Vancouver, Toronto markets drive decline in housing affordability: RBC
Price increases likely to continue in near term, report says
Housing affordability in Canada has continued to erode in the first three months of the year, with Toronto and Vancouver featuring prominently in that decline, according to a new report from RBC.
Thetwo housing hot spots have grown substantially lessaffordable, although the change was not as pronounced in most other parts of the country, the bank said in its latest quarterly look at the housing market.
Rising house prices were the main cause for the decline in affordability, especially in the single-detached home segment. However, in Calgary and Edmonton, which have been affected by the decline in oil prices,slipping income was the main factor behind reduced affordabilityin those markets.
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Meanwhile,Winnipeg, Reginaand Saskatoon actually went against thetrend and became more affordablefor some or all housing categories in the January-March quarter.
'Out of reach'
For the Vancouver area, RBC said owning a single-detached home at market prices has "become out of reach for all but just a minority of higher-income households."
RBC's affordability measure shows the proportion of median pre-tax household income required to pay formortgage payments, property taxesand utilities based on the average market price for a dwelling.
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The bank said that the affordability measure for the single-detachedcategory in Vancouver rose by 9.9 percentage points to 119.5 per cent, making itthe worst ever recorded anywhere in Canada.
Stretched affordability
In Toronto, by comparison, it wouldtake 71.7 per centof a typical household income to cover ownership costs at market prices in the first quarter.
RBC characterized affordability in the Toronto's single-detached home segmentas "significantly stretched," but said conditions in the condominium market were "much less severe."
The hot housing marketsin Vancouver and Toronto prompted warnings from some quarters. TD has said the markets are ripe for correction," while the Bank of Canada has said that house price gains in the two regions are unsustainable.
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However, RBC said it doesn't expect a change in the country's divided housing situation soon, as resale activity and demand in Vancouver and Toronto are still going strong.
"We expect such market conditions to fuel further rapid price increases in Canada's hottest markets in the near term," RBC said."This would mean that owning a home especially a single-detached dwelling at market price is likely to become even less affordable in those markets."