rose by a whopping 47.5 per cent of median household income during the four-month period. This amounted to an increase of two percentage points from the previous quarter and a nearly six point increase from a year ago, pushing housing affordability to a 31-year low in Canada. When determining these figures, mortgage payments, utilities and property taxes and some of the factors that are taken into consideration by RBC.
“The need for more supply has never been greater. This became clearly evident in the past year with bidding wars springing up in places that have rarely or never seen them before, and intensifying in places more accustomed to them. And until demand and supply return closer to balance, prices will continue to rise,” RBC Economist Robert Hogue wrote in the report.
Vancouver was identified as the least affordable market in Canada, with a home ownership costs reaching 64.3 per cent of median household income during the period, while in Toronto this figure rose to 61.9 per cent.
Accordingly, Hogue concluded that the outlook for buyers remain “grim”, as experts anticipate interest rate hikes next year. Shifting from its previous language which suggested rate hikes could be expected during the second half of 2022, in its most recent Monetary Policy Report, the Bank of Canada suggested that a lift-off could be expected in the “middle quarters” of next year. This could increase RBC’s national gauge of affordability by another two to 3.5 points, according to Hogue.
“A potentially significant deterioration in affordability could squeeze many buyers out of the market—or at least out of a market or housing category. That would be the market’s self-correcting mechanism at work,” he said. “So long as supply is slow in coming, much of rebalancing adjustments will fall on the demand side of the equation.”
