Wright and Hogue (2014) reported that the affordability of housing in Canada had only improved mildly in the fourth quarter of 2013. While this mild increase was attributed to a considerable increase in home ownership and management costs in recent years, it has also been observed that prospective homebuyers are often required to allocate a significantly smaller proportion of their annual income in order to purchase a home at the existing market value owing to the relative strength of income gains to subprime mortgages. It has also been reported by the Royal Bank of Canada that household income had, during the same period, outpaced the monotonic rise in the costs of carrying mortgages. The same had for long been kept under control by property appreciation; it has however been attributed to tamer measures in most housing markets in and around the country, and the increase in the total number of marginal mortgage rate advances (refers to the first significant increase in more than two years in the third quarter).
Alexander et al (2013) had predicted the long-run rate return on Canadian housing, citing a wide variety of characteristic events in the Canadian and world economy. The salient features of the same are as follows:
With the apparent economic meltdown in the Canadian housing market owing to the after-effects of the financial crisis of 2008, many prospective home-buyers are speculative about the future value of their homes. The reason for this has been attributed to the fact that real estate is the largest financial asset most Canadians have in their possession.
The outlook on the housing market is generally speculative and cyclic in nature, due to the observed pattern of the housing market being prone to several frequent cyclical ups and downs. Experts at TD Economics, including Burleton (pp. 38) have been of the opinion that the housing industry should embark on a “gradual, modest, downward adjustment” by the end of 2017.