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Business Briefing We knew Toronto and Vancouver were expensive. They’re actually among the most unaffordable housing markets in the world

Briefing highlights

  • Where Toronto, Vancouver rank
  • Markets, loonie at a glance
  • What to expect from Apple
  • What to watch for on Brexit
  • PG&E files for bankruptcy protection
  • Metro raises dividend
  • From today’s Globe and Mail

The affordability scale

Toronto and Vancouver rank among the world’s “least affordable” housing markets, a new study shows.

The two Canadian cities have oft been cited as expensive, and out of reach for many. But the Knight Frank report released today puts it in a global context, finding Toronto and Vancouver rank seventh and eighth, respectively, as the least affordable among 32 markets measured as of 2018.

Topping the list, ahead of Toronto and Vancouver, are Amsterdam, Auckland, Hong Kong, Los Angeles, San Francisco and Sydney.

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Notable, too, is that Bangkok, Berlin, Dublin, London, Melbourne, New York, Singapore and Tokyo fared slightly better than Toronto and Vancouver in housing affordability, sitting a group deemed the “second-least” affordable.

The “most affordable” are led by Dubai, Istanbul, Jakarta, Kuala Lumpur, Lisbon, Manila, Rome and Sao Paolo. Among the “second-most” affordable are Brussels, Cape Town, Madrid, Miami, Moscow, Mumbai, Paris and Stockholm.

The real estate consulting group’s findings are based on three main measures, including the ratio of home prices to income, rent as a proportion of income, and real growth in prices compared with that of income.

“Our research shows that there is growing global disparity between house prices and income,” said Knight Frank senior research analyst Flora Harley.

“Across the 32 cities covered, over the past five years, average real house price growth outpaced average real income growth by 16 per cent.”

Some cities “bucked the trend,” Knight Frank said, citing New York and Moscow, for example.

In Vancouver, Ms. Harley added in an interview, real house price growth outstripped real income growth by 46 percentage points over the five years. In Toronto, the corresponding number was 38 percentage points.

“This evident disparity between the two indicators is a clear contributing factor to these cities falling into the ‘least affordable’ quadrant," Knight Frank said of the overall findings.

In Canada, of course, the B.C. and Ontario governments and the federal bank regulator have moved to cool inflated prices and prevent a debt bubble from bursting.

The Knight Frank report comes on the heels of a National Bank Financial study last week, which showed affordability across Canadian housing markets deteriorated again in the fourth quarter of 2018.

Marking the 14th quarter of deterioration, it found, for example, that it now takes 340 months to save for a down payment on a representative home in Vancouver, and 102 months in Toronto.

Housing affordability statistics

City Median price Months of down payment saving Mortgage payment as % of income
Toronto $902,916 111.9 75.8%
Montreal $369,234 37.3 36.5
Vancouver $1,318,768 414.5 101.5
Calgary $494,689 37.4 36.6
Edmonton $422,508 24.7 24.2
Ottawa/Gatineau $428,595 32.7 32.0
Quebec $286,491 27.5 26.9
Winnipeg $321,259 27.7 27.1
Hamilton $598,274 55.3 46.5
Victoria $850,469 124.3 86.2

SOURCE: NATIONAL BANK OF CANADA

It goes without saying that there are major issues surrounding affordability, not the least of which is that many people get priced out of the market, first-time buyers among them.

There’s a broader economic impact, too, Knight Frank said.

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“The issue of how to ensure workers can access housing is relevant to almost all successful urban centres,” said Liam Bailey, Knight Frank’s global head of research.

“In many cases, it is economic success itself that worsens the situation, attracting workers and pushing up the cost of accommodation as demand outpaces the ability of cities to provide new housing.”

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Markets at a glance

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What to watch for today

Apple Inc., which, remember, recently trimmed its outlook, reports quarterly results after markets close.

"Even with the higher price tag there has always been this feeling that Apple has been overreaching with its price points," said CMC Markets chief analyst Michael Hewson.

"We may well be there now given the intense competition in this space, and an asking price of over $1,000 a unit, while acceptable as an expense over a two-year period, starts to become less attractive on an annual basis," he added, referring to the higher-end iPhone.

"It would appear that Apple fatigue may be starting to set in with some of their customers, particularly with the incessant minor upgrades, and lack of innovation elsewhere."

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Markets will also be watching as British Prime Minister Theresa May’s Brexit Plan B goes to a vote.

So watch the pound.

"Hopes that PM May’s Brexit deal will get the backing from MPs that previously opposed it have boosted sterling in recent days," said Liam Peach of Capital Economics.

"We still think that the chances of the deal passing before 29 March are slim, so the currency may give back some of its gains if the deal is rejected again [this] week," he added, referring to the date Brexit is supposed to take effect.

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