Canada vs United States - Which is more affordable?
While Canadians pride themselves on everything from universal health care to our abundant natural resources, when it comes to housing affordability, our southern neighbours may be well ahead of us.
According to Oxford Economics 2021 Q1 North American Housing Affordability Index, Canadian cities like Toronto, Vancouver and even Hamilton, Ontario are less affordable than globally influential American regions like New York City and Los Angeles.
The North American Housing Index creates ratios based on the median housing price to the median incomes of households in the area. To simplify, ratings of 1 or more suggest that if you are the median property owner, you will not be able to afford your home based on your income. REMAX notes that this longer-term trend started to appear in 2006 when Canadian housing prices began skyrocketing compared to the US.
Although no one knows for sure, many theories have been proposed as to why Canadian homes have consistently become less affordable than their US. Some point to Canada’s greater regulation, which many feel impedes homebuilders, especially in cities like Toronto and Vancouver. For example, Ed Glaeser and Joseph Gyourko, two US professors, argue in their research that when “housing prices are highly regulated, housing prices are higher and population growth slower compared to demand.”
Others point to demographic or cultural factors, including that Canadians are more likely to choose to live in urban areas with high price tags.
Of course, across both the US and Canada there is a wide range of property markets for you to choose from. In Canada, Quebec City and Edmonton rank as the most affordable major cities, while in the US, Chicago and Columbus are most affordable.
And while some of these findings may deter North Americans from purchasing homes, the report also notes that there are a few bright spots in the market. Regina, Saskatchewan is the most affordable of all measured Canadian regions with an average home selling price of $300,000. In the US, an average home in Detroit, Michigan will set you back $70,000 with many bargains even lower.
In conclusion, it looks like whichever country you choose to make your home, you should look carefully before settling down and purchasing a property. What may cost a modest sum in one region may be a fortune somewhere else.