Housing affordability declines in Toronto, Vancouver

Albertans are faring better

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TORONTO – A report by RBC Economics says housing affordability continued to decline in Toronto and Vancouver, while conditions for homebuyers improved in Alberta during the first quarter of the year as lower oil prices caused the real estate market to soften.

RBC says mortgage rate cuts improved the affordability of homes in many Canadian housing markets where prices didn’t accelerate too rapidly.

That offset rapid price growth in Toronto and Vancouver, leaving national affordability levels relatively flat.

RBC says demand in softer markets such as Montreal and Ottawa began to pick up.

The RBC Housing Affordability study measures the proportion of household income that is needed to service the costs of owning a home at current market values.

On a national level, RBC says affordability edged 0.3 percentage points lower for condos to 27.1%, while for detached homes it declined 0.2 percentage points to 47.9%.

The bank predicts that rate hikes from the central bank, which is expected to raise its trend-setting overnight interest rate next year, are likely to erode affordability.

“Exceptionally low interest rates have been a key factor keeping housing affordability levels in a largely manageable state in recent years,” Craig Wright, RBC’s senior vice-president and chief economist, said in a statement.

“The knock-on effect of the anticipated rise in rates would be most visible in high-priced markets.”

One comment on “Housing affordability declines in Toronto, Vancouver

  1. The article initially states Toronto and Vancouver markets’ affordability is in decline even in the low interest rate environment. Then the RBC chief economist essentially states if the interest rate was to go up, it would impact the most visibly high priced markets – likely implying that as interest rate goes up, affordability will decline, especially in the high-priced markets which would definitely include Toronto and Vancouver markets.

    Wow, what breathtaking analysis. Thank you.

    Reply

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