Affordability Relief Is Back, But Investors Should Read the Fine Print
Canadian housing looks more affordable than it has in four years, but investors should resist reading that as a clean buy signal. The latest affordability improvement is real, yet it sits inside a market that remains historically stretched, uneven by property type, and increasingly dependent on income growth rather than lower borrowing costs.
According to Better Dwelling’s coverage of RBC’s Housing Affordability Measure, ownership carrying costs fell to 53% of median household income in Q1 2026. That is down 1.4 percentage points from the previous quarter, 3.9 points lower than a year earlier, and 10.6 points below the record high reached in late 2023.
For buyers and investors, that sounds constructive. The more important comparison is historical. RBC’s measure remains far above its long-term average of 41.9%, and roughly aligns with levels seen around the early 1990s housing bubble. In practical terms, the market is improving from extreme stress, not returning to normal.
The strongest signal is not national affordability. It is segmentation. Condo apartments saw carrying costs fall to 35.2% of median income, bringing them close to pre-pandemic conditions. Detached homes moved in the opposite direction, with costs rising to 59.2%, up 4.2 points from a year earlier. This is a meaningful divergence for capital allocation.
The affordability story is no longer about Canada as a whole. It is about which asset class, in which city, has repriced enough to restore usable demand.
For rental investors, that points toward a more selective condo opportunity, particularly in markets where prices corrected and rents remain supported by population growth, household formation, and limited purpose-built supply. Toronto is the obvious case. Its condo affordability has improved enough that ownership costs now sit near Montreal’s, despite Toronto’s long-standing reputation as the more expensive market.
That shift matters. If a market that UBS has repeatedly flagged as one of the world’s more elevated housing markets now shows better condo affordability than Montreal, investors should not assume smaller cities are automatically cheaper or safer. Halifax, for example, is now within a few affordability points of Toronto condos. That suggests some secondary markets may have absorbed price growth without the same depth of local incomes or liquidity.
The risk is that the window for further affordability gains may be closing. RBC noted that the typical Canadian home price rose 1.9% in the quarter to $792,000, up 3.9% year over year. If prices stabilize or climb while interest rates stop falling, affordability improvement must come from income growth. In a softer labour market, that is a fragile assumption.
For investors, the lesson is discipline. This is not a market to buy simply because conditions are less bad than they were in 2023. Underwriting should still stress-test higher carrying costs, vacancy risk, insurance, taxes, condo fees, and the possibility that rent growth moderates. The best opportunities will be assets where the purchase price already reflects the new financing environment, not listings still priced for the low-rate era.
The takeaway is clear: affordability relief improves liquidity and may support demand in selected condo markets, but it does not eliminate valuation risk. Investors should focus on cash flow resilience, local income strength, and relative repricing. In this cycle, selectivity is not caution. It is the strategy.
Source: Better Dwelling
