Canada’s Housing Market Is Less Affordable: RBC

Canada's Housing Market is Less AffordableIf you’re looking for a new home, you might want to call the search off for a few months, according to RBC Economics Research.

Canada’s housing market has continued its slow descent, becoming slightly less affordable for the second consecutive quarter.

“Market conditions remained fairly balanced across the country in the second quarter, laying the groundwork for further price increases, which in turn contributed to a decrease in affordability,” said Craig Wright, senior vice-president and chief economist at RBC, in a statement. “Going forward, we anticipate that the latest mortgage insurance rule changes and prospects for further erosion in affordability will restrain homebuyer demand in Canada.”

What Can Canadians Really Afford?

A quick peruse across the bank’s Housing Trends and Affordability report sheds more light on the state of housing in Canada. Trends are based on The RBC Housing Affordability measure, which is represented by the percentage of a household’s monthly pre-tax income (in a detached bungalow home) that go towards homeownership costs, including mortgage payments, utilities and property taxes.

Here’s a look at how housing markets are faring across the nation:

 British Columbia

Unsurprisingly, B.C. continues its streak as Canada’s least affordable market. The province’s near record decline in affordability was enough to exaggerate the national affordability rate. For the most part, the decline is contingent on the Vancouver market’s continuous climb. The city’s absurd housing prices tap out at 91 per cent.


 The backbone of the nation’s oil sector witnessed widespread improvements in affordability – mostly on the back of lower utility prices including electricity and natural gas. According to the report, “Calgary’s housing market enjoyed stronger home resales and building activity, as well as moderately rising prices, and continues to register one of the most attractive affordability levels among Canada’s largest cities.” Calgary remained unchanged at 36.7 per cent and Edmonton fell 0.1 percentage points to 32.4 per cent.


 The great prairie province didn’t fare as well as its western neighbour, experiencing one of the biggest erosions in affordability across Canada. Strong demand and inadequate supply drove housing prices higher in the second quarter.

“With strong demand and a short supply of homes for sale, the negotiation scale tipped in favour of sellers and the result was a noticeable rise in prices, denting housing affordability in the process,” said Robert Hogue, a senior economist at RBC. Affordability for the province rose to 38.7 per cent.


Despite the province’s dip in affordability, Manitobans still reap the benefits of some of the cheapest housing costs as a share of their income in the country.

“Manitoba’s housing market was quite hot this spring – second quarter home resales recorded the highest pace ever in the province for that period, while monthly figures showed substantial volatility since the beginning of the year,” added Hogue. “Resale statistics for June and July indicated that some cooling of activity has taken place more recently.”

The province’s affordability hovered at 37.8 per cent.


Homeownership costs continued to rise in Ontario, a trend that’s been on the go since 2009. Affordability in Toronto mirrored the provincial trend, deteriorating “modestly” according to the report. Market activity cooled off in the second quarter. Though it’s by no means as expensive as Vancouver, Toronto homeownership was still pricey in the second quarter at 54.5 per cent on RBC’s affordability measure. Ottawa stood solid at 41.9 per cent.


The French-speaking province proved to be quite the anomaly in the second quarter, trending sideways in the opposite direction and contrasting with the rest of the country. For the most part, housing affordability in cultural epicenter Montreal undid deteriorations from the first quarter and sitting at historical norms. The provinces affordability measure for the second quarter was 34 per cent, on par with the province’s norm.

 Atlantic Canada

The region remained untethered from the ups and downs of the rest of the country but still experienced a slight decline in affordability.

“Atlantic Canada continues to be one of the more affordable regions to own a home in the country, maintaining the slow, yet relatively harmless, pace of deterioration that started at the end of the recession,” states Hogue. “Home buyers were not fazed by the mild erosion in affordability – they remained quite active this spring, driving second quarter home resales up seven per cent above last year’s levels.” The regions average for a detached bungalow stood at 33.2 per cent.


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