Measuring Housing Affordability in Quebec
Housing affordability is a central issue in Canada and Quebec that directly affects mortgage brokers' daily work. It determines how many households can access homeownership, the mortgage amounts required, and the financial feasibility of purchase plans. Several indicators measure and compare affordability across regions and over time.
- RBC Affordability Index
- Quarterly measure published by RBC Economics calculating the share of gross median household income needed to cover ownership costs of a median-priced home. Costs include mortgage payment (calculated on 25-year amortization at the current 5-year fixed rate with 20% down), property taxes, and utilities. An index above 50% is considered problematic for affordability.
- Price-to-income ratio
- Simple indicator dividing a region's median property price by median annual household income. A ratio of 5 means the property price equals 5 times the median household's annual income. Historically in Canada, this ratio ranged from 3 to 4; in major centres, it now exceeds 8 to 10.
Regional Comparisons in Quebec and Canada
Affordability in Quebec varies considerably by region. Montreal is the province's least affordable market, with an RBC index around 50% for single-family homes. Gatineau, influenced by Ottawa-area prices, follows closely. Quebec City offers better price-income balance, with an RBC index of approximately 35%. Saguenay, Trois-Rivieres, and remote regions are the most affordable, with indices often below 30%. Despite these pressures, Quebec remains among Canada's most affordable provinces: owning in Montreal requires about 50% of median income, compared to over 80% in Toronto and over 90% in Vancouver.
Three Pillars of Affordability
- Property prices: determined by local supply and demand, speculation, new construction, and government policies. In Quebec, prices increased approximately 40 to 60% between 2019 and 2022 in major markets.
- Mortgage interest rates: influenced by Bank of Canada monetary policy and the bond market. A 2% rate increase can reduce borrowing capacity by 20 to 25%, equivalent to a budget reduction of $80,000 to $100,000 on a typical loan.
- Household incomes: determined by employment conditions, economic growth, and wage policies. In Quebec, average wages increased 3 to 5% annually between 2020 and 2024, but this progression was insufficient to offset housing price and interest rate increases.
The Affordability Erosion: 2020-2023
The 2020-2023 period represented the fastest housing affordability détérioration in a generation in Canada. In 2020-2022, prices surged 40 to 60% across most Quebec markets, fuelled by historically low rates, pent-up demand during lockdowns, remote work, and government support measures. Then in 2022-2023, aggressive policy rate hikes (from 0.25% to 5.00%) dramatically increased borrowing costs without significant price declines. The result: a double shock pushing affordability to its worst historical levels in most regions.
Government programs attempt to mitigate this erosion. The Home Buyers' Plan (HBP) allows first-time buyers to withdraw up to $60,000 per person from their RRSP tax-free for a home purchase. The fédéral First-Time Home Buyers' Tax Credit provides a non-refundable amount of $10,000. In Quebec, the SHQ's Accès Famille program supports eligible households in certain municipalities with down payment assistance. While helpful, these measures only partially offset the price increases that have far outpaced wage growth since 2020.
The Broker's Role in the Affordability Challenge
Mortgage brokers help clients navigate affordability challenges by exploring multiple avenues. Minimum 5% down with CMHC insurance enables access with less savings. Fédéral programs like the HBP (RRSP withdrawal up to $60,000) and FHSA (up to $40,000) increase down payment capacity. Choosing 30-year amortization (conventional) or the first-time buyer new-build exception reduces monthly payments. Including a co-borrower or rental income improves debt ratios. Brokers can also guide clients toward more affordable regional markets or more accessible property types (condos, plexes). This creative, personalized approach makes the broker an indispensable ally for buyers in a demanding market.