canadian-housing-affordability Photo: Fabian Blank/Unsplash

The income support the federal government has provided to Canadian households since the pandemic’s early days lifted household disposable income to a point that housing has actually become more affordable across the country.

RBC, which published its second quarter Canadian Housing Affordability Measure earlier this week, said that Canadian households received more money from programs like CERB than they lost in wages as a result of the pandemic.

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According to the bank’s analysis, household disposable income rose 11 percent in Canada from April to June. Household purchasing power is a key element in how RBC determines affordability in housing markets across the country and at the national level.

“Widespread lockdowns to contain the spread of COVID-19 delivered the biggest, most sudden shock in generations to Canada’s economy this spring,” wrote RBC Senior Economist Robert Hogue.

“But they also prompted unprecedented government action to financially support households affected by the pandemic. The net result of it all has been a dramatic shift in home resale activity from spring to summer, and a (perhaps surprising) material improvement in housing affordability,” he continued.

The bank, which measures affordability in terms of the share of household income needed to cover homeownership costs, said that the national affordability measure for 2020’s second quarter was 47.3 percent. This means an average household would need to dedicate 47.3 percent of its income to cover ownership costs. That’s down 3.3 percentage points compared to the previous quarter and marks RBC’s best affordability reading in four years.

Beyond the huge financial support measures, Hogue said lower mortgage rates and a decline in household utility costs helped further improve the housing affordability picture nationwide in the second quarter.

While the affordability measure improved in all markets monitored by the bank, Hogue was quick to note that this doesn’t mean notoriously expensive housing markets like Toronto and Vancouver have suddenly become accessible to broad swaths of buyers.

“Owning a home in Vancouver, Toronto and Victoria continues to be a huge stretch for an average household despite significant improvement in the second quarter,” the economist wrote.

“The bar also remains high in Montreal and Ottawa. Affordability stress in these large markets is more much intense in the single-detached home category where prices are steepest. Condo apartments, on the other hand, are a generally more achievable option, especially for first-time buyers,” he added.

That was not the only caveat Hogue included in his commentary.

With government income support programs winding down or changing, the affordability boost observed in the second quarter will prove to be temporary.

As households gradually move back to income levels seen in the pre-pandemic period and home prices continue to rise, the significant second quarter gain in affordability will be rolled back, Hogue said.

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