According to a new research from the Royal Bank of Canada, housing affordability in Canada is rapidly declining at a rate not seen in more than 30 years.
During the second quarter of the year, markets across the country and in every housing category experienced a dip in affordability. According to the analysis, this, together with three preceding quarters of reduced affordability, has completely reversed any affordability gains seen at the start of the pandemic.
Last quarter, RBC’s affordability index increased by 2.7 percent, the largest quarterly increase in more than three decades. In Canada’s largest markets, affordability has eroded the greatest, with Toronto’s affordability index increasing by 4.1 percent, Vancouver’s by 3.2 percent, and Ottawa’s by 3.1 percent.
As a result of these developments, Canadians now have to devote a larger portion of their income to housing costs. The amount increased by 3% in just the last quarter, putting the national average to 49.7%, far higher than the long-term average of 43.1 percent.
Despite price rises, several sections of the Prairies and Atlantic Canada are more affordable, with towns such as Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Saint John, Halifax, and St. John’s scoring below their long-term affordability average.
However, if inventory levels remain tight, housing prices are anticipated to rise in the coming months across the country. Thankfully, some respite is on the way in 2022, when the rate of appreciation is predicted to reduce and prices are expected to level off.
“Overall, affordability is most strained in Vancouver (ownership costs represent 63.5% of household income), Toronto (59.1%) and Victoria (48.0%),” said the report. “Ottawa (38.5%) and Montreal (38.4%) are two other markets where RBC’s aggregate measures look historically high.”