Affordability a Challenge in Hamilton Housing Market, Compounded by Stagnant Wages

Affordability remains the most challenging part of entry to the Hamilton housing market, with ownership rates in the city steadily declining over the census years, falling from a high of 71.6 per cent in 2006 to a low 68.6 in 2021, according to Statistics Canada Census Data. Hamilton-Burlington reported the highest increase in overall average price in the 15-year period, climbing more than 240 per cent from $253,887 in 2006 to $879,446 in 2021.

Solid population growth in that 15-year span has placed pressure on housing supply, including the most recent five-per-cent increase pushing the Hamilton CMA’s population to just over 785,000 in 2021. Much of this growth has been spurred by Torontonians seeking access to more affordable home ownership, resulting in significant upward pressure on average price in recent years.

Stagnant wage growth in the city, however, has made it increasingly difficult for local buyers to enter the housing market. Even a condominium priced at $425,000 can be a challenge for a single first-time buyer, given unrecoverable costs such as maintenance and taxes. Some would-be buyers can afford to make the leap into ownership but opt to rent to avoid common stressors associated with home ownership, including the recent volatility of borrowing costs, fluctuations in housing values, and the cost of maintenance, repairs and upkeep. Rentals have become an increasingly common option amongst younger generations, who may or may not use the opportunity to save for a later downpayment on a home.

Micro condos, which have been a significant component of the Hamilton housing market in recent years, have list their appeal as builders and developers come to realize that demand is limited for the product. Large condo units are selling and are in greater demand, but they are few and far between. Focus has shifted on construction that is more communal as a result, allowing for several generations to live in one larger unit.

Movement to urbanized areas with cache outside the city core has been a trend, including markets such as Ancaster, Dundas and Port Dalhousie. These areas typically offer a vibrant culture and sense of community. Flight to affordability has occurred simultaneously in the region, with migration occurring to markets further afield including Haldimand County and Beamsville, where housing values are more affordable.

The stress test, introduced in 2018, also proved a barrier to home ownership, despite softer housing values in 2018, 2019 and 2020. Pent-up demand was unleashed during the pandemic as interest rates fell to historic lows, creating one of the frothiest markets on record. Buyers moved off the sidelines and jumped into the market to take advantage of lower rates. Although the stress test likely proved beneficial during the pandemic, it has likely outlived its usefulness.

Home ownership will remain top of mind, but the industry may have to step up its efforts to help younger buyers achieve their goals. Meanwhile, ownership levels in the Hamilton housing market remain slightly above the national average, thanks to its relative affordability compared to much of the neighbouring Greater Toronto Area.