Housing affordability concerns in the second quarter are helping explain a slower summer for brokers across much of the country, with an increasingly expensive Vancouver now at risk of a downturn, according to a new report.
“Elevated home values appreciated ever more in British Columbia in the second quarter of this year, making it even harder for the provincial households to own a home,” reads the Royal Bank of Canada's quarterly survey on affordability. “Hefty price gains for bungalows, in particular, contributed to a significant loss of affordability in the province. We expect that poor affordability will weigh on housing demand by B.C. households and pressure prices down next year.”
Affordability measures for British Columbia rose between 1.0 and 5.7 percentage points in the second quarter, representing the steepest increases among the provinces. “Vancouver’s housing market is without a doubt the most stressed in Canada and is facing the highest risk of a downturn,” said Craig Wright, senior vice-president and chief economist with RBC.
"The measures for all housing types are now either at or very close to their worst levels on record,” continues the report. That’s distinctly different than most of the country.
A bungalow in Toronto required just under 52 per cent of the average family’s pretax household income in Toronto. In Montreal, it was only 42.6 per cent, while it ate 41.2 per cent of that family’s income in Ottawa and 37.1 per cent in Calgary. But the measure for the same bungalow in Vancouver jumped a whopping 10.4 percentage points in the quarter to an all-time high of 92.5%.
“With the bar set so high, owning a home is a dream that only the area’s highest-earning households can contemplate,” says the RBC report.
But a weakening economy and the volatility in the stock market may ultimately work to zap those gains, ensuring new buyers continue to access low interest rates.
Still, Vancouver mortgage brokers are increasingly having to do the math to convince discouraged clients that they can, in fact, afford to live on the Lower Mainland.
Those calculations often rely on an income suite, but median income families are still finding and qualifying for detached homes in the $750,000 range, Dustan Woodhouse, a high-volume broker with Dominion Lending Centres Canadian Mortgage Experts, told MortgageBrokerNews.ca. “That puts them in a great little suburb like Port Moody – just 35 minutes from the downtown core by car -- less by commuter train.”