Thanks to the mortgage stress test, only 7.69% of Vancouver families can afford homeownership.
“Only one in eight families earns the income necessary to manage ownership costs in the Vancouver area, and one in five families in the Toronto area and Victoria. And this isn’t taking into account the mortgage stress test,” said RBC’s report on Housing Trends and Affordability. “Clearing a higher qualifying rate would drop even more families out of contention (to one in 13 in Vancouver, and one in seven in Toronto).”
Families shopping in the condominium market should fare better, though.
“Buying a more affordable condo apartment opens the field to two-thirds of families in most markets,” continued the report. “But still just one-quarter of them would be able to cover condo-ownership costs in Vancouver and only one-third in Toronto. Severe affordability issues remain a major obstacle for all but the wealthiest in Vancouver, Toronto and Victoria.”
Although nominal, the RBC report noted housing affordability improved in Canada for a consecutive quarter, dropping 0.3% to 51.4% in Q1-2019—an historical high. Due to price declines in Western and Atlantic Canada in tandem with increasing household income, housing is more affordable than it was during the third quarter of 2018.
However, that won’t mean much to buyers in Toronto, Vancouver and Victoria.
RBC also predicts lower ownership costs because of interest rates that aren’t likely to be hiked, which will be particularly advantageous for buyers in Western Canada where prices are beginning to fall.
“A majority, or near majority, of families would be able to cover the cost of owning an average home in nine of the 14 markets we track,” said the report. “The proportion of ownership-capable families is highest in Canada’s most affordable markets—S. John, St. John’s, Regina, Quebec City and Halifax. It’s a very different story for a trip of least-affordable markets. Only one in eight families earns the income necessary to manage ownership costs in the Vancouver areas, and one in five families in the Toronto area and Victoria. And this isn’t taking into account the mortgage stress test.”