Home affordability in Canada weakens in Q1

The average cost of carrying a detached bungalow in Canada rose by 0.7 of a percentage point to 40.5%, according to the latest Housing Trends and Affordability report, released by RBC Economics Research.

In Vancouver, it was more of a surge, with the average family forking over 72.1% of its income – a 3.4% increase from the previous quarter – to live in the same average bungalow. In Toronto, housing expenses had a more modest climb, rising to an average of 47.5% of income, up 0.8 of a percentage point.

Affordability in Montreal was further compromised, it taking 43.1%, a growth of two percentage points, to cover costs. Calgary came in at 35.9% of income, or a rise of about one percentage point.

In fact, the majority of Canadian markets are grappling with weakened affordability. While Vancouver’s property value gains led the country, Quebec's homebuyers also faced noticeable rises in ownership costs, while those in Atlantic Canada saw their affordability advantage somewhat diminish.

The picture remained mixed in other areas of the country, with Ontario, Alberta and Saskatchewan experiencing ebbs and flows in ownership costs, depending on property type, according to the RBC scale.

"Despite the latest erosion in affordability, provincial levels generally continue to stand near their long-term averages, suggesting that owning a home remains affordable or, at worst, slightly unaffordable across Canada – with Vancouver being a notable exception," said Robert Hogue, senior economist with RBC in the report.

The housing affordability measure, which has been compiled since 1985, relies on the bungalow as a reasonable property benchmark for housing in Canada. Alternative housing types are also presented including a standard two-storey home and a standard condominium. The higher the reading, the more costly it is to afford a home.

Results from the first quarter support the concerns of brokers who point to a growing number of homebuyers having to scale back on expectations. Even with more modest homes, many are finding it harder to win prime-rate financing given mortgage rule changes that have made it harder to qualify for CMHC-backed loans.

“The spring market has been softer, I’d say about 15%,” Joe Digiambattista, vice president of Sales for Canadiana Financial told MortgageBrokerNews.ca.

“What we’re seeing is a loss of what were A clients that no longer qualify as borrowers with us because of the rule changes. I think those clients have gone to the alternative lender market, where their risk might not be suited to that model.”

MortgageBrokerNews.ca is a division of KMI Media.

 

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