RBC Housing Affordability Report shows “well-balanced” markets. Mortgages affordable for many

The majority of markets across Canada saw a rise in ownership costs relative to household income in the first quarter of 2016, according to RBC’s most recent Canadian Housing Affordability report.
Housing affordability is the cost of owning a home at market price as a share of household income, so a higher number means less affordable housing. In the first quarter, RBC’s aggregate measure for housing affordability in Canada rose 0.8 percentage points to 47.1%, the highest level since 2010. Deterioration in the Canada-wide condo apartment affordability measure was more modest, as it rose 0.4 percentage points to 35.4%.
Although the story of the soaring prices in Vancouver-Toronto story is one we’ve all heard, Robert Hogue, Senior Economist for RBC Economics Research, was still surprised at one aspect of the report.
“The one surprise to me was the speed at which affordability deteriorated in Vancouver. It’s not a new situation in the sense that this is a very, very tight market, but how quickly prices have appreciated, particularly earlier this year, is a bit of a surprise and the impact that it’s had on affordability.”
Hogue says that single detached homes are generally not possible for buyers looking to get mortgages in Toronto and Vancouver, but there’s still plenty of room to get into the housing market. “There are still relatively more affordable options in the form of condos . . . at the provincial level in the case of Ontario, it’s been dictated to favour more higher-density development. So for first-time buyers, this is pretty much becoming the norm as the more viable ownership option.”
Generally, home price increases were the main factor contributing to higher ownership costs, although in Calgary and Edmonton, affordability slipped mainly due to a decline in household income. In the Vancouver area, the affordability measure rose to 87.6%, the worst ever recorded anywhere in Canada.
News isn’t all doom and gloom, though. The report shows that overall, markets across the country are “well-balanced” and that “housing affordability is not a major obstacle to home ownership in Canada.” In fact, Winnipeg, Regina, Halifax, and Saskatoon even saw improved affordability. Only time will tell if factors such as job development in markets across the country will draw young people away from the big cities on the coasts as they look for more affordable places to buy a home and take advantage of today’s low mortgage rates.
Apart from Toronto and Vancouver, which continue to “defy expectations for a slowdown” and “crush” affordability respectively, the aggregate measure for Victoria, B.C. rose throughout 2015 and into 2016, representing the third-largest in the country.

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