Housing affordability improved in most regions last quarter: RBC report

Houses became more affordable nearly everywhere in Canada in the fourth quarter of 2018, according to the latest RBC Economics Housing Trends and Affordability Report.

RBC’s aggregate housing affordability measure—the share of household income spent on housing—dropped 0.7 percentage points to 51.9% in the quarter, the company said in a release. This came after three straight years of deteriorating affordability in Canada.

Given the current economic climate, RBC does not predict an increase in house prices in the near future.

“We have lowered our profile for future interest rates in light of disappointing economic developments since the late stages of 2018,” Craig Wright, RBC’s senior vice-president and chief economist, said in a statement. “Furthermore, we also see very little scope for home prices to increase nationally this year.”

But RBC noted housing affordability in Vancouver and Toronto remain at “crisis levels.”

RBC said the Vancouver market, where home prices have fallen, accounted for much of the improvement in its affordability measure. It noted the city is now in “full-blown correction mode,” with resales plummeting by 58% since 2016 with “no signs of a turnaround so far in 2019.” But owning a home in Vancouver is still costly, eating up 84.7% of household income.

In Toronto, where sales have declined by 31% over the past two years, RBC said the aggregate measure of housing affordability remains at “near historical highs” at 66.1%, and predicted that prices would likely remain flat through 2019.

Read the full report here.

Staff

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