Toronto, Vancouver becoming more unaffordable says RBC

Housing affordability is remaining stable across most of Canada, according to the latest assessment from Royal Bank of Canada.

The bank's quarterly Housing Trends and Affordability Report found that affordability has been fairly flat over the last five years, with the exception of Toronto and Vancouver.

Those two markets saw increased prices again in the second quarter of 2015, especially for single detached houses, widening the gap between these cities and the rest of Canada.

RBC chief economist Craig Wright said that the heat in the Toronto and Vancouver markets has dented affordability overall in Canada.

“Outside of Toronto and Vancouver, affordability levels are close to, or slightly better than, long-term averages, which suggests that housing affordability remains fairly neutral in most of Canada with limited signs of undue stress being exerted on homebuyers,” he said.

RBC sees the situation continuing in the near term, unless there is a rise in interest rates, which would then hit affordability nationwide. “However, we expect policy interest rates to remain low in the coming year," said Wright.

"This suggests that any near-term risk would stem from weakness in the labour market, which has fortunately been holding up well to date."

Overall, the bank sees a strong year for the housing market in 2015 with house prices increasing by an average of 4.6%. There are, of course, regional variations, which can be seen in the full report.

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