Canada’s housing affordability is at its worst level since 1990 and its going to get worse.
A newly report from RBC Economic Research shows that its aggregate housing affordability measure was 53.9 in the second quarter of 2018, based on the share of household income required for ownership costs including taxes and mortgage payments.
The figure is up from 43.2% just 3 years ago and although house prices are responsible for the initial rise, interest rates are the bigger influence of the past year.
Since Q2 2017, the index has increased 2.6 percentage points and there was a 1.1 percentage point rise quarter-over-quarter. The impact of the mortgage stress test has added to the burden for first-time buyers.
“The grim outlook for prospective home-buyers will likely continue in the near term,” said Craig Wright, Senior Vice-President and Chief Economist at RBC. “We anticipate the Bank of Canada will proceed with further interest rate hikes well into 2019. This will keep mortgage rates under upward pressure and boost ownership costs even more across Canada.”
Condo affordability worsened more than single-family detached homes, especially in Toronto.