Housing affordability in Canada’s most expensive market — Vancouver — is at “crisis levels,” according to a new study, which says the re-acceleration of home prices, along with higher interest rates, are “slamming” ownership costs again.
The cost of buying a home in Vancouver reached its highest levels on record in the first quarter of this year, according to the RBC Housing Affordability Measures study released on Tuesday.
Vancouver residents would need nearly 88 per cent of their household income to buy a home, while Toronto residents would need more than 74 per cent of their income to cover the cost, the study said.
That compares with the Canadian average of about 48 per cent of household income and less than 44 per cent in other major cities like Montreal and Calgary.
“Affordability is a major issue in two of Canada’s largest markets. It’s at crisis levels in Vancouver and poses a tremendous challenge for many Toronto-area buyers despite improving in the past two quarters,” said Robert Hogue, senior economist at RBC Economic Research, in the report.
“Because they apply from coast to coast, higher interest rates pressured affordability in all markets across Canada. In Vancouver, though, a re-acceleration of home prices in the past three quarters amplified the effect,” he added.
“These factors returned affordability to a sharply deteriorating track after a short period of reprieve in late-2016 and early-2017.”
Despite a series of measures introduced by regulators and the government over the past two years in an attempt to rein in property prices in Vancouver, the benchmark price for a home in Greater Vancouver rose to a record $1,094,000 in May, even as sales fell 35 per cent from a year ago, according to the Real Estate Board of Greater Vancouver.
Meanwhile, the Bank of Canada has raised interest rates three times since July last year and is widely expected to raise rates again at its policy meeting next week Wednesday.