Housing affordability eroded in Canada for a ninth consecutive quarter, according to RBC Economics Research, reaching the worst level since 1990 and breaking records in specific markets.
RBC’s housing trends and affordability report calculates the share of household income required to carry the costs of owning a home at market price. The number rose to 48.7% in the third quarter of 2017. Vancouver set a new record for any market in Canada at 87.5%. Toronto’s measure rose for the 13th consecutive quarter to a record for the area of 78.4%.
“The continued erosion in affordability in Toronto was a disappointment,” said Craig Wright, senior vice-president and chief economist at RBC, in a release. “There was scope for some improvement given the significant cooling in resale activity since April’s Fair Housing Plan but all we got was the slimmest rise in ownership costs in two years.”
Victoria was the only other market where the affordability measure was above the national average, also reaching an area record—of 61.5%.
While the report says those three markets skewed the overall picture, housing was almost universally less affordable in the quarter, with the measure rising in all markets except Saint John. “Affordability tensions may be emerging” in Ottawa and Montreal, in particular, the report said, where the measure trended “increasingly above their respective long-run averages.” The share of household income was still low compared to Vancouver, Toronto and Victoria, though: 39.2% in Ottawa and 43.5% in Montreal.
The report also noted how interest rate increases could have “significant implications for housing affordability in Canada.”
“We expect the Bank of Canada to build on the rate increases it made in 2017 by hiking its overnight rate three times in 2018. All markets would be affected, but the effect would be particularly amplified in high-priced markets,” it said.
Read the full report here.