Owning a home is like a good Hollywood movie – it has lots twists and turns and it often goes over budget.
The new affordability report released by the Royal Bank of Canada this week offers proof of both, with the attainability of homeowner slipping again.
In particular, bungalows saw a 0.3 per cent increase in price relative to income, rising to 42.7 per cent, while two-storey homes increased by 0.4 per cent. Condos remained flat at 27.9 per cent.
But there is some light at the end of the tunnel for Canadian buyers. Many have been undeterred by this news, and continue to forge ahead with making new deals. As one expert explains, there are still some positives out there that will drive buyers’ interest.
“I don’t think people are making decisions about purchasing based on a report,” says Mortgage Intelligence agent Kim Gibbons. “People are still buying because of low interest rates. In Toronto, for instance, rentals are very expensive now, and you’re basically paying the same (price) if you were to purchase.”
Although affordability is an issue right now, Gibbons believes that this scenario will eventually return to normal, as she notes the price increase is part of a cycle most housing markets experience.
“I think that there’s going to be some leveling off at some point,” she says. “It’s just a cycle that we’re going through, and the next cycle to hit is for the prices to come down and become more affordable for consumers.”
One element that won’t be affected by rising prices is mortgage rates. Gibbons says these are more dependent on other factors rather the performance of home prices.
“Fixed rates are dictated by the bond market, and variable rates are dictated by the economy and the Bank of Canada,” Gibbons explains. “The RBC report has no bearing on where interest rates are going.”