Following two consecutive quarters of encouraging improvements, housing affordability deteriorated in Vancouver and nationwide in the early months of 2012.
According to RBC Economics Research’s latest Housing Trends and Affordability Report released today, vigorous homebuyer demand pushed home prices higher in the first quarter, driving the cost of owning a home in Canada modestly upwards.
The RBC housing affordability measure captures the proportion of pre-tax household income that would be needed to service the costs of owning a specified category of home at going market values.
During 2012’s first quarter, measures at the national level rose between 0.3 and 0.8 percentage points for the three housing categories tracked by RBC (a rise in the measure represents deterioration in affordability).
Measures stand slightly above historical averages, and Canada’s housing market remain fairly balanced, indicating that only modest stress is being exerted on housing demand.
Following two consecutive quarters of declines, home prices rebounded across all housing types in the Vancouver area in the first quarter of 2012.
RBC's housing affordability measure for the benchmark detached bungalow in Vancouver was 88.9% (up 3.1 percentage points from the previous quarter).
RBC measures rose between 0.3 and 3.1 percentage points, raising doubts that significant affordability improvements will surface anytime soon.
Across B.C., despite marginal improvements in the latter half of 2011, affordability in remained poor in the first quarter.
This poor affordability is likely weighing on buyer demand and a key factor behind the downward trend in home resales since last fall. RBC expects this pressure to persist.
Craig Wright, senior vice-president and chief economist at RBC, said, “It became a little tougher on household budgets to carry the costs of owning a home at market prices at the start of this year.
“Strong buyer demand was a principal driver of the modest rise in homeownership costs. While the deterioration in affordability was felt to varying degrees across the country, it was mild in most cases.”
