision caused fury in the left-wing coalition that won the most seats in the National Assembly, but not enough to govern alone, leaving France’s powerful lower house of parliament with no party holding a majority.
Barnier said he will present his ministers next week. The New Popular Front coalition vowed protests and censure against Macron and the new government, insisting that the president has dismissed the popular vote that gave the leftist alliance the mandate to govern.
EDMONTON – The return of k.d. lang and the Reclines is expected to be a highlight as the Canadian Country Music Association hands out its annual hardware tonight in Edmonton.
The appearance marks the first time the Alberta songstress has teamed up with the band in 35 years and is tied to her induction into the Canadian Music Hall of Fame.
Lang and the Reclines are expected to perform “Big Boned Gal” from the last album they recorded together in 1989.
Singer MacKenzie Porter of Medicine Hat, Alta., is co-hosting the show with American crooner Thomas Rhett, and they are also set to perform.
Porter is up for six awards, including female artist of the year, as well as single and video of the year for “Chasin’ Tornadoes.”
She’s tied with Jade Eagleson of Bailieboro, Ont., who is also nominated for best single for “Rodeo Queen” and top album for “Do It Anyway.”
Tenille Townes is defending her title of best female artist after winning the prize in 2023 for the fifth consecutive year. The “Somebody’s Daughter” singer from Grande Prairie, Alta., was first nominated for the award in 2011, when she was 17.
Brett Kissel and Dallas Smith are set to perform and the James Barker Band and Steven Lee Olsen are set to take the stage as presenters.
The awards show is back in Alberta’s capital for the first time since 2014. It was held in Hamilton last year and in Calgary in 2022.
It airs live on CTV at 8 p.m. ET.
This report by The Canadian Press was first published Sept. 14, 2024.
