Homebuyers wanting to get into Canada’s urban markets may be frustrated by rising prices with the investing landscape set to change again, according to RBC. Affordability is once again forcing potential home buyers out of Canada’s key markets but despite this, RBC is still expecting housing activity to pick up.
Prices for single-family homes in Calgary, Toronto and Vancouver had “considerable upward momentum” during the first quarter of this year, and led to the strongest annual price gains nationally in nearly two year.
The latest Housing Trends and Affordability Report by RBC it is not all bad news though. Ottawa, and some markets in Saskatchewan, Manitoba and Atlantic Canada, actually saw affordability improve for at least some types of houses.
The investing landscape may change in the coming months. “We expect the Bank of Canada to gradually raise the overnight rate starting in the middle of 2015, which will cause bond yields to drift gently upward,” says Craig Wright, senior vice-president and chief economist with RBC. “This should mitigate the risk that higher rates will unhinge affordability levels.”
This may further erode availability, adds Wright. “With prices levelling off, that will be neutral to maybe slightly negative for affordability, but as rates go higher, that will make affordability a bit more of a challenge.”
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