RBC Report Says Canadian Housing Becoming More Unaffordable

This article was last updated on April 16, 2022

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A report by the economics department of Royal Bank of Canada, released on Wednesday, narrates that higher mortgage rates and increased house prices have toughened the affordability of Canadian homes for the second quarter in a row. The report pointed out that the impact mainly affected markets for detached bungalows and single-family homes, as they are now becoming only an unaffordable luxury in many parts of Toronto, Montreal and Vancouver. Whereas, Condos suffered only a small decline in affordability, as plenty new supply keeps the prices in check.

The housing affordability measure of RBC, which is tasked to deliberate at what proportion of a typical household’s monthly pre-tax income must go to the cost of owning a home, reported an increase of 0.7 percentage points to 43.3 per cent for detached bungalows; 0.6 percentage points to 48.9 per cent for two-storey houses; and only 0.1 percentage points, to 28 per cent, for condominiums. The report stated that “even though affordability of all housing categories remains within manageable levels overall in Canada, single-family homes represent more of a stretch for home buyers than they have historically, whereas condo apartment affordability is closer to its historical norm.”

In the report, Mr. Wright writes that “by the third quarter, stronger resale activity across Canada heated up home prices a few degrees, though primarily in single-family home categories.” It is added that “at the same time, Canadian bond yields rose in tandem with those in the U.S., climbing in anticipation of the Fed tapering its bond-buying program. These factors translated into the first notable increase in mortgage rates in Canada this summer since the second quarter of 2011 and, ultimately, contributed to a slip in affordability.”