Despite some minor improvements, housing affordability in Canada remains a critical issue. RBC’s aggregate housing affordability measure dipped slightly, falling by 0.3% to 59.5%. This means that it still takes a significant portion of the average household income to cover the costs of home ownership. In particular, affordability deteriorated in Vancouver and Toronto, where it takes a staggering 97.5% and 79.6% of a household’s income to cover ownership costs. The report suggests that even though there was a modest increase in household income, mortgage payments are on the rise due to higher home prices and record-high interest rates, which continue to pose challenges for prospective homebuyers.
Looking ahead, RBC predicts that housing affordability is likely to worsen in the third quarter, as income improvements may not be sufficient to offset higher carrying costs due to rising interest rates. Relief for buyers is not expected until 2024 when prices and rates are anticipated to stabilize. RBC’s report underscores the need for substantial efforts to address housing affordability in Canada. Increasing housing supply is identified as a key long-term solution, but it’s a complex process that may take years to address, especially given rising construction costs and finite construction capacity, as noted by the Canada Mortgage and Housing Corporation (CMHC).
In conclusion, while there has been a minor improvement in housing affordability, the situation remains challenging, particularly in major Canadian markets like Vancouver and Toronto. Long-term solutions, such as significantly increasing housing supply, are necessary to fully address this issue. However, these solutions will require concerted efforts and time, making it a complex problem to solve.
Published by Steve Huebl