“The most recent values of RBC’s measures are little changed from where they were in 2010 and remain modestly above long-term averages,” the Royal Bank
of Canada’s latest affordability report states. “At the local level, however, trends deteriorated for single-family homes in Toronto and Vancouver (notwithstanding substantial volatility).
“In these markets, owning a single-family home has become quite a stretch, budget-wise, for the ‘average’ homebuyer.”
The report states that condominiums will continue to be the most affordable housing option for those looking to buy in these two major metropolises.
Home sales also dropped across the country, which the big bank attributes to unfavourable weather conditions; though the trend is not expected to last much longer.
“For the most part, home resales were subdued across Canada this past winter, declining by 4.8% between the fourth quarter of 2013 and first quarter of 2014,” the report states. “Poor weather likely restrained activity —possibly quite materially in certain markets—and we expect this softness to reverse when better weather returns in the coming months.”
Understandably, RBC believes the future of interest rates, and whether they will rise or fall, will play a major role in determining whether markets such as Toronto and Vancouver -- and, indeed, markets across Canada – will become more or less affordable in the near term.
“Potential offset could come from mortgage rates dropping further and/or household income growing much more rapidly, however,” The report states. “In the medium term, the eventual normalization of monetary policy will lead to substantial rises in interest rates, which may be too much for other affordability determinants to counteract.”
Mortgage brokers in Toronto and Vancouver may have to start getting more creative with lead generation, with recent stats suggesting affordability in these two markets is eroding.