Photo: Jeremy Schultz/Flickr
The first quarter of 2015 saw housing affordability deteriorate in the priciest real estate markets in Canada while the rest of the country saw an easing in costs.
The RBC Economics Housing Trends and Affordability Report, released Monday, further emphasized the rift between Toronto and Vancouver – hot housing markets with ever-climbing house prices – and the Prairies, Atlantic Canada and Quebec, where the market is much more moderate.
“Generally speaking, housing affordability remains fairly neutral in Canada with limited signs of undue stress being exerted on homebuyers,” wrote Robert Hogue, Senior Economist at RBC, in the report.
Toronto and Vancouver remain the exceptions, especially in the detached market, although condos did become slightly more affordable.
The RBC Housing Affordability Measures is based on a number of factors including median household income, and the average price for a standard detached bungalow, standard two-storey house and standard condo. For carrying costs, the measure uses a 25 per cent down payment and a 25-year mortgage loan at a five-year fixed rate for its standard.
Put plainly, the higher the RBC measure, the more difficult it is to afford a home. If the affordability measure is 50 per cent, that means that home ownership costs, including mortgage payments, utilities, and property taxes take up 50 per cent of a typical household’s pre-tax income.
The bank warned that the single-detached home affordability in Toronto is “inching closer to risky levels.” The affordability measure for standard bungalows (57.3 per cent) rose up by 0.6 percentage points from the previous quarter, while two-storey homes (67 per cent) climbed up by 1.5 percentage points from Q4-2014. Both reached their highest points in more than 24 years.
“Approaching the 1990 levels may signal that risks are mounting in the Toronto market, because those were associated with a housing bubble at the time and then followed by a steep and prolonged downward correction in prices during the first half of the 1990s,” said Hogue.
However, condo prices remained in check in the city and the increase in completions in the city may continue to keep this portion of the market affordable in the future.
In Vancouver, affordability is expected to deteriorate further in light of accelerating prices experienced this spring. The affordability measure for bungalows rose 2.8 percentage points to 85.6 since the fourth quarter of 2014, the biggest increase seen in three years. Two-storey homes experienced an increase of 0.9 percentage points to 86.9 per cent, while condos fell 0.5 percentage point to 39.6 per cent.
In contrast, the housing affordability measure improved for all housing types in Calgary, with two-storey houses seeing the measure decline by 1.5 percentage points to 32.6 per cent, the biggest drop among all three housing types.
Here’s a closer look at how the affordability measure compares across the country:
Standard two-storey houses
| Region | Q1 2015 Avg price | Qualifying Income, Q1 2015 | RBC Affordability Measure | Q/Q Change in Affordability Measure |
|---|---|---|---|---|
| Canada | $455,000 | $92,700 | 47.9% | -0.2% |
| British Columbia | $715,900 | $132,100 | 72.8% | -0.1% |
| Alberta | $406,800 | $84,200 | 33% | -1% |
| Saskatchewan | $375,500 | $80,100 | 37.9% | 0% |
| Manitoba | $324,500 | $69,600 | 36.9% | 0.3% |
| Ontario | $514,000 | $105,300 | 51.7% | 0.3% |
| Quebec | $321,900 | $68,700 | 41.1% | -0.3% |
| Atlantic | $248,000 | $59,000 | 34% | -0.5% |
| Toronto | $759,800 | $146,900 | 67% | 1.5% |
| Montreal | $397,500 | $82,100 | 47.8% | -0.4% |
| Vancouver | $929,000 | $167,500 | 86.9% | 0.9% |
| Ottawa | $413,700 | $93,600 | 37.1% | -0.6% |
| Calgary | $480,700 | $94,200 | 32.6% | -1.5% |
| Edmonton | $400,100 | $84,100 | 35.4% | -1% |
Standard detached bungalow
| Region | Q1 2015 Avg price | Qualifying Income, Q1 2015 | RBC Affordability Measure | Q/Q Change in Affordability Measure |
|---|---|---|---|---|
| Canada | $409,100 | $82,600 | 42.7% | 0% |
| British Columbia | $689,000 | $125,900 | 69.3% | 1% |
| Alberta | $405,000 | $81,100 | 31.8% | -0.7% |
| Saskatchewan | $339,600 | $71,600 | 33.9% | 0.3% |
| Manitoba | $313,700 | $67,100 | 35.6% | 0.3% |
| Ontario | $454,000 | $92,600 | 45.5% | 0.3% |
| Quebec | $255,400 | $55,000 | 32.9% | -0.3% |
| Atlantic | $221,100 | $51,100 | 29.4% | -0.7% |
| Toronto | $654,200 | $125,800 | 57.3% | 0.6% |
| Montreal | $303,300 | $63,800 | 37.2% | -0.2% |
| Vancouver | $924,700 | $165,000 | 85.6% | 2.8% |
| Ottawa | $406,000 | $89,300 | 35.4% | -0.6% |
| Calgary | $498,400 | $94,600 | 32.8% | -1% |
| Edmonton | $379,400 | $78,100 | 32.8% | -0.8% |
Standard condominium
| Region | Q1 2015 Avg price | Qualifying Income, Q1 2015 | RBC Affordability Measure | Q/Q Change in Affordability Measure |
|---|---|---|---|---|
| Canada | $251,300 | $52,400 | 27.1% | -0.3% |
| British Columbia | $312,400 | $59,700 | 32.9% | -0.4% |
| Alberta | $247,600 | $50,700 | 19.9% | -0.6% |
| Saskatchewan | $250,300 | $52,100 | 24.7% | -0.1% |
| Manitoba | $197,400 | $41,900 | 22.2% | -1.1% |
| Ontario | $278,100 | $58,900 | 28.9% | -0.2% |
| Quebec | $198,000 | $42,600 | 25.5% | -0.1% |
| Atlantic | $195,300 | $43,400 | 25% | 0% |
| Toronto | $371,700 | $74,500 | 34% | 0.2% |
| Montreal | $240,300 | $50,200 | 29.2% | -0.1% |
| Vancouver | $411,700 | $76,200 | 39.6% | -0.5% |
| Ottawa | $269,600 | $59,700 | 23.7% | -0.3% |
| Calgary | $287,100 | $56,000 | 19.4% | -0.6% |
| Edmonton | $224,800 | $47,200 | 19.9% | -1.5% |
Or check out our housing affordability tool.
