On a national level, Canadian housing is becoming more affordable, but things aren’t looking good for buyers in the country’s most expensive markets, Toronto and Vancouver.
According to the RBC Economics Housing Trends and Affordability Report, housing affordability in Canada improved for the second quarter in a row in the first quarter of 2019. The improved affordability is mostly due to price drops in Atlantic and Western Canada, paired with rising household incomes.
RBC’s national aggregate affordability measure fell 0.3% in the first quarter of 2019 down to 51.4%, which is a share of household income. The lower the percentage, the more affordable housing is in the country.
"There's a high proportion of ownership-capable families in Canada's most affordable markets—Saint John, St. John's, Regina, Quebec City and Halifax,” says Robert Hogue, Senior Economist, RBC. "However, only one in eight families earns the income necessary to manage ownership costs in the Vancouver area, and one in five families in both the Toronto area and Victoria."
When looking at just the condo market, affordability in Toronto and Vancouver improves slightly, but not by much. Approximately a quarter of families can afford a condo in Vancouver and only about one-third can afford a condo in Toronto.
“Ottawa, Toronto and Montreal were the only three markets that we track bucking the trend,” reads the report. “RBC’s measure rose slightly in Ottawa and Toronto, and was unchanged in Montreal. In the case of Toronto, the rise followed a larger decline in the fourth quarter.”
In Toronto, the aggregate affordability measure was 66% in the first quarter of the year, which is just under the historical high of 67.1% (late 2016). With the highly active spring, prices are rebounding, and RBC forecasts prices to further trend upwards, so there’s no signs of affordability improving in the near future.
RBC’s report was released right after the Building Industry and Land Development Association released its new home sales figures for May 2019, which reported that the average price of a new condo in the Greater Toronto Area is closing in on $780,000, and the average price of a new single-family home is still hovering above $1.1 million.
So, it will likely be a few months until we see another RBC Affordability Report for the second quarter of 2019, but we think it’s safe to say that housing affordability in Toronto didn’t improve in April, May, or June.
On a national level, with interest rates no longer expected to increase, RBC expects housing affordability to improve in the coming quarters.