The prospect of owning a home is growing increasingly remote for many Canadians, according to a new report from RBC Economics that points to the deterioration of housing affordability.
According to the report, the bank’s aggregate affordability measure — which indicates the share of median pre-tax income required to cover mortgage payments, property tax and utilities — soared 2.7 points to 45.3% in the second quarter, marking the largest jump in more than 30 years.
“This was the fourth-straight increase, entirely rolling back the improvement that occurred at the start of the pandemic,” the report said.
Additionally, every market and housing category “got less affordable” in the second quarter, with conditions worsening most in Toronto, Vancouver and Ottawa, the report said.
For single-family homes, the affordability picture is bleak.
“The share of income necessary to cover the costs of owning a single-detached home in Canada is not only high, it’s also rising rapidly,” the report said. “In the second quarter, that share surged 3.0 percentage points to 49.7%—well above the long-run average of 43.1%.”
These trends are expected to continue too, at least in the short term.
“We expect home prices to continue to rise in the near term, as demand-supply conditions generally remain exceptionally tight. This will further raise ownership costs across a wide spectrum of markets and housing categories,” the report said, though prices might flatten in 2022.