Affordability conditions in Toronto and Vancouver essentially unchanged - report

Despite the passage of several government measures to address outsized home price growth in Canada’s most in-demand real estate markets, the fourth quarter of 2016 saw Canadian housing costs remain at overheated levels.

In its latest Housing Trends and Affordability Report, RBC Economics Research announced that affordability levels for the final quarter of 2016 stood essentially unchanged from Q3.

“Owning a home at market price in Canada still took an abnormally large bite out of household income, but RBC’s aggregate affordability measure was unchanged in the fourth quarter after a string of six quarterly increases,” RBC senior vice-president and chief economist Craig Wright said.

As of the fourth quarter, the affordability measure was 44.2 per cent nationwide. RBC noted that this is the most stressed level of Canadian home prices since late 2008.

Toronto affordability worsened to 64.6 per cent, from 63.8 per cent in Q3.

“Further policy intervention would be wise to cool surging home prices in Toronto, as the market has become disconnected with economic fundamentals,” Wright explained. “The last time affordability in Canada’s largest city was this poor, in 1990, the housing market subsequently fell into a deep and prolonged slump.”

Meanwhile, affordability saw a marked improvement in Vancouver for the first time in over three years, up to 84.8 per cent (from 90.0 per cent in the third quarter). However, RBC added that would-be buyers in Vancouver are still facing the greatest affordability hurdles in Canada.

In early March, Statistics Canada said that Canada’s new home prices exhibited start-of-the-year increases that might be a prelude to an overheated year for consumers and industry players alike. National prices for new homes (excluding condominiums and apartments) spiked upwards by 3.1 per cent year-over-year in January, representing 0.1 per cent growth compared to December 2016 numbers.

Related stories:
Red-hot Toronto a source not just of profits but also of dismay for agents
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