- A decline in property values helped improve RBC's affordability measure for Canada for
the first time in more than three years in Q4/2018
- The improvement was widespread across the country
- Owning a home in Vancouver, Toronto and Victoria is still way out of reach for many buyers
TORONTO, March 28, 2019 /CNW/ - After three years of
deteriorating housing affordability in Canada, a measure of relief arrived for prospective home
owners, according to the latest RBC Economics Housing Trends and Affordability Report.
The broad-based softening of housing market activity helped lower home ownership costs nearly everywhere in Canada, taking down RBC's aggregate housing affordability measure by 0.7 percentage points to 51.9 per cent
last quarter. This measure is calculated as a share of household income. A lower number means that buying a home is more
affordable.
Still, the fourth-quarter relief barely made a dent in Vancouver and Toronto where affordability remains at crisis levels. Owning a home in both of these markets, as well as in
Victoria and increasingly Montreal, is a huge stretch for
ordinary buyers.
Across the rest of the country, however, housing affordability levels are generally within historical norms. The affordability
strains present in Canada are still confined to a few—but large—markets.
The good news is that the dip in ownership costs in the fourth quarter is unlikely to be an aberration.
"We have lowered our profile for future interest rates in light of disappointing economic developments since the late stages
of 2018," said Craig Wright, Senior Vice-President and Chief Economist, RBC. "Furthermore, we also
see very little scope for home prices to increase nationally this year."
With tight labour markets poised to keep household income growing, the stars are aligning for more affordability relief in the
period ahead.
Affordability crisis magnifies Vancouver market correction
Much of the improvement in RBC's aggregate affordability measure came from a fall in prices in Vancouver, where the market is now in full-blown correction mode. Home resales have plummeted 58 per cent
since early 2016 with no signs of a turnaround so far in 2019. But with Vancouver ownership
costs still representing 84.7 per cent of household income, the market is still a long way from ending the affordability
crisis.
Owning a home still a stretch for Toronto buyers, despite market cooling
In Toronto, owning a home remains a huge stretch for many buyers. Despite a
significant cooling to the Toronto housing market, RBC's aggregate measure (66.1 per cent)
continues to be near historical highs. RBC Economics does not expect the market to reverse its two-year, 31 per cent sales
decline any time soon. Furthermore, it is expected that prices will likely stay flat overall this year.
Decade-low affordability not an obstacle for Montreal buyers
With a vibrant economy and increasing international interest, homebuyer demand has been solid in Montreal. Property values are going up, but at a controlled pace. As a result, housing affordability is
eroding gradually to levels that could potentially pinch buyers—though so far they haven't shown any sign of balking. RBC's
aggregate measure of 44.5 per cent is near a decade high.
Buying a condo a bigger step up than ever from renting
Intense affordability pressures present in Canada's largest markets over the past few
years have boosted demand for lower-priced housing options—mainly condos. The catch has been, however, that condo prices have
risen sharply, which eroded condo affordability. Over the past year, condos' affordability advantage has narrowed: RBC's
affordability measure for condos in Canada increased by 2.8 percentage points compared to only
0.9 percentage points for single-detached homes. The appeal of condo ownership is also diminishing relative to renting an
apartment in Canada's priciest markets. Buyers of an average condo in Vancouver, Toronto, Victoria and
Montreal pay a premium of more than $900 per month relative to
renting a two-bedroom apartment. That premium has ballooned in the past three years. Buying a condo is a bigger step up from
renting than it's ever been in these cities.
About RBC
Royal Bank of Canada is a global financial institution with a purpose-driven,
principles-led approach to delivering leading performance. Our success comes from the 84,000+ employees who bring our vision,
values and strategy to life so we can help our clients thrive and communities prosper. As Canada's biggest bank, and one of the largest in the world based on market capitalization, we have a
diversified business model with a focus on innovation and providing exceptional experiences to our 16 million clients in
Canada, the U.S. and 33 other countries. Learn more at rbc.com.
We are proud to support a broad range of community initiatives through donations, community investments and employee volunteer
activities. See how at rbc.com/community-sustainability.
SOURCE RBC
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