Canada's housing affordability dips for second quarter: bank report

TORONTO, Aug. 22, (Xinhua) -- As a result of higher home prices and mortgage rate increases, Canada's housing affordability has slipped for a second consecutive quarter this year, according to the latest Housing Trends and Affordability report released Monday by Royal Bank of Canada (RBC) Economics Research.

"By and large, the share of household budgets, taken up by the costs of owning a home at current market values, remains close to historical norms," said Craig Wright, RBC senior vice-president and chief economist. "However, extremely poor and rapidly eroding affordability in the Vancouver-area market is somewhat skewing the national picture."

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 the second quarter of 2011, measures for the national level rose for all housing categories tracked by RBC (a rise represents a loss of affordability).

Since the start of 2011, the Greater Vancouver Area directly accounted for up to one-third of the deterioration in affordability at the national level. Vancouver's market continues to be in a class by itself for unaffordable housing. Strong demand in higher-end pockets of this particular market has catapulted prices to unprecedented levels.

"Vancouver's housing market is without a doubt the most stressed in Canada and is facing the highest risk of a downturn," added Wright.

Market segments that also faced some affordability pressures in the second quarter included: the two-storey home category in Quebec (Montreal), Ontario (Ottawa and Toronto) and Saskatchewan. At the other end of the spectrum, Alberta remains an attractive province to would-be homebuyers, as owning a home in a market such as Calgary is very affordable.

"Renewed turmoil in global financial markets has caused heightened uncertainty with respect to the pace of global growth and we need to factor this into our outlook for the Canadian housing market," said Wright. "However, this volatility might have a silver lining; housing affordability in Canada may not deteriorate as quickly or by as much as we previously expected."