Toronto, Vancouver becoming more unaffordable says RBC

Housing affordability is remaining stable across most of Canada according to the latest assessment from Royal Bank of Canada. The mortgage lender’s quarterly Housing Trends and Affordability Report says that affordability has been fairly flat over the last five years with the exception of Toronto and Vancouver.

Those two markets saw increased prices again in the second quarter of 2015 especially for single detached houses, widening the gap between them and the rest of Canada.

RBC chief economist Craig Wright commented that the heat in the Toronto and Vancouver markets have dented affordability overall in Canada: “Outside of Toronto and Vancouver, affordability levels are close to, or slightly better than, long-term averages, which suggests that housing affordability remains fairly neutral in most of Canada with limited signs of undue stress being exerted on homebuyers.”

RBC sees the situation continuing in the near term unless there is a rise in interest rates, which would then hit affordability nationwide: “However, we expect policy interest rates to remain low in the coming year. This suggests that any near-term risk would stem from weakness in the labour market which has fortunately been holding up well to date” Wright said.

Overall the bank sees a strong year for the housing market in 2015 with house prices increasing by an average of 4.6 per cent. There are of course regional variations which can be seen in the full report.

MBN