Despite improving home ownership affordability nationwide, the new lending realities have put less Canadians families under a new roof, according to brokers.
“I don’t know what the banks are saying in their reports,” says Dan Balfour, a broker with Mortgage Alliance in Markham, Ont. “In the last two quarters, I have seen more and more people shut out of the market.”
In a report released last week, the Royal Bank of Canada said that the most recent figures from its affordability index indicated that the cost for detached bungalow stood at 42 per cent of income nationally. That means an owner would need to spend 42 per cent of pre-tax annual income to pay for mortgage payments, utilities and property taxes — one percentage point lower than in the second quarter of 2012.
The index fell even more for two-storey homes, by 1.2 percentage points to 47.8 per cent and eased 0.6 percentage points to 28 per cent for condos.
The latest figures, however, mean very little on the ground, according to some brokers.
“Price tags may be lower, but a lot of buyers are shut out from the market because new the new mortgage rules won’t qualify them for a loan,” said Balfour.
In another previously hot market, things are somewhat at a standstill because of “so much doom and gloom news” about a market correction, said another broker.
“The actual numbers are not translating to action,” said Rebecca Awram, a broker at Dominion Lending Centres – Origin Mortgages, in Fraser Valley, B.C. “Buyers are waiting for a fire sale and sellers are waiting it out until prices improve.”
RBC's housing affordability measure for the benchmark detached bungalow in Canada's largest cities is as follows:
Vancouver 83.2 per cent (down 5.8 percentage points from the previous quarter)
Toronto 52.4 per cent (down 0.7 percentage points)
Montreal 40.2 per cent (up 0.1 percentage points)
Ottawa 38.7 per cent (down 0.4 percentage points)
Calgary 38.3 per cent (down 0.7 percentage points)
Edmonton 31.1 per cent (down 0.6 percentage points)
The Vancouver market was already cooling some several months ago, she said. When the government announced its mortgage rule revamp, this had a further chilling effect on consumers.
Awram’s observations are bolstered by the RBC report which noted that Canada’s housing market slowed down further in the third quarter, partially because of the effects of a fourth round of rule changes to government-backed mortgage insurance.
Exceptionally low interest rates have been the key factor in keeping affordability levels from reaching dangerous heights in Canada in recent years, according to RBC chief economist Craig Wright.