The Royal Bank of Canada released its Housing Trends and Affordability report on Wednesday indicating slight deterioration of affordability across all Canadian regions; though not enough to create turmoil in the market.
“Rises in home prices and mortgage rates consequently boosted the costs of owning a home at market value, more so than what could be offset by household income gains,” the report stated. “Still, the lessening of affordability that resulted from this combination of factors was mild overall and did not pose any immediate threat to the general health of the housing market.”
Canadians clamoured to get into the market prior to mortgage rate increases which coupled with the eventual hikes created a larger affordability gap.
“Renewed vigour in most of Canada’s housing markets since spring and a rise in mortgage rates this summer set the stage for a second consecutive quarterly reduction in housing affordability in the third quarter of 2013,” the report stated. “Stronger resale activity by mid-year contributed to heat up home prices by a few degrees, primarily in single-family home categories.”
And the affordability gap between multi-family dwellings and single-family dwellings continues to grow, as the deviation splits further to margins not seen since the 1980s.
“The difference between RBC’s two-storey home and condo apartment measures at the national level, for instance, was the second-widest registered since the mid-1980s,” the report stated. “Even though affordability of all housing categories remains within manageable levels overall in Canada, single- family homes represent more of a stretch for homebuyers than they have historically, whereas condo apartment affordability is closer to its historical norm.”
While affordability eroded among all regions, British Columbia was the most effected; though housing affordability is still viewed as reasonable in both the Atlantic region and Alberta.
The relative unaffordability across the country, however, has not deterred buyers from buying and selling.
“Overall in Canada, home resales increased by a solid 6.0% in the third quarter, following a slightly stronger 6.3% advance in the second quarter, thereby indicating that recent affordability levels (and the back-to-back quarterly deteriorations) generally did not stand in the way of homebuyers stepping into the fray in this country.”