It’s never been so unaffordable to buy a home in this country, according to the latest RBC Housing Affordability Measures.
The national aggregate measure rose in the past eight quarters.
MART PRODUCTION
The report by RBC said the Bank of Canada’s battle against inflation has made it a lot harder to buy a home in this country. Massive rate hikes since March drove RBC’s aggregate affordability measure to 62.7 per cent, its worst-ever level in the third quarter. The deterioration totaled an astounding 14.5 percentage points over the past year.
The RBC Housing Affordability Measures show the proportion of median pre-tax household income that would be required to cover mortgage payments (principal and interest), property taxes, and utilities based on the benchmark market price.
“The massive erosion of affordability has kept Canada’s housing market on a major correction course since spring. Home resales have plummeted 36 per cent nationwide—more so in BC (-43 per cent) and Ontario (-41 per cent)—reaching levels far below those that prevailed before the pandemic. The pace of decline has eased in recent months, though. Falling prices also appear to be slowing. These may be early signs the correction is approaching its final stage,” said the report.
“Still, headwinds will remain stiff in the near term. Affordability issues aren’t likely to reverse quickly. It will take more time for the market to absorb the rise in mortgage rates. We expect the market to bottom out around spring. Price drops will eventually help affordability. The market correction’s silver lining is it’s setting the stage for some affordability improvement in the year ahead. We expect the national benchmark price to fall 14 per cent from its early 2022 peak, providing significant scope to lower ownership costs once interest rates stabilize. We think that could start in the early part of 2023—though the timing is poised to vary by market. Growing household income will partly drive the improvement process. It will likely take years to fully reverse the tremendous deterioration that took place since 2021.”
(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)
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