Home ownership costs – driven up by dramatic price increases in Vancouver early last year – continued to drop as 2011 came to a close, according to RBC.
The RBC Housing Trends and Affordability Report said Canadian homebuyers benefited from softer home prices and income gains that helped lighten the load on their budgets in the fourth quarter of 2011 as affordability improved for the second straight quarter.
“The improvement in affordability was modest for the most part, but still significant enough to dial back the deterioration that impacted the market in spring last year,” said Craig Wright, senior vice-president and chief economist, RBC. “As a result, the cost of owning a home at market price represented slightly less of a pinch on household budgets in the fourth quarter. Continued low interest rates in 2012 will help keep housing costs at bay in the near term.”
The RBC housing affordability measure captures the proportion of pre-tax household income that would be needed to service the costs of owning a specified category of home at going market values.
During the fourth quarter of 2011, measures at the national level fell for all housing categories tracked by RBC (a fall represents an improvement in affordability). The two-storey home category showed the most notable improvement.
“At this point, housing in Canada is essentially as affordable as it was a year ago, and only slightly less affordable on average than it has been over the long term,” Wright noted. "All things considered, the housing market is sitting in a reasonably balanced position overall, despite some minor stress being exerted on housing demand.”
While Vancouver and British Columbia saw improvement in homeownership costs, the proportion of a typical Vancouver household’s income that would go towards owning a home is still extremely high.
Housing affordability measure for the benchmark detached bungalow:
Vancouver 86.0 per cent (down 4.6 percentage points from the previous quarter)
Toronto 52.2 per cent (down 0.1 percentage points)
Montreal 40.1 per cent (down 0.7 percentage points)
Ottawa 40.9 per cent (down 0.1 percentage points)
Calgary 36.7 per cent (down 0.7 percentage points)
Edmonton 32.8 per cent (down 0.3 percentage points)
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