That dream home your clients thought was within reach has been pushed a little higher again. With the national economy turning a corner, the majority of Canadian markets experienced weakened home affordability in the first quarter of 2011, according to the latest Housing Trends and Affordability study by RBC Economics.
Rising ownership cost and falling affordability were noted across the country, but the deterioration was the worst in British Columbia. More specifically, Vancouver saw significant gains in property values, which drove the already elevated cost of homeownership even higher, the study reported.
“Despite the latest erosion in affordability, provincial levels generally continue to stand near their long-term averages, suggesting that owning a home remains affordable or, at worst, slightly unaffordable across Canada—with Vancouver being a notable exception,” said Robert Hogue, senior economist, RBC.
Not far behind, Quebec’s housing market, after a decline in the latter half of 2010, faced higher ownership costs in the first quarter of 2011.
“Quebec started the year with a hit to affordability, showing deterioration that ranked second only to British Columbia for certain housing types,” said Hogue. “The province’s housing market has seen consistent price increases over the past year, which has raised the bar for homebuyers in the province.
Property values in the Montreal-area market appreciated substantially for key housing categories and registered the strongest home price gains in the country relative to a year ago.
“With affordability measures rising above the national average and a narrowing of the gap with Toronto, Montreal is losing its status as an affordable market,” said Hogue.
It is anticipated that interest rate increases will raise barriers to market entry even higher.
Those in Atlantic Canada saw their affordability advantage somewhat diminish while the picture remained mixed in other areas of the country, with Ontario, Alberta and Saskatchewan experiencing ups and downs in ownership costs, depending on the housing type.
The RBC housing affordability measure for a detached bungalow in Canada’s largest cities is as follows: Vancouver 72.1% (up 3.4 percentage points from the last quarter), Toronto 47.5% (up 0.8 of a percentage point), Montreal 43.1% (up 2.0 percentage points), Ottawa 39.0% (up 0.4 of a percentage point), Calgary 35.9% (up 0.9 of a percentage point) and Edmonton 31.5% (up 0.5 of a percentage point).
The nationwide drop in affordability has done little to change the attitude of most Canadians toward boosting their real estate portfolio with a vacation property, as many still see this as a good long-term investment.
A nationwide survey, commissioned by Royal LePage Real Estate Services and conducted by the Angus Reid Forum, found that 89% of current owners and prospective buyers agree that recreational properties are a good long-term investment.
Broken down by region, this included 92% of respondents from Alberta, 91% of Ontarians, 87% of B.C. residents and 81% in Quebec.
“Canadians’ confidence in recreational property values is mirroring what we have been seeing in Canada’s urban centres,” said Phil Soper, president and chief executive, Royal LePage Real Estate Services. “This spring, the horror stories from some fundamentally flawed international housing markets that had dampened demand for cottage-type living during the recession era, are being shrugged off.”