Homeownership got further out of reach for the average Canadian family over the summer.
According to a new report from the Royal Bank of Canada, higher prices and a rise in mortgage rates set the stage for a second consecutive quarterly reduction in housing affordability.
In fact, housing affordability — or more appropriately, unaffordability — in the third quarter rose modestly for all housing types relative to the previous three months (an increase represents a deterioration in affordability). But as always, the numbers vary significantly between housing types and regional markets.
Looking at the national picture, RBC’s measures show the average detached-bungalow moved up 0.7 percentage points to 43.3 per cent. That means the average household would have to commit 43.3 per cent of its pre-tax income to be able to afford a bungalow at current market values — including mortgage payments, utility bills and municipal taxes.
For two-storey homes, the affordability reading rose 0.6 of a percentage point to 48.9 per cent. Condos also saw a modest decline in affordability, climbing 0.1 of a percentage point to 28 per cent of pre-tax income.
That’s the national picture, now let’s look at some notable regional numbers…
Lotus Land continues to be the country’s most expensive market and affordability deteriorated further during the third quarter of 2013. According to RBC’s data, the average household now has to devote 84.2 per cent of its pre-tax income in order to be able to afford a detached-bungalow — a 2.0 per cent increase over the second quarter. (Tweet this stat)
In stark contrast to Vancouver, Calgary maintained its standing as one of Canada’s most affordable housing markets, despite seeing a deterioration in affordability between 0.2 percentage points and 0.7 percentage points. A detached-bungalow will only take up 33.7 per cent of the average household’s pre-tax income. (Tweet this stat)
The share of household income needed to cover the costs of owning a home at current market prices in the Toronto area: 55.6 per cent for bungalows, 63.7 per cent for two-storey homes, and 33.8 per cent for condos (tweet this stat). The last measure means condos actually became more affordable in Toronto over the summer, albeit by a marginal 0.1 of a percentage point.
Affordability in Montreal, or any lack thereof, does not appear to be a major impediment at this point in general, says RBC. However, owning a two-storey home at current prices would take up 50.6 per cent of the average household’s income (tweet this stat). RBC’s measures rose slightly between 0.2 percentage points and 0.9 percentage points in the third quarter.
While RBC’s affordability index accounts for mortgage payments, utility bills and municipal taxes, it does not factor in condo maintenance fees. With that caveat in mind, here’s a look at the breakdown of condo affordability across Canada.
If you’d like to delve deeper into the numbers, the full report can be seen here.