Homeownership costs are quickly approaching all-time highs thanks in part to higher mortgage rates in the second quarter, according to RBC Economics Research.
In a report released Monday morning, RBC said affordability measures in B.C. rose between 1.1% and 2.5% during the second quarter compared with the first, representing some of the most significant affordability deterioration across the country.
That means demand for housing in the months ahead will likely diminish, RBC said.
“While we generally dismiss talk of a Canadian housing bubble, the high-flying Vancouver market is probably the closest area to one in the country with very poor affordability likely playing a role in the steep drop in the resale market since the start of the year,” said RBC senior economist Robert Hogue. “Nonetheless, even though the Vancouver market is clearly vulnerable to a price correction, this does not imply that a collapse is imminent because existing and new home supply is well contained at this point.”
RBC’s housing affordability measure rose across all housing types in the second quarter.
The measurement looks at the pre-tax household income needed to service the costs of owning a home.
A measure of 50%, for example, means homeownership costs account for 50% of a household’s monthly pre-tax income.
The measure for the benchmark detached bungalow in B.C. rose 1.7% to 63.8% last quarter compared with the first quarter, while the measurement for a standard townhouse was up 1.1% to 47.7%.
Costs rose 1.1% to 34.6% for standard condominiums in the second quarter, while the cost to own a standard two-storey home was up 2.5% to 71.2%.
RBC said increased housing costs are testing the limits of household budgets in B.C., and are approaching highs not seen since before the recession.
Last week, Business in Vancouver reported 75% B.C. homeowners do not plan to live in their current residence a decade from now (see “B.C. home buyers among the most experienced in Canada: TD Canada Trust ” – see BIV Business Today, September 23).