Photo: James Bombales
Canadian home buyers rejoice — according to a new report from RBC, the housing market is more affordable now than it has been in years.
The bank’s national housing affordability measure fell by 0.2 per cent in the last quarter of 2017 to 48.3 per cent, the lowest level in two years. The number is calculated by measuring the share of household income that would be required to carry the costs of owning a home at market price.
But the good news may be short lived, as the effects of recent policy, such as the Ontario government’s Fair Housing Plan, begin to fade. Toronto’s affordability measure currently sits at 75.1 per cent, having dropped 2.3 per cent in the last quarter.
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“We expect the relief to Toronto ownership costs that ensued from the introduction of Ontario’s Fair Housing Plan to be short-lived,” writes RBC chief economist Craig Wright, in a statement. “Our view is that Toronto prices will bottom out sometime this spring.”
One thing that could worsen affordability in coming months? Rising interest rates. The Bank of Canada hiked the overnight rate to 1.25 per cent in January, and is widely expected to do so again before the end of the year.
“We expect further interest rate hikes through the remainder of this year, which has the potential to stress housing affordability markedly in Canada,” writes Wright.
As for BC, homeownership still seems out of reach for many would-be buyers, as Vancouver’s affordability measure increased by 1.8 per cent to 85.2 per cent last quarter.
“Unfortunately, Vancouver homebuyers are being challenged by the worst affordability levels ever recorded in Canada,” writes Wright. “The costs of owning a home at today’s prices would have represented an astounding 85.2 per cent of a typical household’s income in the fourth quarter.”
He adds that, in the current climate, it’s understandable that the BC government took further steps to address affordability last month.
“In this context, it’s unsurprising that the BC government announced further housing policy initiatives to cool the market in its 2018 budget,” he writes.