So is it now only rich Canadians who can afford a home?
“That certainly looks like it in Canada’s most expensive markets. Buyers in Vancouver, Toronto and Victoria needed between two and three times the median household income to qualify to purchase an average home,” RBC economists Craig Wright and Robert Hogue wrote in the bank’s latest Housing Trends and Affordability report released December 21.
“In Vancouver, for example, the income necessary to cover ownership costs and clear the mortgage stress test was $211,000 in the third quarter.”
The report found that despite what some first-time homebuyers would consider a jaw-dropping household income, housing affordability eased up somewhat in Metro Vancouver during the third quarter.
RBC’s affordability measure fell 1.7 percentage points annually to 86.9 per cent.
The measure calculates the proportion of median pre-tax household income required to cover the cost of mortgage payments, property taxes and utilities based on the average market price for single-family detached homes and condos.
For comparison, Calgary’s measure came in at 43.4 per cent — down 0.2 percentage points from a year earlier.
Victoria, however, was the least affordable region in Canada after Vancouver at No. 1 and Toronto (75.3 per cent) at No. 2.
The provincial capital saw its measure fall 0.1 percentage points in the third quarter to reach 65.3 per cent.
“What’s perhaps more troublesome is the extent to which the qualifying income increased over the past three years,” the report authors said.
“In Vancouver, it surged by $84,000 (or 66 per centa), whereas it rose by $64,000 in Toronto and $68,000 in Victoria. No wonder so many buyers fear that their ownership dream is slipping away in those markets.”
RBC also doesn’t expect affordability to improve in the New Year.
The report concluded further interest-rate hikes expected in 2019 will keep upward pressure on ownership costs.