Canada's Housing Affordability Streak Continues, Driven by Condo Market
Housing affordability in Canada has improved for an eighth consecutive quarter in the final three months of 2025, marking the longest streak of improvement on record. However, new data reveals that these gains have been driven disproportionately by the condo market rather than the broader housing stock, raising questions about the sustainability and equity of the recovery.
National Trends Show Mixed Progress
According to the latest Housing Affordability Monitor from the National Bank of Canada, while national affordability improved again in the fourth quarter, housing costs remain far above historical averages. The mortgage payment on a representative home fell to 51.6 percent of median household income, which is the lowest level in nearly four years but still well above the long-term average of 40.5 percent.
Beneath the headline improvement, the condo market is doing much of the heavy lifting. Nationally, affordability improved by 0.6 percentage points for condos in the quarter, compared to a 0.4-point improvement for non-condo homes. This pattern highlights a significant divergence in market performance.
Major Cities Exhibit Similar Patterns
In Toronto, the mortgage payment for a representative condo declined 0.6 percentage points in the quarter to 41.4 percent of income, while non-condo affordability improved by 0.7 points but remained elevated at 71.7 percent. Vancouver showed a similar trend, with condo affordability improving by 1.0 percentage point, bringing the mortgage burden to 49.9 percent of median household income, while non-condo homes still required 114.0 percent of median income.
"Most of the improvements in the last year have occurred in the markets that were the most stretched, rather than in areas with relatively more affordable housing," the report stated. Within those markets, the adjustment has been most evident in condos, where prices have softened more materially.
Drivers of Affordability Gains
Much of the improvement in affordability was attributed to income growth rather than lower borrowing costs. Median household income rose 0.8 percent in the quarter, outpacing the 0.4 percent increase in home prices, while benchmark five-year mortgage rates rose just four basis points.
"With this latest movement, borrowers are financing at rates approximately 22 basis points lower than a year earlier," the report noted, though it added that "income gains contributed more to the improvement in the quarter than changes in interest rates."
Challenges and Disparities Persist
The condo-led improvement in affordability occurs even as buying in major cities remains more expensive than renting. In Toronto, purchasing a two-bedroom condo still carries a 19.5 percent premium compared to renting, while Vancouver's premium stands at 32.0 percent, both well above historical averages.
Outside Canada's largest markets, condo affordability is already near long-term norms. In Calgary, the condo mortgage burden fell to 22.6 percent of income, while Edmonton's declined to 17.8 percent, among the lowest readings nationally.
National Bank cautioned that while affordability has improved for two years running, the gains remain uneven and concentrated in market segments where prices have adjusted most. Detached and semi-detached homes continue to absorb a disproportionate share of household income, limiting the extent to which headline improvements translate into broader access to ownership.
This analysis underscores the complex dynamics shaping Canada's housing market, where affordability gains are real but narrowly focused, leaving many potential homeowners still facing significant barriers.
