Canadian real estate affordability is improving at a record pace—after collapsing at one too. National Bank Financial’s (NBF) Housing Affordability Index shows affordability across the country improved for an 8th consecutive quarter in Q4 2025. The bank’s data reveals meaningful progress, but the core problem remains: Home prices are still deeply unaffordable, even after the fastest affordability improvements on record.
Canadian Real Estate Affordability Improving At Record Pace, But Still Far From Historic Norms
Canadian housing affordability is improving faster than ever, but has a long way to go. Monthly mortgage payments as a percentage of income fell 0.4 percentage points to 51.6% in Q4 2025, 4.5 points lower than last year and 10.4 points below the record high reached in Q4 2023. After falling for 8 consecutive quarters, the market hasn’t been this affordable in roughly 4 years.
“This was the longest streak of improving affordability ever recorded in the country,” explains NBF.
Despite record progress, affordability is even more strained than usual. Their calculations show the long-term average is 40.5% of the median income since 2000, indicating the market is still 27% less affordable than usual. Keep in mind that the affordability threshold is 30% of income, so affordability has been evasive over the long run—but it’s even worse than usual.
Income Gains Fuel Affordability Gains Despite Rising Home Prices
Improved affordability isn’t being driven by home prices. NBF notes that seasonally adjusted home prices rose in Q4 2025, according to their methodology using property registry data. However, the five-year benchmark mortgage rate declined four basis points, reversing the Q3 increase. “Income gains, however, contributed more to the improvement in the quarter than changes in interest rates,” explains the bank.
Median household incomes rose 0.8% in the quarter, double the rate of home prices. “Although incomes have lagged home price growth in recent years, the gap has been narrowing, and the home-price-to-income ratio now stands at its most favourable level in five years,” says NBF.
While NBF doesn’t get into this, the income trend has been influenced by recent changes to immigration. The reduction of the country’s non-permanent resident (NPR) population means fewer young adults, who tend to be on the lower end of wages. Removing them provides a lift to the population that skews slightly higher, but may not translate into a material improvement for buyers.
Canadian Affordability Gains Driven By The Frothiest Markets
National improvements were also heavily concentrated in the most stretched real estate markets. Erosion in relatively affordable markets like Quebec City and Ottawa is more than offset by the sharp drops in the Big Two—Vancouver and Toronto.
Vancouver remains the least affordable market, with a typical mortgage eating up 85% of the median income in Q4 2025. That’s an improvement from the peak of 103.9% in Q4 2023, but the city remains 18.9 points above its historical average of 65.4%.
Toronto has made an even sharper correction than Vancouver. A mortgage currently requires 69.8% of the median household income in Q4 2025, falling 19.6 points over 8 consecutive quarters. This is still 15.6 points above its long-term average of 54.2%, over half the median income. For those who recall Toronto being much more affordable, that’s because it was.
The long-term average isn’t volume adjusted, allowing recent stagnation to drag the index higher. Despite near record-low sales, it will drag the average higher the longer it stays at this level.
On the topic of superficial improvements in Toronto, there is also the matter of young adults fleeing the region. A lack of affordability is driving early career households outside of the greater region, helping to skew averages to more experienced workers. The city now has more seniors than children, which ultimately means a very different shift than most imagine. Yes, it’s more affordable to local incomes—but the demographic least likely to buy a home is driving the gains.
Calgary deserves a special mention this quarter. The region made its fastest quarterly improvement since early 2023, falling to 39.3% in Q4 2025. It remains just 3.3 points above its historical average of 36%, but as recently as the early 2020s it had plunged below 20%.
There are signs of affordability improvement, driven by lower mortgages and higher incomes. However, it’s unclear if this improvement is a material gain for buyers or largely superficial due to methodological quirks. Material improvements will result in rising sales in the coming quarters. Improvements driven by composition change won’t change much. Out-of-reach home prices don’t suddenly fall into a buyer’s budget just because there are fewer people that make less around them.
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