“This represented the second consecutive quarter during which the costs of owning a home at market prices grew as a share of household income, following back-to-back quarterly declines in the latter half of 2011,” write RBC economists Craig Wright and Robert Hogue.
More specifically, the cost of owning a detached bungalow or two-storey house was higher in the second quarter than the first, although condo affordability remained unchanged.
That phenomenon is generally seen as positive by property investors now enjoying some of the lowest vacancy rates in Canadian history. The affordability challenge means a growing number of renters will wait out the current market as renters in hopes of prices correcting themselves.
That has already started to happen in B.C., although RBC is pointing out that home prices on the Lower Mainland are once again skewing the national average and, so, the affordability index reading.
“RBC’s affordability measures further deteriorated for all housing types in (Vancouver) to levels that stood very close to the worst on record,” reads the report.
The bank economists also point out that Canadian housing markets showed signs of cooling in the second quarter, meaning home resale numbers dropped in May and June.
Even weaker demand will exacerbate the situation, says RBC, chalking it up to recent mortgage rule changes. Still even with that drop in home prices, there is increasingly the threat of higher interest rates, according to the bank.
“Exceptionally low interest rates have been the key reason that kept affordability from reaching dangerous levels in Canada in recent years,” says the report. “Affordability-related pressures, therefore, could well intensify next year.”
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