It has never been so unaffordable to own a single-detached home in the
Toronto is seeing rapid deterioration in affordability, particularly for
Affordability in the majority of other Canadian markets is improved or
TORONTO, Feb. 29, 2016 /CNW/ - Housing affordability generally remained
stable across Canada in the fourth quarter of 2015, with the exception
of the scorching Vancouver and Toronto markets where soaring home
prices continued to raise the bar on homeownership to ever higher
levels, according to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.
On a national level, housing affordability in Canada deteriorated
slightly in the final quarter of 2015 as RBC's Q4 Housing Affordability
measures continued to highlight marked regional differences.
"The significant rise in homeownership costs in Vancouver and Toronto
had a dominant influence on Canada-wide affordability measures in the
fourth quarter of 2015," said Craig Wright, RBC Chief Economist. "While
prices continue to escalate in Vancouver and Toronto markets, there are
few signs that housing affordability is problematic elsewhere in
Canada. Homes in other markets remain affordable with the situation
either improving or remaining fairly stable," added Wright.
Moreover, within Vancouver and Toronto there is also a clear divergence
in affordability conditions between single-detached homes and condo
apartments. Most of the affordability-related stress is concentrated in
the single-detached segment. Owning a condo apartment, on the other
hand, is still within reach for many households in those two markets.
The RBC Housing Affordability measure captures the proportion of pre-tax
household income required to service the cost of owning a specific
category of home at current market value (an increase in the measure
represents a deterioration in affordability). For example, an
affordability reading of 50 per cent means that home ownership costs,
including mortgage payments, utilities and property taxes, would take
up 50 per cent of a typical household's monthly pre-tax income.
RBC's housing affordability measure for the aggregate of all housing
types in Canada rose by 0.6 percentage points to 46.7 per cent in the
fourth quarter of 2015, the highest level in more than five years. The
slight increase was broadly based across housing categories with the
measure for single-detached homes climbing 0.6 percentage points to
51.3 per cent, and condo apartments moving up by 0.3 percentage points
to 35.2 per cent.
Regional disparities expected to continue
"Current market conditions suggest that housing affordability in
Vancouver and Toronto will stay on a deteriorating path in the near
term. Sellers are very much in control of both markets, and prices are
likely to continue to rise rapidly in the coming months," added Wright.
"Recent changes to mortgage insurance rules aimed at cooling
high-priced markets may slow down price increases at the margin but we
do not believe they will materially reverse current momentum."
Conditions in Vancouver, in particular, show increasing signs of
over-heating in single-detached segments where home prices have
skyrocketed in the past year. With an average price exceeding $1.2
million, single-detached homes have long slipped out of reach for the
average local homebuyer. Purchasing a condo apartment is the only
realistic option for most first-time buyers—although this too has
become slightly less affordable in the last two quarters.
Single-detached home affordability in Toronto continues to slip deeper
into stressful territory for homebuyers; however, conditions are not as
extreme as they are in Vancouver.
The housing affordability situation is much more constructive elsewhere
in Canada. The balance of supply and demand in most other markets
indicates that prices will rise more slowly and affordability measures
therefore are likely to be more stable.
Most of the markets seeing steady improvement in affordability were in
the Atlantic region, where demand-supply conditions have been soft for
some time amid economic and demographic challenges. In Alberta, flat
affordability trends masked weakness in home prices and household
income resulting from the energy bust and provincial recession. Price
declines in markets such as Calgary will likely lead to improved
Note: Changes to RBC's Housing Affordability measures
This issue of Housing Trends and Affordability report includes important
changes to the way RBC reports housing affordability:
We have expanded local coverage to 14 markets from six previously,
thereby offering richer information on regions;
We present a simple, all-encompassing aggregate measure of all housing
categories for each market, as well as separate measures for
single-detached homes and condominium apartments to highlight
distinctive trends; and
The affordability measures are based on new source data for home prices
(supplied by Brookfield RPS) following the discontinuation of price
data earlier sourced from Royal LePage.
Due to these changes, new affordability estimates are not strictly
comparable to estimates reported in previous Housing Trends and
Affordability reports. A more detailed description of changes and their
implications can be found in a note accompanying the full report.
More details regarding provincial and regional housing figures can be
found in the attached fact sheet.
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For further information:
Craig Wright, Chief Economist, RBC Economics Research, 416-974-7457
Robert Hogue, Senior Economist, RBC Economics Research, 416-974-6192
Catherine Hudon, RBC Communications, 416-974-5506