With the mortgage stress test, only one in 13 Vancouver families can afford to buy a home.
“Only one in eight families earns the income necessary to manage ownership costs in the Vancouver area, and one in five families in the Toronto area and Victoria. And this isn’t taking into account the mortgage stress test,” said RBC’s report on Housing Trends and Affordability. “Clearing a higher qualifying rate would drop even more families out of contention (to one in 13 in Vancouver, and one in seven in Toronto).”
The news is slightly better for condo buyers, though.
“Buying a more affordable condo apartment opens the field to two-thirds of families in most markets,” continued the report. “But still just one-quarter of them would be able to cover condo-ownership costs in Vancouver and only one-third in Toronto. Severe affordability issues remain a major obstacle for all but the wealthiest in Vancouver, Toronto and Victoria.”
The report otherwise noted housing affordability in Canada improved for the second straight quarter, albeit nominally. It declined 0.3% to 51.4% during Q1-2019, yet remains an historical high. Thanks to declining prices in Western and parts of Atlantic Canada, as well as a boost to household income, housing is technically more affordable than it was in Q3-2018.
But that’s little solace for homebuyers in Vancouver, Toronto and Victoria, and housing markets in Montreal and Ottawa are beginning to show signs of stress, too.
While the signs of fledging affordability are negligible at this point, RBC forecasts a drop in ownership costs because interest rates aren’t likely to rise. Buyers in Western Canada will have an opportunity to capitalize because housing prices are under pressure from above.
“A majority, or near majority, of families would be able to cover the cost of owning an average home in nine of the 14 markets we track,” said the report. “The proportion of ownership-capable families is highest in Canada’s most affordable markets—St John, St. John’s, Regina, Quebec City and Halifax. It’s a very different story for a trio of least-affordable markets. Only one in eight families earns the income necessary to manage ownership costs in the Vancouver area, and one in five families in the Toronto area and Victoria. And this isn’t taking into account the mortgage stress test.”