Brisk demand for single-family homes that is pushing up prices across the GTA caused housing affordability to slip in the first quarter of 2012 and shows “no signs of easing at this point,” says a new report by RBC Economics released Tuesday.
In fact, “affordability headwinds” are likely to increase into next year if interest rates start to rise, notes the latest Housing Trends and Affordability Report.
“The seller remains king in the Toronto-area housing market with brisk buyer demand outstripping the availability of homes for sale,” says senior economist Robert Hogue. “That said, if affordability continues to deteriorate over the next year, we expect this will have a cooling effect on the lively resale market and restrain homebuyers to a certain degree.”
The cost of carrying the benchmark detached home in Toronto ate up 53.4 per cent of pre-tax household income in the first quarter of this year, up 1.2 percentage points from the previous quarter, the report notes.
Condo costs also edged up half a percentage point to 34.4 per cent.
That’s still a far cry from the 88.9 per cent it costs to carry the same resale property in Vancouver which, despite a slowing of sales in what has long been Canada’s hottest real estate market, was up 3.1 percentage points from the previous quarter.
Under the affordability measures, first compiled in 1985, the higher the reading, the higher the costs of home ownership, including mortgage payments, utilities and property taxes.
Those increases in Toronto and Vancouver outstripped national increases that ranged from 0.3 to 0.8 percentage points.
“The market is speaking. There hasn’t been any collapse so far,” says Hogue, a reference to suggestions in the media, and from Ottawa, that Toronto’s housing market is dangerously overheated, especially in the condo sector.
“I think what will be a very strong test is once interest rates start rising and we see how much demand has been borrowed from the future because of exceptionally low interest rates.”
May 29, 2012 05:05:00
Susan Pigg
Business Reporter
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