William Lew Live-Dream-Play

Call or Text 604-862-1966 | EMAIL info@williamlew.com |

Canadian housing affordability at 30-year-low says RBC

 

by Steve Randall01 Oct 2018

Canada’s housing affordability is at its worst level since 1990 and its going to get worse.

A newly report from RBC Economic Research shows that its aggregate housing affordability measure was 53.9 in the second quarter of 2018, based on the share of household income required for ownership costs including taxes and mortgage payments.

The figure is up from 43.2% just 3 years ago and although house prices are responsible for the initial rise, interest rates are the bigger influence of the past year.

Since Q2 2017, the index has increased 2.6 percentage points and there was a 1.1 percentage point rise quarter-over-quarter. The impact of the mortgage stress test has added to the burden for first-time buyers.

"The grim outlook for prospective home-buyers will likely continue in the near term," said Craig Wright, Senior Vice-President and Chief Economist at RBC. "We anticipate the Bank of Canada will proceed with further interest rate hikes well into 2019. This will keep mortgage rates under upward pressure and boost ownership costs even more across Canada."

Condo affordability worsened more than single-family detached homes, especially in Toronto.

Vancouver, Toronto off-the-scale
Affordability in Toronto and Vancouver remains at staggering levels with an average GTA buyer facing a burden of 75.9% of their income to cover costs, up 1.8pp in the quarter.

In Vancouver, the situation is even worse having risen 8.2pp over the year and 1.6pp in the quarter to 88.4%.

"The prospect of further rate hikes doesn't bode well for Toronto or Vancouver buyers, whether they're on the look-out for a condo or a single detached home," said Wright. "Affordability pressures are likely to become an even bigger issue for them, which we believe will limit how much home resale activity will rebound from its recent cyclical low."

Victoria is also showing strained affordability with RBC's aggregate measure up 2.4pp points to 65% in the second quarter.

Only St John’s saw a slight improvement with other markets generally manageable.

Outlook isn’t great
For first-time buyers the ability to afford a home is not going to get any easier any time soon.

RBC Economics expects intensifying affordability pressures to hold back homebuyer demand in the coming year.

 
The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Real Estate Board of Greater Vancouver (REBGV), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the REBGV, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the REBGV, the FVREB or the CADREB.