Q1 affordability stable due to near-flat interest growth – National Bank

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The Bank of Canada’s recent decision to retain its current benchmark interest rate, which is hovering 0.25 points above the record low, had the side effect of improving affordability, especially for former energy sector employees who have been hurt the most by the global oil shock.
National Bank this week said housing affordability stabilized in the first quarter, when mortgage payments on a typical Canadian home as a percentage of income increased by only 0.1 percentage points,” Kevin Carmichael, senior fellow at the Centre for International Governance Innovation, wrote in an analysis for Canadian Business.
The National Bank data also showed that this ratio dropped in 6 of the 10 metropolitan areas surveyed, pointing at the possibility that securing a home is getting easier for plenty of Canadians.
“There’s never been a better time to buy a home in Calgary, at least for those who still have jobs. In Montreal, affordability is the best in a decade,” Carmichael said.
The picture in Toronto and Vancouver is entirely different, however, as the two cities continue to maintain their reputation as Canada’s most costly markets.
“There is an argument to be made that the Bank of Canada’s policies are making homes more expensive in those two cities by stoking already strong demand. In both markets, non-condo affordability is the worst on record, even though it’s never been cheaper to borrow money,” Carmichael stated.
On the bright side, the analyst said that the National Bank data points at the absence of widespread risk factors faced by the United States just before the real estate meltdown almost a decade ago.
“The pre-crisis collapse of the U.S. housing market surprised people because they didn’t see the [buying] frenzy had spread to almost every major market,” Carmichael assured. “The data in Canada suggest there has been no such contagion. The risks are localized and it will be up to authorities other than the central bank to contain them.”

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