Led by “sky-high” prices in Vancouver, housing in Canada has become less affordable for a second quarter running.
The latest Housing Trends and Affordability report released Monday by RBC Economics Research once again singled out the British Columbia city as the least affordable in the country.
For the second quarter of 2011, Vancouver residents could expect to spend 92.5% of their pre-tax income on homeownership costs, including mortgage payments, utilities and property taxes.
“Vancouver’s housing market is without a doubt the most stressed in Canada and is facing the highest risk of a downturn,” said Craig Wright, senior vice-president and chief economist with RBC.
The report found most housing markets in the country are still reasonably affordable or merely slightly unaffordable with the costs of homeownership hovering around historical norms.
“However, extremely poor and rapidly eroding affordability in the Vancouver-area market is somewhat skewing the national picture,” Mr. Wright said.
Country-wide, the percentage of household income required to own the benchmark detached bungalow used in the report increased 1.7 percentage points to 43.3%. The higher the reading on the the affordability measure, the more it costs to own a home based on going market values.
For a condo, it went up 0.8 percentage points to 29.2% and for a two-storey home, it increased 1.8 percentage points to 49.3%.
The report notes that since the beginning of the year, increases in housing costs in the Greater Vancouver Area have directly accounted for up to one third of the nation-wide changes.
Other markets like Montreal, Ottawa and Toronto also became less affordable in the quarter. The benchmark measure for a detached bungalow increased in all three cities, with Toronto’s bump of 2.0 percentage points pushing it over the halfway mark to 51.9%.
Montreal was up 1.4 percentage points to 42.6% and Ottawa was up 1.3 percentage points to 41.2%.
The measure also increased in Calgary and Edmonton, which were both up 0.6 percentage points to 37.1% and 33.8% respectively.
In contrast to these increases, the costs of owning a detached bungalow in Vancouver shot up 10.4 percentage points to reach the 92.5% level.
The silver lining, Mr. Wright suggests, is that due to recent stress in global financial markets, an interest rate hike at the federal level is no longer expected until the middle of 2012, according to RBC’s projections.
“Housing affordability in Canada may not deteriorate as quickly or by as much as we previously expected,” he said.
However, he said the future for housing prices remains uncertain, as the delay in the interest rate increase could prompt buyers to remain active for longer, extending the current upward momentum in prices.
Source: The Financial Post
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