The Canadian real estate market has seen notable fluctuations in recent years, with 2023 being no exception. As of May 2023, the average sold price of a home in Canada stands at $716,083. This marks a 4% decrease from the previous month and a 4% decrease year-over-year.. While home prices have seen a modest decline, the median household income in Canada remains at $66,800, creating a widening gap between home prices and average income.
In Canada’s major cities, the disparity is even more pronounced. The average home price in Greater Vancouver for April 2023 was $1,295,266, a 3% decrease year-over-year. Toronto’s real estate market also reflects this trend, with the average home price in the fourth quarter of 2023 hitting $1,056,734. To put these prices into perspective, the average yearly income in these cities for the same period is $134,000 and $129,000 in Toronto and Vancouver, respectively.
The recent years have brought a whirlwind of changes to the Canadian real estate landscape. Despite expectations of a return to stability in 2022, the pace of change persisted. Interest rate hikes by the Bank of Canada led to a slowdown in commercial in the latter half of 2022. Yet, when measured against early 2020, key indices including housing prices showed positive returns. For 2023, despite higher costs of capital impacting asset values, a soft landing is expected where the economy should see a technical recession while remaining positive overall for the year.
Income trends are another essential component of this analysis. The median after-tax income in Canada increased year on year from 2016 to 2020, with disparities between provinces. For example, Alberta boasts the highest median household income among the provinces, while Newfoundland and Labrador saw a decrease in median income over the same period. However, the average yearly salaries were down by just under 1% in the first quarter of 2022 compared to 20217. It is important to note that incomes within provinces and territories can vary widely, with residents in bigger cities generally earning higher median incomes than those in smaller towns or rural areas.
While it is challenging to predict specific trends in the Canadian real estate market and income beyond 2023, several indicators suggest optimistic prospects for Canada. As we move forward, the country is set to lead the G7 in terms of population, GDP, and employment growth over the coming five years. This potential growth will undoubtedly have an impact on both real estate prices and income, adding another layer of complexity to this dynamic market6.
The correlation between real estate prices and income is a critical aspect of Canada’s economic landscape. By monitoring these trends, policymakers, investors, and everyday Canadians can better understand the broader economic picture and make informed decisions. As we navigate through 2023 and beyond, it is crucial to keep a close eye on these evolving trends.
